SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 2000
Commission File No. 0-19566
EARTH SEARCH SCIENCES, INCORPORATED
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(Exact Name of Registrant as Specified in its Charter)
Utah 87-0437723
(State or other Jurisdiction of (IRS Employer ID)
Incorporation or Organization)
502 North 3rd Street, #8 McCall, Idaho 83638
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(Address of Principal Executive Offices, Including Zip Code)
Registrant's telephone number, including area code: (208) 634-7080
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes No X
The number of shares outstanding of each of the registrant's classes of common
stock, as of the close of the period, covered by this report: 130,090,825
shares. The registrant has only one class of common stock.
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EARTH SEARCH SCIENCES, INC.
FORM 10-Q
(Unaudited)
QUARTER ENDED JUNE 30, 2000
PART I
FINANCIAL INFORMATIONTABLE OF CONTENTS
Item 1. Consolidated Financial Statements Page
----
Consolidated Balance Sheet
as of June 30 and March 31, 2000. 3
Consolidated Statement of Operations for the
Three Months Ended June 30, 2000 and 1999. 4
Consolidated Statement of Cash Flows for the
Three Months Ended June 30, 2000 and 1999. 5
Selected Notes to Consolidated Financial
Statements. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II
OTHER INFORMATION REQUIRED
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters of a Vote of
Security Holders 8
Item 5. Other information 8
Item 6. Exhibits and Reports on Form 8-K 8
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<CAPTION>
Earth Search Sciences, Inc.
Consolidated Balance Sheet
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<S> <C> <C>
June 30, March 31,
2000 2000
------------------- -------------------
Assets
Current assets:
Cash $ 3,698,281 $ 6,119,562
Other current assets, net 856,497 803,682
------------------- -------------------
Total current assets 4,554,778 6,923,244
Property and equipment, net 14,000,271 12,608,986
------------------- -------------------
Total assets $ 18,555,049 $ 19,532,230
=================== ===================
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 2,641,012 $ 2,687,212
Accounts payable and accrued expenses 6,171,961 6,287,548
Accrued interest 405,729 356,962
Capital lease obligation 3,000,000 3,000,000
Unearned revenue 49,985 -
------------------- -------------------
Total current liabilities 12,268,687 12,331,722
Long-term liabilities:
Shareholder loans 459,844 459,844
Deferred officers' compensation 2,062,615 2,037,846
Minority interest 1,996,152 2,017,428
------------------- -------------------
Total liabilities 16,787,298 16,846,840
------------------- -------------------
Redeemable common stock, $.001 par value, 134,160 shares
issued and outstanding 21,734 21,734
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Nonredeemable shareholders' deficit
Series A preferred stock; 200,000 shares authorized,
issued and outstanding at June 30 and March 31, 2000, respectively 1,000,000 1,000,000
Common stock, $.001 par value; 200,000,000 shares authorized;
129,956,665 and 126,402,044 shares respectively, issued and outstanding 129,956 126,402
Additional paid-in capital 23,783,921 22,906,866
Common Stock subscribed - 363,000
Treasury stock (200,000) (200,000)
Accumulated deficit (22,967,860) (21,532,612)
------------------- -------------------
Total shareholders' equity 1,746,017 2,663,656
------------------- -------------------
Total liabilities and shareholders' equity $ 18,555,049 $ 19,532,230
=================== ===================
The accompanying notes are an integral part of these financials statements
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<TABLE>
<CAPTION>
Earth Search Sciences, Inc.
Consolidated Statement of Operations
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<S> <C> <C>
For the Three Months
Ended June 30
2000 1999
--------------- ----------------
Revenue $ 463,014 $ 101,784
Cost of services provided (981,364) (74,043)
Gross margin --------------- ----------------
(518,350) 27,741
Expenses:
General and administrative 902,934 375,201
--------------- ----------------
Loss from operations (1,421,284) (347,460)
Interest income 49,334 -
Interest expense (135,573) (201,370)
--------------- ----------------
Loss before minority interest (1,507,523) (548,830)
Minority interest in losses of consolidated subsidiaries 72,276 -
--------------- ----------------
Net loss $ (1,435,247) $ (548,830)
=============== ================
Shares applicable to basic and diluted loss per shares 128,179,335 98,327,779
Basic and diluted loss per share $ (0.011) $ (0.006)
The accompanying notes are an integral part of these financials statements
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<TABLE>
<CAPTION>
Earth Search Sciences, Inc.
Consolidated Statement of Cash Flows
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<S> <C> <C>
For the Three Months
Ended June 30,
2000 1999
----------------- ----------------
Cash flows from operating activities:
Net loss $ (1,435,247) $ (548,830)
Adjustments to reconcile net loss to net cash used in operating activities
Issuance of common stock for services and interest expense 21,354 30,912
Non cash compensation expense 3,656 -
Loss attributed to minority interest (72,276) -
Depreciation 135,340 69,365
Amortization of lease discount - 121,242
Changes in assets and liabilities:
Other current assets (52,815) (61,402)
Accounts payable and accrued liabilities (115,587) 42,944
Accrued liabilities 48,767 22,534
Unearned revenue 49,985 (10,000)
Deferred officers' compensation 24,769 107,566
----------------- ----------------
Net cash used in operating activities (1,392,054) (225,669)
----------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (1,463,140) -
----------------- ----------------
Net cash used in investing activities (1,463,140) -
----------------- ----------------
Cash flows from financing activities:
Repayment of notes payable (25,000) -
Proceeds from shareholder loans - 255,382
Issuance of common stock for cash 407,913 -
Proceeds from subsidiary stock sales 51,000 -
----------------- ----------------
Net cash provided by financing activities 433,913 255,382
----------------- ----------------
Net (decrease) increase in cash (2,421,281) 29,713
Cash at beginning of period 6,119,562 47,642
----------------- ----------------
Cash at end of period $ 3,698,281 $ 77,355
================= ================
The accompanying notes are an integral part of these financials statements
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Earth Search Sciences, Inc.
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SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 (unaudited)
Note 1 Summary of Operations and Significant Accounting Policies
The consolidated statement of financial position as of June 30, 2000,
and the consolidated statements of operations and cash flow for the three months
ended June 30, 2000, and 1999, have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) have been made that are necessary to present fairly the
financial position, results of operation, and cash flows at June 30, 2000 and
1999.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted. These financial statements and notes
thereto should be read in conjunction with the Company's Form 10-K for March 31,
2000 . The results of operation for the three months ended June 30, 2000 are
not necessarily indicative of the operating results to be expected for the full
fiscal year.
New accounting pronouncements
In April 2000, Financial Accounting Standards Board Interpretation No. FIN 44,
"Accounting for Certain transactions involving stock compensation, an
interpretation of APB opinion No. 25", was issued. FIN 44 clarifies and modifies
APB opinion 25, "Accounting for stock issued to employees." FIN 44 is effective
for us in the second quarter of fiscal year 2001. We have not yet determined the
effect, if any, the implementation of the interpretation will have on our
financial condition or results of operations.
Note 2 Operating Segment and Geographic Information
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<CAPTION>
<S> <C> <C> <C> <C>
Airborne
Hyperspectral Satellite
Services Development Other Industries Combined
---------------- ------------- ------------------ ------------
Revenue $ 30,000 $ 433,014 $ - $ 463,014
=============== ============= ================== ============
Operating Loss (569,345) (671,261) (180,678) (1,421,284)
--------------- ------------- ------------------ ------------
Interest income 49,334
Interest expense (135,573)
Minority interest in losses of
consolidated subsidiaries 72,276
------------
Income from continuing operations
before income taxes (1,435,247)
============
Total Assets at June 30, 2000 $ 6,072,500 $ 11,845,814 $ 636,735 $ 18,555,049
=============== ============= ================== ============
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Earth Search Sciences, Inc.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Included in the financial statements of the Company for the first
quarter of 2001 is Space Technology Development Corporation (STDC) which was
acquired on December 21, 1999. The STDC acquisition falls under the DUAP with
the Navy. Earth Search Sciences, Inc. has made all milestone payments to date.
In the first quarter of 2001, the Company continued to pursue its strategic plan
to survey areas of interest for its own use. Areas of interest surveyed with the
Company's remote sensing instruments in the first quarter of 2001 included
potential hydrocarbon properties. A significant third party remote sensing
survey planned for the first quarter of 2001 was postponed to the third quarter
of 2001
Revenue, costs of services provided, and general and administrative expenses
include $433,014, $952,438 and $151,837, respectively, from STDC.
LIQUIDITY AND CAPITAL RESOURCES
Net cash decreased in the first quarter of 2001 due mainly to capital
expenditures, salaries and overhead. Capital expenditures in 2001 were primarily
for payments for an aircraft and hyperspectral instruments.
FUTURE OPERATIONS
In the future, the Company intends to perform remote sensing surveys
for third parties in the mineral, hydrocarbon, forestry and environmental areas.
In addition, the Company intends to continue to perform remote sensing surveys
for its own use with applications in mineral and hydrocarbon exploration.
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Earth Search Sciences, Inc.
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PART II
OTHER INFORMATION REQUIRED
Item 1. Legal Proceeding None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote
of Security Holder None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned.
EARTH SEARCH SCIENCES, INC.
Date: August 14, 2000 /s/ Larry F. Vance
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Larry F. Vance
Chairman and Director
