As filed with the Securities and Exchange Commission on December 20, 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. [ ]
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CALCULATION OF REGISTRATION FEE
_______________________________________________________________________________
Proposed Proposed
Title of each class maximum maximum aggre-
of securities to be Amount to be offering gate offering Amount of
registered registered price per price
registration
share fee
_______________________________________________________________________________
Common Stock, $.01
par value:
Issued and
outstanding 217,327 Shares $ .22 (1) $ 47,812 (1) $ 13.29
Issuable upon
exercise of
options 4,813,827 Shares $ .01 (2) $ 48,138 (2) $ 13.38
_______________________________________________________________________________
Totals 5,031,154 Shares $ 95,950 $ 26.67
_______________________________________________________________________________
(1) Based on the average price of the common stock on the OTCBB Market on
December 14, 1999. The resulting fee is calculated pursuant to section (c) of
Rule 457 of Regulation C.
(2) Based on the exercise price of the options.
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 December 20, 1999
EARTH SCIENCES, INC.
5,013,154 SHARES OF COMMON STOCK
This prospectus relates to shares of our common stock being offered for resale
by certain selling shareholders and those shares to be acquired upon exercise of
certain stock options as described more fully below. The shares of common
stock offered consist of:
* 217,327 shares of common stock currently issued and outstanding, and
* 4,813,827 shares of common stock issuable upon exercise of options at an
exercise price of $.01 per share.
The selling stockholders may offer their 217,327 shares 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.
We would receive $48,138 upon the exercise of all of the options. The exercise
of the options are subject to certain market conditions as described below in
Risk Factors and Determination of Offering Price.
The acquisition and ownership of our common stock involves 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 the
OTCBB Market under the symbol "ESCI". On December 14, 1999, the last quoted
sales price of the common stock on the OTCBB was $.22 per share.
Neither the Securities and Exchange Commission nor any state securities
Commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
This prospectus is dated December 20, 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. We and 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.
SPECIFIC 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 HAVE A HISTORY OF LOSSES.
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 to
* the start up nature of our major activities,
* exploration and development costs on properties from which no revenue is
derived,
* continuing corporate general and administrative costs, and
* interest expense associated with long term debt.
THE EXERCISE OF OPTIONS WILL DILUTE CURRENT SHAREHOLDERS AND MAY
REDUCE THE MARKET PRICE OF THE COMMON STOCK.
See the discussion below under the heading "Determination of Offering Price"
with regard to the conditions for exercise of the options. The total number of
option shares that may be issued upon exercise of the options is limited to no
more than 4,813,827. The table below sets forth the option shares that may be
issuable based on various prevailing market prices and the percentage such
option shares would represent of the outstanding shares of common stock. The
option holders have agreed to limit their weekly sales of shares in total,
except in the event of unusual market activity, to the greater of 2% of shares
held, including option shares, or 40% of the previous week's trading volume of
the shares.
Prevailing Market Option Shares Approx. % of
Price per Share Issuable Outstanding Shares
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$.20 4,813,827 19.1%
$.40 2,444,408 9.7%
$.60 1,128,064 4.5%
$.80 515,940 2.0%
$1.00 160,627 0.6%
The issuance of any option shares will dilute the percentage interests and
could dilute the per share book value of existing shareholders, including
persons purchasing securities in this offering. The average daily volume of
sales in November 1999, as reported by OTCBB, was approximately 76,000 shares.
Assuming that the option holders receive the maximum option shares
and also sell all those shares of common stock into the market, such sales
would represent approximately of 19% of the then outstanding shares. Such
sales would represent approximately 64 days of trading volume or 158 days based
on November's average volume and the selling limitations noted above. We expect
the impact of that volume of shares being sold in the market, absent any
significant news announcements, would have a depressive impact on the market
price of the Common Stock.
FUTURE ISSUANCES OF COMMON STOCK WILL DILUTE CURRENT SHAREHOLDERS AND MAY
REDUCE THE MARKET PRICE OF THE COMMON STOCK.
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.
Based on the current working capital deficit and the need for additional
working capital to fund expected growth, it is likely that we may issue
additional securities to provide such capital, and that such additional
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issuances may involve a significant number of shares. The issuance of
additional securities will dilute the percentage interests and may dilute the
per share book value of existing shareholders, including persons purchasing
securities in this offering, and may also reduce the market price of the common
stock.
THE PRICE OF OUR COMMON STOCK HAS BEEN AND MAY BE VOLATILE.
The market price for shares of our common stock has been and may be 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 stock over the last 52 weeks has traded in the range from a
high of $1.47 to a low of $.20, which range as a percentage of the price is
greater than the market in general. The start-up nature of our activities and
uncertainties about future performance, as discussed in these risk factors, may
create more volatility and greater risk to an investor in our company than to an
investor in the market in general.
WE WERE RECENTLY DELISTED FROM THE Nasdaq SmallCap MARKET.
Our common stock was listed on the Nasdaq SmallCap Market under an exemption
from the minimum bid price requirement, which is $1.00. The exemption was
granted by Nasdaq until June 30, 1999. On July 14, 1999 Nasdaq removed our
stock from the SmallCap Market. The common stock now trades on the OTC
Bulletin Board. The OTCBB does not impose listing standards or maintain
relationships with quoted issuers but does require sponsorship by a
participating Market Maker and periodic filing of financial information with
the SEC.
RISKS RELATED TO OUR MINERAL EXPLORATION AND DEVELOPMENT ACTIVITIES
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THE NATURE OF MINERAL EXPLORATION AND DEVELOPMENT IS RISKY; WE HAVE NOT YET
DISCOVERED ANY PROVEN COMMERCIALLY VIABLE RESERVES ON OUR MINERAL PROPERTIES;
WE COULD INCUR A WRITEDOWN ON OUR INVESTMENT IN ANY SUCH PROPERTY.
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. 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. These hazards and risks include
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. If
management determines that capitalized costs associated with any of our mineral
interests are not likely to be recovered, we would incur a writedown on our
investment in such property interest.
WE HAVE A COMPETITIVE DISADVANTAGE DUE TO OUR LIMITED FINANCIAL RESOURCES AND
MINERAL LANDS OF INTEREST TO US MAY BE ACQUIRED BY OTHERS.
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
US, Venezuela and other areas where we contemplate conducting exploration
activities. In general, we are at a competitive disadvantage in acquiring
mineral properties since we must compete with other individuals and companies,
most of which have greater financial resources and larger technical staffs than
ours. For example, the annual exploration budgets of major mineral companies
typically are several million dollars. Our exploration budget for 1999 is
expected to be not more than $100,000. 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. Our limited financial resources restrict our ability to act quickly
and deter our ability to mount the extensive exploration efforts often needed
to find and acquire attractive mineral properties.
THE PRICE OF MINERALS FLUCUATES; WEAK GOLD PRICES WILL LESSEN THE
ATTRACTIVENESS OF OUR PROPERTIES TO OTHERS AND REDUCE OUR EXPECTED RETURNS.
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
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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. The price of gold has recently declined as a
result of decisions by the UK and International Monetary Fund to sell gold
reserves. It appears to be the trend of many central banks to reduce their
gold holdings in favor of assets which offer higher returns. The sale of gold
reserves and the influx of gold into the marketplace beyond what comes from
production has weakened gold prices over the last two years. These trends may
continue. The current price of gold is approximately $280 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 Bureau of Land Management 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. We are not currently conducting any activities which
are adversely affected by environmental standards, nor are we currently subject
to any reclamation costs. However, US Federal and state environmental laws and
regulations potentially applicable to our exploration activities include:
(a) the assessment of environmental impacts with regard 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.
All of the items in the list above have the potential to substantially increase
the cost and significantly lengthen the timeframe of activities we might carry
out. 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.
Two of our mineral properties which are in the US include a total of 17
unpatented mining claims to which we have only possessory title. These claims
cover a total of approximately 870 acres in Montana and Nevada. We also hold
mineral interests on 4 other properties covering approximately 5,600 acres that
do not include any unpatented mining claims. 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 US 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 US government of a rental fee of
$100 per claim per year for each assessment year instead of performing
assessment work. Neither Montana nor Nevada currently have State laws that
require performance of assessment work.
The present status of our properties as unpatented mining claims located on
public lands of the US allows the claimant the exclusive right to mine and
remove valuable minerals, such as precious and base metals and industrial
minerals, found on those claims. Also, those claims allow us to use the surface
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of the land solely for purposes related to mining and processing the mineral-
bearing ores. However, legal ownership of the land remains with the US
government. Accordingly, with an unpatented claim, the US government retains
many of the incidents of ownership of land. The US government regulates use of
the surface, and we remain at risk that the claims may be forfeited either to
them 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 September 30, 1999, 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.
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. At the end of August 1999, we closed two of our three
field camps in Venezuela and have suspended further exploration activities there
until additional funding becomes available.
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.
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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
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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 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. The tonnage sales expected
under the CIC contract represent approximately one third of the anticipated
production in 1999. 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 AND WE LACK LONG-TERM PURCHASE
CONTRACTS.
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 three US suppliers. We generally receive a
discount from listed market price from two of those suppliers, while we have
been purchasing at an annual fixed price from the third which approximates
market price. We have been able to acquire sufficient quantities to supply our
estimated requirements of SPA, but we have no long-term contracts for supply
and other suppliers of SPA may not be available. There can be no assurances
that we will be able to obtain sufficient quantities of SPA at reasonable
prices in the future.
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.
PRODUCT QUALITY, PRICE AND DISTRIBUTION CAPABILITIES DEFINE 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, most,
if not all, 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.
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PRODUCTION HAS RECENTLY BEEN SUSPENDED WHILE WE SEEK ADDITIONAL WORKING CAPITAL.
Production at the Calgary facility was suspended at the end of August 1999 to
limit cash flow deficits being experienced in operations. Projections indicate
that a level of approximately 1,000 tons per month of purified phosphoric acid
production and sales are necessary to achieve a cash flow break even. We have
insufficient working capital to build the inventories of raw materials, work-in-
process and finished goods needed to sustain that rate of production and sales.
We are currently seeking a minimum total of approximately $2.5 million in
funding:
(1) $1.5 million in order to build the needed inventories,
(2) $500,000 to modify the facility to produce food-grade product, and
(3) $500,000 to improve efficiencies and increase the capacity from the
current estimated 16,500 tons per year of primary product to 25,000 tons per
year. There can be no assurances that we will be successful in acquiring the
needed funding or that the facility will return to operations for its currently
intended purposes.
ADVERSE EFFECTS 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 OTCBB Market. Reports, proxy statements and
other information filed by the Company prior to June 30, 1999 can be inspected
at the National Association of Securities Dealers, Inc. 1735 K Street NW,
Washington, D.C. 20006.
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.
2. Our quarterly report on Form 10-QSB, as amended, for the three months ended
March 31, 1999.
3. Our quarterly report on Form 10-QSB, as amended, for the three and six months
ended June 30, 1999.
4. Our quarterly report on Form 10-QSB for the three and nine months ended
September 30, 1999.
5. 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, should also be considered to be part of this
prospectus from the date of the filing of those 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).
_________________________________
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FORWARD LOOKING STATEMENTS
Except for historical information contained in this prospectus, the matters
discussed in this prospectus may contain or incorporate 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.
EARTH SCIENCES, INC.
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, which operations have been temporarily suspended while we
seek additional working capital; flue gas conditioning technology for coal-fired
boilers and other applications provided through ADA Environmental Solutions LLC,
a wholly-owned subsidiary; and continued exploration activities for diamond and
gold resources in Venezuela. Operations at the extraction facility and further
exploration activities in Venezuela have been temporarily suspended to improve
cash flow while we seek additional working capital as discussed above in Risk
Factors and in the second paragraph below.
Our principal executive offices are located at 910 12th Street, Golden,
Colorado, 80401, and our telephone number is (303) 279-7641.
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 with Yankee Atomic Electric Co.
and Vermont Yankee Nuclear Power Corp. and restricted the use of the facility
solely to uranium extraction. We modified the contract with the Yankee
companies in 1990 to allow us to use the facility for any other lawful
activity. Revamp of the facility to allow production of purified phosphate
products was completed in 1997. The Calgary facility had been routinely
producing technical grade phosphoric acid until August of 1999 when operations
were temporarily suspended while we seek approximately $2.5 million in funding
for working capital and improvements.
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
has provided ADA with purified phosphoric acid (PPA), a chemical component
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 were sold
at closing bid prices which ranged from $.55 to $.91 per share. Originally, we
had the obligation to issue additional shares to those purchasers based on
certain market prices, which obligation has recently been converted to stock
options essentially under the same terms. To provide for that obligation we
have issued options for a total 4,813,827 shares which are exercisable based on
certain market prices as described below in Determination of Offering Price.
10
<PAGE>
The registration of all the option shares and certain other shares of
common stock issued and outstanding 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 June 1999 we have made the following news releases and announcements
(the full text of these announcements is available on our web site at
www.earth-sciences.com):
1) June 10, 1999 - ADA announced the signing of an agreement with Wells Fargo &
Co. to finance its receivables.
2) June 10, 1999 - We announced the reopening of the Calgary facility after an
approximately one month maintenance shut down, the drop of 17% in feed stock
prices and finalization of our financing agreement with the Hongkong Bank of
Canada.
3) June 11, 1999 - ADA announced signing of air pollution control contract with
MidAmerica Energy.
4) September 2, 1999 - We announced the reduction in expenditures in Calgary
and Venezuela, by suspension of activities, to concentrate resources on ADA
growth.
5) September 14, 1999 - We announced the award of a $1 million contract from the
DOE to ADA for research into new products.
6) September 28, 1999 - ADA announced the appointement of Richard Schlager as
Vice President.
7) November 10, 1999 - We announced our third quarter results.
8) November 15, 1999 - We announced ADA's achievement of cash flow and stand
alone profits in the 3rd quarter of 1999.
USE OF PROCEEDS - Sales by Selling Stockholders
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 $4,000 for legal, accounting, printing, and other costs.
Any separate costs of selling stockholders will be borne by them.
______________________________________________________________________________
Price Offering Proceeds to Proceeds to
to Public Commissions Selling Stockholders Company
- ------------------------------------------------------------------------------
By Selling
Stockholders
Per Share ..$ .22 $ -- $ .22 $ --
TOTAL.......$ 47,812 $ -- $ 47,812 $ --
____________________________________________________________________________
The price per share for the securities offered by the selling stockholders
is estimated at the last sales price quoted on the OTCBB for the common stock
on December 14, 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
stockholder and the purchaser at the time of sale. 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.
USE OF PROCEEDS - Exercise of Options
We would receive up to $48,138 upon the exercise of the stock options, which
amount is expected to be used for general working capital purposes. Any separate
costs of option holders will be borne by them. The proceeds to the company does
not reflect expenses of this offering payable by the Company estimated at
$4,000.
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. The listed selling stockholders, with the exception of World Capital
Funding as noted below, purchased or received a total of 1,540,623 shares of
common stock from us at various dates at the then current market price. All of
those shares have previously been registered for sale.
11
<PAGE>
To the best of our knowledge, none of the selling stockholders are broker
dealers or affiliated with any broker dealers.
Shares Owned
Securities Owned Prior to the Offering After Offering
Common Stock Options Shares to
Selling Stockholders Stock Held(1) be Offered Number(2) %
_______________________________________________________________________________
Augustine Fund, LP(3) 684,591 1,948,124 57,715 2,575,000 9.0
Daniel R. Bisque (4) 213,928 389,625 11,543 592,010 2.2
Michael J. DeBoer (5) 93,086 188,462 5,548 276,000
1.0
Pegasus Holdings,
Ltd. (6) 385,495 779,249 60,744 1,104,000 4.0
Barry Seidman 385,495 779,249 60,744 1,104,000 4.0
Franklin J. Stermole 104,921 173,450 4,921 273,450 1.1
R. Scott Tracey (7) 150,639 339,668 10,067 480,240 1.8
World Capital
Funding, LLC (8) 186,045 316,000 6,045 396,000 1.5
______________________________________________________________________________
Totals 2,204,200 4,913,827 217,327 6,809,700 21.8
===============================================================================
(1) The stock options shown, with the exclusion of options for 100,000 shares
held by World Capital Funding which are exercisable at an average price of $1.25
per share, are exercisable at $.01 per share through November 2001, but only to
the extent described below under Determination of Offering Price.
(2) The amounts shown include the stock options noted in (1) above.
(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 a non-US entity beneficially owned by the Pegasus
Trust whose investment decisions are made by James Grant.
(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.
(8) World Capital Funding, LLC is a private corporation controlled by Keith A.
Mazer and received its shares and options in payment of fees for arranging a
portion of the sales of our shares in February 1999. Included in the stock
options are 100,000 shares exercisable over a five year period commencing in May
1999 with 50,000 shares at $1.00 per share and 50,000 shares at $1.50 per share.
DETERMINATION OF OFFERING PRICE - Option Holders
The exercise price of the outstanding options of $.01 per share is significantly
less than the current market price of the common stock. This exercise price,
which equals the par value of the common stock, was determined in arms-length
negotiations with the option holders. In such negotiations the option holders,
as described below, exchanged certain rights to obtain additional shares of
common stock, for the options to acquire the shares that are included in this
prospectus. The option holders purchased or received for services shares of
common stock from us at various dates at the then current market price. As an
inducement to the sale or receipt, we agreed to issue a limited number of
additional shares to such persons 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, were to have been issued
so that the total shares held by each such person times the 5-day average bid
price equals 125% of the amount paid for the common stock. The total shares
held, for the purpose of that calculation, do not include prior or subsequent
acquisitions and assume no sales of the original shares purchased. Pursuant to
negotiations with such persons, those stock rights were converted to stock
options in November 1999, exercisable under the same terms that the additional
shares were issuable. To the best of our knowledge, none of the option holders
are broker dealers or affiliated with any broker dealers.
PLAN OF DISTRIBUTION - Sales by Selling Stockholders
This prospectus relates to the public offer and sale by certain selling
stockholders of 217,327 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 of this prospectus, 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
12
<PAGE>
stockholders may also offer some or all of the common stock through market
transactions on OTCBB, on which our common stock is traded. Sales of the
common stock through brokers may be made by any method of trading authorized by
OTCBB, 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 stockholder 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. We have advised each
of the selling stockholders that in connection with the sale of the common
stock they will be subject to the market manipulation rules of Regulation M
promulgated by the Securities and Exchange Commission.
We have agreed to indemnify and hold harmless the selling stockholders (other
than selling stockholder Franklin J. Stermole) and each of their respective
officers, directors or persons controlling the selling stockholders from and
against any claim or liability under the Securities Act of 1933, as amended, or
otherwise if such liability or claim arises out of a material untrue statement
or a material omission in the registration statement of which this prospectus
is a part. We also have agreed to reimburse the selling stockholders for all
legal and other expenses incurred by them in connection with investigating or
defending any such claim as and when such expenses are incurred. This
obligation to indemnify does not apply, however, if the liability arises from a
material untrue statement or a material omission in reliance upon or in
conformity with written information furnished to us by the selling stockholder.
The selling stockholders (other than selling stockholder Franklin J. Stermole)
have agreed to indemnify and hold us, our directors, our officers who sign the
registration statement and each person who controls us, harmless from and
against any claim or liability under the Act or otherwise if such claim or
liability arises our of a material untrue statement or a material omission was
made in reliance upon or in conformity with written information furnished to us
by the selling stockholder expressly for use in the registration statement.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed 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.
PLAN OF DISTRIBUTION - Option Holders
No underwriting discounts or commissions or any dealers compensation will be
paid in connection with the issuance of common stock upon any exercise of the
options.
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 26,703,755 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.
13
<PAGE>
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 amended,
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.
14
<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 Stockholders will not be
paying any of these expenses.
SEC registration fee $ 26.67
Printing and mailing expenses $ 500.00
Legal fees and expenses $ 1,500.00
Accounting fees and expenses $ 1,500.00
-----------
- -
Total $ 3,526.67
=================================
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.
15
<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
10.16* Amendment to Securities Purchase Agreement dated November 1999
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,
as amended, 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant hereby certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement and any amendment thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Golden,
State of Colorado on December 20, 1999
EARTH SCIENCES, INC.
Date: December 20, 1999 /s/ Ramon E. Bisque
---------------------------
Ramon E. Bisque, Member of Executive
Committee
Date: December 20, 1999 /s/ Duane N. Bloom
---------------------------
Duane N. Bloom, Member of
Executive Committee
Date: December 20, 1999 /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: December 20, 1999 /s/ Ramon E. Bisque
--------------------------
Ramon E. Bisque,
Director
Date: December 20, 1999 /s/ Duane N. Bloom
--------------------------
Duane N. Bloom,
Director
Date: December 20, 1999 /s/ Michael D. Durham
--------------------------
Michael D. Durham,
Director
Date: December 20, 1999 /s/ Robert H. Lowdermilk
--------------------------
Robert H. Lowdermilk, Director
Date: December 20, 1999 /s/ Mark H. McKinnies
--------------------------
Mark H. McKinnies,
Director
17
<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
December 20, 1999
Earth Sciences, Inc.
910 12th Street
Golden, Colorado 80401
Re: Registration Statement on Form S-3
Covering the Registration of 5,031,154
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 5,031,154
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 December 20, 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 upon due
exercise of stock options will constitute) 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 10.16
AMENDMENT TO SECURITIES SUBSCRIPTION AGREEMENT
GRANT OF OPTION TO PURCHASE SHARES
This Agreement, entered this 15th day of November, 1999 by and between
EARTH SCIENCES, INC., a Colorado corporation with principal executive offices
located at 910 12th Street, Golden, Colorado 80401 (the "Company"), and
________________(the "Buyer"), is an amendment of the Securities Subscription
Agreement dated February 19, 1999 by and between the same parties (the
"Subscription Agreement") pursuant to which Buyer purchased __________ of the
Company's $.01 par value common stock (the "Shares"). Terms not otherwise
defined herein have the meanings set forth in the Subscription Agreement.
WHEREAS, the Subscription Agreement and its Amendment of the same date
(the "1st Amendment") contemplated the issuance by the Company of additional
shares of its $.01 par value common stock to the Buyer under certain
circumstances (the"Additional Shares");
WHEREAS, the Company and the Buyer intended that the Additional Shares be
included in the registration statement on Form S-3 filed by the Company with
regard to the Shares, but such intention has been frustrated;
WHEREAS, the Company and the Buyer desire to transform the rights to
Additional Shares the Buyer held in the 1st Amendment into options to purchase
shares of the Company's $.01 par value common stock exercisable essentially
under the same terms and conditions as the rights for Additional Shares; and
WHEREAS, the Company's Board of Directors has specifically authorized the
granting of the stock option hereinafter described.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Company and Buyer hereby amend the Subscription Agreement
as follow:
1. Voiding of 1st Amendment. The Company and the Buyer agree that the
1st Amendment is void and of no further force or effect.
2. Grant of Stock Option. The Company hereby grants to Buyer effective this
date the Option to Purchase (hereinafter the "Option") no more than the
aggregate of _________ shares of the Company's $.01 par value common stock, on
the terms and conditions hereinafter set forth at a purchase price of $.01 per
share. To the extent not exercised or exercisable, pursuant to paragraph 3
below, the Option to purchase any remaining shares shall expire as of November
15, 2001.
3. Mechanics of and Limitation on Exercise of Option. If the Buyer delivers to
the transfer agent or the Company certificates representing any of the Shares,
together with a check for the estimated exercise price and a notice to the
Company to exercise a portion or all of the Option (the "Notice") and the
average per share closing bid price for the Common Stock for the five trading
days immediately preceding the receipt of the Notice is less than 125% of the
closing per share bid price the trading day immediately preceding the date of
the Closing (as defined in the Subscription Agreement), then with respect to the
number of Shares specified in such Notice and represented by certificates
actually sent to the transfer agent or the Company, the Company shall cause to
be issued shares under the Option in the name of the Buyer in accordance with
the following formula:
OpSh = Sh x [(1+ Dr) x Pp -Fdb]/Fdb, where
OpSh = the option shares to be issued;
Sh = the number of shares referred to in the Notice;
Pp = the per share purchase price of the Shares of $0.906;
Dr = 25% (or .25); and
Fdb = the 5 trading day average per share closing bid price
preceding the date of receipt of the Notice;
Any shares issued pursuant to this Amendment shall be deemed Shares pursuant to
the Subscription Agreement and shall be subject to all the terms and conditions
of the Subscription Agreement. For purposes of this Amendment, the closing per
share bid price of the Company's $.01 par value common stock shall be as
reported by OTCBB. Notwithstanding anything in this Amendment to the contrary,
the Company shall not be required to issue additional shares in excess of its
legally authorized capital, or issue additional shares greater in number than
the shares granted under the Option, or suffer any penalty forfer to the
Company.
6. Liquidated Damages. The Company acknowledges that time is of the essence
with respect to the Company's compliance with its obligations to issue shares
pursuant to a Notice under Paragraph 3 above. Accordingly, the Company hereby
warrants and represents that in the event it becomes obligated to issue shares
under the Option to the Buyer, it the Transfer Agent such shares and an
applicable Notice pursuant to Paragraph 3 hereof) at a price per share equal to
125% of the per share closing bid price of the Common Stock the day immediately
preceding the date of the Closing (the "Call") and cancel any remaining shares
under the Option. The Buyer shall have the right to decline to sell shares
pursuant to the Call, provided however, that such refusal shall automatically
extinguish the Buyer's right to any remaining shares under the Option as
provided in Paragraph 2 of this Amendment with respect to the number of shares
called. The Company may assign its purchase rights under this Paragraph 4 with
consent of the Buyer.
5. Mechanics for Exercise of the Call. To exercise the Call, the Company
shall deliver written notice to the Buyer along with its commitment to pay the
appropriate price to the Buyer within ten (10) business days of the date of
delivery of such notice of the Call. The Buyer shall have five (5) business
days from delivery of the notice of the Call to decline to sell the shares
pursuant to the Call by a written notice of such declination to the Company
within such 5 business day period. In the event the Company does not receive
timely delivery of such notice to decline the Call, the Company shall be
authorized to treat the Call as accepted and, after payment to the Buyer of the
appropriate price, shall be authorized to take those actions it deems necessary
to terminate the Buyers Option and rights in the Shares. After receipt of the
payment pursuant to the Call, the Buyer shall deliver any and all certificates
evidencing the Shares to the Company properly endorsed for transfer
6. Liquidated Damages. The Company acknowledges that time is of the essence
with respect to the Company's compliance with its obligations to issue shares
pursuant to a Notice under Paragraph 3 above. Accordingly, the Company hereby
warrants and represents that in the event it becomes obligated to issue shares
under the Option to the Buyer, it shall (i) instruct its transfer agent with
respect to such issuance; (ii) cause its counsel to issue any necessary
opinion letters; and (iii) take any and all other action necessary to cause its
Transfer Agent to issue any required shares and deliver the same in accordance
with purchaser's instructions within ten (10) business days after the Transfer
Agent has received the certificates for the Shares and the Company has received
the Notice. In the event the Company breaches this warranty, for any reason,
other than an act of God as described below, then the Company shall immediately
pay the Buyer liquidated damages in the amount of 1% of the pro rata Purchase
Price, allocable to the shares for which such additional shares are to be
issued, per day (the "Cash Damages") until the Company shall have complied with
its obligations under Paragraph 1. In the event the Company is in breach of
this warranty for more than ten (10) business days, the Company shall issue to
the Buyer, as additional liquidated damages, additional shares per day of the
Company's Common Stock equal to 1% of the number of the shares originally
purchased pursuant to the Subscription Agreement. The Company's payment of such
liquidated damages shall not, however, alter in any way the Company's
obligations under Paragraph 3. Further, until the Company cures the breach of
Warranty by delivering the shares and paying the liquidated damages, the Company
shall not issue or contract to issue to any other party any of its equity
securities or debt securities convertible into equity securities of the Company.
For purposes of this agreement, an act of God shall excuse a breach of
warranty in the event that weather conditions, acts of war or terrorism, or some
other catastrophic event not generally encountered in business or reasonably
within the contemplation of the parties at the time of execution of this
agreement renders the Company's performance impossible. Such breach of warranty
shall be excused only for so long as the act of God in fact renders performance
impossible.
7. Filing of Registration Statement. The Company agrees to use its best efforts
to file a registration statement on Form S-3 to include the shares covered by
the Option as soon as practicable.
8. Limitation on Weekly Sale of Shares. Except in the event of unusual market
activity, the Buyer hereby agrees to limit the weekly sale of Shares (including
the shares received from any exercise of the Option) to the greater of : a)
______ shares per week, or b) ____ % of the previous week's volume of the
Company's shares sold as reported by the OTCBB.
No other amendments of the Subscription Agreement are intended.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
EARTH SCIENCES, INC.
By: _________________________
Name: Mark H. McKinnies
Title: President
BUYER
By: __________________________
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., which report
appears in the December 31, 1998 Annual Report on Form 10-KSB of Earth
Sciences, Inc., 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
December 20, 1999
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