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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, 2002
Commission File No. 0-19566
EARTH SEARCH SCIENCES, INC.
--- ---------------------------
(Exact Name of Registrant as Specified in its Charter)
UTAH 87-0437723
---- ----------
(State or other Jurisdiction of (IRS Employer ID)
Incorporation or Organization)
1729 MONTANA HIGHWAY 35, KALISPELL, MT 59901
--------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
Registrant's telephone number, including area code: (406) 751-5200
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 [X] No [_]
The number of shares outstanding of each of the registrant's classes of common
stock, as of August 15, 2002, covered by this report: 176,513,248 shares. The
registrant has only one class of common stock.
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EARTH SEARCH SCIENCES, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
PART I
------
FINANCIAL INFORMATION
---------------------
TABLE OF CONTENTS
-----------------
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS PAGE
----
Consolidated Balance Sheets as of June 30, 2002,
(unaudited) and March 31, 2002. 3
Consolidated Statements of Operations for the Three
Months Ended June 30, 2002 and 2001 (unaudited). 4
Consolidated Statements of Cash Flows for the Three
Months Ended June 30, 2002 and 2001 (unaudited). 5
Selected Notes to Consolidated Financial Statements. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II
-------
OTHER INFORMATION REQUIRED
--------------------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters of a Vote of Security Holders 12
Item 5. Other information 12
Item 6. Exhibits and Reports on Form 8-K 12
The accompanying notes are an integral part of these financial statements.
EARTH SEARCH SCIENCES, INC.
Consolidated Balance Sheets
- -------------------------------------------------------------------------------------------------------
June 30, 2002
(unaudited) March 31,2002
------------ ------------
Assets
Current assets:
Cash $ 402,708 $ 66,681
Accounts receivable, net 890,535 1,205,175
Other current assets 129,935 134,155
------------ ------------
Total current assets 1,423,178 1,406,011
Property and equipment, net 5,455,732 5,690,580
------------ ------------
Total assets $ 6,878,910 $ 7,096,591
============ ============
Liabilities and Shareholders' (Deficit) Equity
Current liabilities:
Notes payable $ 90,480 $ 440,387
Capital lease obligation 3,323,694 3,277,415
Deferred officers' compensation -- 423,641
Accounts
payable 8,282,573 8,620,402
Accrued expenses 95,630 212,773
Accrued interest 376,357 498,928
Investor deposit 377,215 190,000
------------ ------------
Total current liabilities 12,545,949 13,663,546
Long-term liabilities:
Notes payable less current portion 1,022,085 1,033,698
Shareholder loans 1,031,845 1,256,844
Deferred officers' compensation 2,277,832 2,215,094
------------ ------------
Total liabilities 16,877,711 18,169,182
Minority interest 157,011 219,759
Commitments and contingencies -- --
Redeemable common stock, $.001 par value 17,981 17,981
Nonredeemable shareholders' (deficit) equity:
Series A preferred stock; 200,000 shares authorized,
issued and outstanding; liquidation preference $1,000,000 1,000,000 1,000,000
Common stock, $.001 par value; 200,000,000 shares
authorized; 175,707,608 and 158,775,576 shares,
respectively, issued and outstanding 175,708 158,776
Additional paid-in capital 34,504,281 32,697,066
Treasury stock (200,000) (200,000)
Accumulated deficit (45,653,782) (44,966,173)
------------ ------------
(10,173,793) (11,310,331)
------------ ------------
Total liabilities and shareholders' (deficit) $ 6,878,910 $ 7,096,591
============ ============
The accompanying notes are an integral part of these financial statements.
3
EARTH SEARCH SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------------
For the Three Months
Ended June 30,
2002 2001
------------- -------------
Revenue $ 80,779 $ 1,522,069
Costs of revenue 59,409 1,875,926
------------- -------------
Gross margin (deficit) 21,370 (353,857)
Expenses:
General and administrative 573,842 700,413
Non-cash compensation 3,656 3,657
------------- -------------
577,498 704,070
------------- -------------
Loss from operations (556,128) (1,057,927)
Other income (expense)
Interest income 61 1,744
Interest expense (194,290) (143,596)
------------- -------------
Loss before minority interest (750,357) (1,199,779)
Minority interest in losses of consolidated subsidiaries 62,748 114,259
------------- -------------
Net loss $ (687,609) $ (1,085,520)
============= =============
Shares applicable to basic and diluted loss per share 164,597,057 154,201,609
Basic and diluted loss per share $ (0.00) $ (0.01)
The accompanying notes are an integral part of these financial statements.
4
Earth Search Sciences, Inc.
Consolidated Statements of Cash Flows (unaudited)
- ---------------------------------------------------------------------------------------------------
For the Three Months
Ended June 30,
2002 2001
----------- -----------
Cash flows from operating activities:
Net loss $ (687,609) $(1,085,520)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non cash compensation expense 3,656 3,657
Issuance of common stock for services and interest expense 46,380 --
Loss attributed to minority interest (62,748) (114,259)
Depreciation, amortization and depletion 151,005 70,019
Write off capitalized costs on oil and gas properties -- 466,522
Changes in assets and liabilities
Accounts receivable 314,640 (889,176)
Other current assets 4,220 (125,636)
Accounts payable and accrued expenses (454,972) 836,682
Accrued interest 81,942 106,320
Deferred officers' compensation 79,975 31,548
----------- -----------
Net cash used in operating activities (523,511) (699,843)
----------- -----------
Cash flow from investing activities:
Capital expenditures (32,779) (199,824)
----------- -----------
Net cash used in investing activities (32,779) (199,824)
----------- -----------
Cash flows from financing activities:
Repayments on notes payable (11,520) --
Issuance of common stock for cash 300,000 --
Proceeds from shareholder loans -- 1,469,000
Proceeds from sale of interests in mineral properties 116,622 --
Proceeds from investor deposit 187,215 --
Proceeds from sale of common stock of subsidiary 300,000 --
----------- -----------
Net cash provided by financing activities 892,317 1,469,000
----------- -----------
Net increase in cash 336,027 569,333
Cash at beginning of period 66,681 367,902
----------- -----------
Cash at end of period $ 402,708 $ 937,235
=========== ===========
Interest paid $ 44,121 $ 6,411
=========== ===========
Non-cash investing and financing activities:
Conversion of notes payable, shareholder loans and
related accrued interest to common stock $ 733,233 $ --
=========== ===========
Settlement of deferred officers' compensation with
common stock $ 440,878 $ --
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
EARTH SEARCH SCIENCES, INC
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 (unaudited)
1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements of Earth Search Sciences, Inc.
(the Company) have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
The results of operations for interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year ending March 31, 2003. The
accompanying unaudited consolidated financial statements and related notes
should be read in conjunction with the audited consolidated financial statements
and the Form 10-K of the Company for its fiscal year ended March 31, 2002.
2. GOING CONCERN
The Company is experiencing working capital deficiencies because of operating
losses and capital expenditures. The Company and its subsidiaries have operated
with funds received from the sale of its common stock, sale of common stock of
subsidiaries, sale of interest in mineral properties, the issuance of notes and
operating revenue. The ability of the Company to continue as a going concern is
dependent upon continued debt or equity financings until or unless the Company
is able to generate sufficient operating cash flows to sustain ongoing
operations. The Company plans to increase the number of revenue producing
services by executing its sales and marketing plan and thereby continue as a
going concern. There can be no assurance that the Company can generate
sufficient operating cash flows or raise the necessary funds to continue as a
going concern.
3. NEW ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 (SFAS 144), ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS. SFAS 144 supersedes SFAS 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF, and
APB Opinion 30, REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF
DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING EVENTS AND TRANSACTIONS, for segments of a business to be disposed of.
SFAS 144 is effective for fiscal years beginning after December 15, 2001. The
initial application of SFAS 142 did not have a material effect on the Company's
financial statements.
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH
EXIT OR DISPOSAL ACTIVITIES. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, LIABILITY RECOGNITION FOR
CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY
(INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING). The Company will be
required to adopt this statement for exit or disposal activities that are
initiated after December 31, 2002. The Company is currently evaluating the
potential effect of the initial application of SFAS 146 on its consolidated
financial statements.
6
4. NAVAL EARTHMAP OBSERVER (NEMO) PROJECT
The Company, through a wholly owned subsidiary, in cooperation with the
Department of the Navy's Office of Naval Research (ONR) and several commercial
partners, has worked on developing a remote-sensing instrument to be mounted on
a satellite, Naval EarthMap Observer (NEMO).
In May 2002, the Company received notification from the ONR indicating that the
performance period for the agreement governing the NEMO project had ended and
that it was time to initiate close-out procedures, which include accounting for
the distributions of federal funds under the agreement and accounting for and
disposing of all real property and equipment acquired under the agreement.
Further, the ONR requested the Company to provide an audited record of all
distributions of federal and non-federal funds under the agreement. The Company
is waiting for an audit date to be set by the ONR and the Defense Contract Audit
Agency.
Management believes that after the close-out procedures and the related audit of
project distributions, the Company may enter into a new agreement with the ONR
relating to the NEMO project. Further, management believes that given the
Company's significant contribution to the NEMO project to date, any future
agreement with the ONR would most likely include appropriate compensation and
reimbursement. The ONR is unwilling to formally discuss this possibility until
after the completion of the close-out audit.
Given the uncertainty surrounding the future of the NEMO project, the Company
reevaluated the carrying value of the costs incurred in the development of the
remote sensing instrument and satellite. Under the direction of current
accounting pronouncements, the Company determined that the asset was impaired
and recognized a loss on the long-lived asset of $13,010,364 as of March 31,
2002.
As of June 30, 2002, accounts receivables include $808,436 due from the ONR as
reimbursement for certain subcontract costs, which the Company believes were
approved by the ONR for payment with federal funds. The ONR has questioned
$649,839 of this balance and refuses reimbursement until the conclusion of the
NEMO project close-out audit. Management is confident that the Company has
accounted for the disbursements of federal funds properly, but it is possible
that the amount in question may not ultimately be reimbursed by the ONR.
Included in accounts payable as of June 30, 2002 and March 31, 2002 is
$7,657,630 and $7,596,683, respectively, of accounts payable to NEMO
subcontractors and vendors. These liabilities are payables of the subsidiary and
are not guaranteed by Earth Search Sciences, Inc.
5. MINERAL PROPERTIES
In the first quarter of fiscal 2003, the Company incurred additional
expenditures on existing working interests in oil and gas properties of $27,279.
Also in the first quarter of 2003, the Company sold portions of two (2)
properties to an outside investor for $116,622. Based on the agreements for the
Company's oil and gas working interests, the Company will proportionately share
in future revenues as well as future exploration, drilling and operating costs.
For new drillings on existing properties, the Company will have the right but
not the obligation to participate in new drilling efforts. On a case by case
basis the Company will determine whether or not to participate in these new
drilling efforts.
7
6. OPERATING SEGMENT AND GEOGRAPHIC INFORMATION
Business Segment Information for First Quarter of 2003
Airborne Adjustments
Hyperspectral Satellite Oil and Gas Other and
Services Development Properties Industries Eliminations Combined
------------ -------------- ------------ ------------- ------- ------------
Revenue $ 22,400 $ -- $ 58,379 -- -- $ 80,779
============ ============== ============ ============= ======= ============
Operating Loss $ (248,991) $ (181,178) $ (19,663) $ (106,296) -- $ (556,128)
============ ============== ============ ============= ======= ============
Interest income 10 51 -- -- -- 61
Interest expense (91,269) (103,021) -- -- -- (194,290)
Income from continuing operations
before income taxes and minority
interests -- -- -- -- -- (750,357)
Identifiable assets at 6/30/2002 $ 4,443,928 $ 1,175,364 $ 1,148,990 $ 110,628 -- $ 6,878,910
============ ============== ============ ============= ======= ============
Total Assets at 6/30/2002 -- -- -- -- -- $ 6,878,910
============
Depreciation, amortization and
depletion for the period ending
6/30/2002 $ 137,297 $ -- $ 13,277 $ 431 -- $ 151,005
============ ============== ============ ============= ======= ============
Capital expenditures for the period
ending 6/30/2002 $ 5,000 $ -- $ 27,779 $ -- -- $ 32,779
============ ============== ============ ============= ======= ============
Business Segment Information for First Quarter of 2002
Airborne Adjustments
Hyperspectral Satellite Oil and Gas Terranet & and
Services Development Properties Skywatch Eliminations Combined
------------ -------------- ------------ ------------- ------- ------------
Revenue $ 36,156 $ 1,370,419 $ 115,494 -- -- $ 1,522,069
============ ============== ============ ============= ======= ============
Operating Loss $ (411,781) $ (85,081) $ (448,904) $ (112,161) -- $ (1,057,927)
============ ============== ============ ============= ======= ============
Interest income 593 1,151 -- -- -- 1,744
Interest expense (143,569) -- -- -- -- (143,596)
Income from continuing operations
before income taxes and minority
interests -- -- -- -- -- (1,199,779)
Identifiable assets at 6/30/2001 $ 5,723,479 $ 14,054,585 $ 1,115,587 $ 113,903 (50,000) $ 20,957,554
============ ============== ============ ============= ======= ============
Total Assets at 6/30/2001 -- -- -- -- -- $ 20,957,554
============
Depreciation, amortization and
depletion for the period
ending 6/30/2001 $ 56,803 $ -- $ 12,785 $ 431 -- $ 70,019
============ ============== ============ ============= ======= ============
Capital expenditures for the period
ending 6/30/2001 $ 5,495 $ 47,167 $ 147,162 $ -- -- $ 199,824
============ ============== ============ ============= ======= ============
7. NET LOSS PER SHARE
Basic loss per share is based on the weighted average number of shares
outstanding during each quarter and income available to common shareholders.
Loss per share assuming dilution is based on the assumption that outstanding
stock options were exercised. The weighted average shares for computing basic
loss per share were 164,597,057 and 154,201,609 for the three months ended June
30, 2002 and 2001, respectively. At June 30, 2002 and 2001, 17,075,000 and
17,575,500 stock options were exercisable, respectively. Because of the net loss
for the three months ended June 30, 2002 and 2001, potentially dilutive common
stock issuances were not included in the calculation of diluted loss per share
as their inclusion would be anti-dilutive.
8
8. SUBSEQUENT EVENTS
Subsequent to June 30, 2002, the Board of Directors approved an extension of
options to certain officers that were scheduled to expire on July 31, 2002 for
another four years under the same terms. Additionally, a new stock option for
1,000,000 shares at an exercise price of $0.15 per share expiring December 31,
2004 was issued to an officer of the Company and previously issued options to
the officer were considered vested for past performance.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Included in the financial statements of the Company is Space Technology
Development Corporation (STDC), which was acquired on December 21, 1999.
In the fourth quarter of 2002, STDC recognized a long-lived fixed asset
impairment loss of $13,010,364 due to the uncertainty surrounding the future of
the NEMO project. Management is waiting for the Office of Naval Research (ONR)
to schedule an audit of distributions of federal and non-federal funds under the
expired agreement with ONR for the NEMO hyperspectral satellite program. Until
the audit is complete, the ONR has decided not to reimburse STDC for certain
invoices for subcontract and vendor costs on the NEMO program even though these
costs were approved by the Naval Research Laboratory and the ONR for payment
with government funds. As of June 30, 2002, the Company has $808,401 of
receivables on its balance sheet from the ONR. The Company believes that the ONR
will make payment of the remaining receivables as soon as the audit is complete.
In the Airborne Hyperspectral Services business segment in the first quarter of
2003, the Company projects were primarily environmental related projects. During
the quarter, the Company experienced significant down time due to aircraft
maintenance and adverse weather conditions. In the second quarter of 2003, the
Company anticipates it will catch up on its scheduled data collections.
In the Oil and Gas Properties business segment in the first quarter of 2003, the
Company continued with its strategic plan of investing in projects that explore
and develop oil and gas reserves.
The Company recognized revenue of $80,779 in the first quarter of 2003 compared
with $1,522,069 in the first quarter of 2002. Included in the first quarter of
2003 is $58,379 in revenue from Oil and Gas Properties compared to $115,494 in
revenue in the first quarter of 2002. Included in the first quarter of 2002
revenue is $1,370,419 from STDC and $0 in the first quarter of 2003 due to the
termination of the agreement with the ONR. Revenue from the agreement with the
ONR is a pass through to subcontractors and vendors on the NEMO program and is
offset with an equal amount of cost of sales in the Statement of Operations.
The Company recognized cost of revenue of $59,409 in the first quarter of 2003
compared with $1,875,926 in the first quarter of 2002. Included in the three
months ended June 30, 2002 is STDC cost of sales of $3,510 compared with
$1,370,419 for the three months ended June 30, 2001. Included in cost of sales
for the three months ended June 30, 2001 is $466,522 of previously capitalized
costs on two oil and gas drillings that were determined to be uneconomical
wells.
General and administrative expenses for the first quarter of 2003 were $573,842
compared with $704,070 in the first quarter of 2002. The termination of the
agreement with the ONR caused the Company to reduce staff and overhead at its
Alexandria, Virginia office.
9
Interest expense for the three months ended June 30, 2002 and 2001 was $194,290
and $143,596, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash increased in the first quarter of 2003 due to proceeds from the sale of
the Company's common stock under the equity line agreement, sales of subsidiary
common stock, sale of portion of mineral properties less expenditures and
operating losses. Capital expenditures in the first quarter of 2003 were
primarily expenditures for the Company's oil and gas properties and computer
related assets.
Net cash used in operating activities was $523,511 for the three months ended
June 30, 2002 resulting primarily from a net loss of $687,609 net of certain
non-cash expenses. Net cash used in operating activities was $699,843 for the
three months ended June 30, 2001, resulting primarily from a net loss of
$1,085,520, net of certain non-cash expenses.
Included in accounts payable and accrued expenses at June 30, 2002 and March 31,
2002 is $7,657,630 and $7,722,688, respectively of STDC liabilities. These
liabilities are not guaranteed by Earth Search Sciences, Inc.
The Company is experiencing working capital deficiencies because of operating
losses and capital expenditures. The Company and its subsidiaries have operated
with funds received from the sale of common stock, the issuance of notes and
operating revenue. The ability of the Company to continue as a going concern is
dependent upon continued debt or equity financings until or unless the Company
is able to generate operating cash flows to sustain ongoing operations. The
Company plans to increase the number of revenue producing services through the
use of additional hyperspectral instruments and thereby continue as a going
concern. There can be no assurance that the Company can generate sufficient
operating cash flows or raise the necessary funds to continue as a going
concern.
FUTURE OPERATIONS
- -----------------
In the future, the Company intends to continue with its efforts in the
environmental market and oil and gas business segment as well as to pursue sales
of hyperspectral services, including surveying and processing, to 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 as well as
hyperspectral validation surveys that will assist the Company in future
marketing activities.
The Company believes that the market for hyperspectral remote sensing services
will experience significant growth over the next several years. The current
ASPRS/NASA TEN-YEAR INDUSTRY FORECAST (http://www.asprs.org/news.html) indicates
that the remote sensing market has been growing at a rate of 13% per year and
the hyperspectral portion of that market will be 12% by 2006 and worth
approximately $440 million. Further, in the last year, the Company has seen an
important increase in awareness of and applications for hyperspectral remote
sensing technology.
The Company has engaged the services of the strategic consulting firm of
D'Angelo Cohen, LLC. William D'Angelo and Matthew Cohen, principals of D'Angelo
Cohen LLC, are joining ESSI as Vice Presidents; their first assignment will be
to develop 1) a plan of short and long term strategic strategies necessary to
achieve profitability and long term success 2) a business plan suitable to
present to potential investors 3) an analysis of the competitive landscape and a
sales and marketing plan to take full advantage of the current opportunities and
4) a review of potential merger and acquisition strategies and other
alternatives to best increase shareholder value and stock liquidity.
10
Further, management anticipates that Mssrs. D'Angelo and Cohen will assist in
the execution of their recommendations, suggested strategies and other corporate
endeavors.
In the prior six months, the Company has focused on reducing overhead as a
result of the termination of the agreement with the ONR and in order to become
more competitive. The Company believes that with the reduction and overhead,
performance of current backlog surveys, and execution of a sales and marketing
plan, future financial results should improve with profitability being
managements near term target.
The Company is currently searching for potential replacements to the recently
departed Chief Executive Officer and President. The Company is looking for
qualified candidates with a proven record of directing the operations of an
emerging technology company. Until replacement(s) are found, the Chairman has
assumed the duties of CEO and President.
The Company intends to continue to expedite the ONR's requested audit of STDC.
Upon completion of the audit, management firmly believes that ONR will meet with
the Company to discuss options for going forward and negotiate at a minimum
tasking and data stream from the NEMO hyperspectral instrument if it is
successfully launched for the significant investment made in the NEMO program.
The Company holds security interests in important space segment hardware for the
NEMO program as well as a critical commercial remote sensing license. As the ONR
has spent over $60 million on the NEMO program, the Company is optimistic that a
viable option to complete and launch NEMO will be found. Management believes
with sufficient funding the NEMO program will be back on track.
The Company is presently scheduled to sign an agreement with the Republic of
Fiji on August 28, 2002. The scope of the agreement will cover hyperspectral
mapping of the Republic of Fiji islands, training of local personnel in
hyperspectral processing, and the establishment of a remote sensing educational
center in Fiji. After the agreement is signed, it will be the mutual
responsibility of the Company and the Republic of Fiji to seek out and secure
financing for the project.
The Company believes the future of remote sensing is to integrate satellite,
airborne and handheld remote sensing information from various remote sensing
instruments including hyperspectral instruments. This integration of remote
sensing information from different sources is already occurring and will
continue to define the roadmap for the future of the remote sensing industry. As
the Company has recognized an impairment loss on the NEMO program in the prior
year and if the Company can obtain the tasking and data stream from NEMO and
successfully penetrate the emerging market for combined satellite and airborne
hyperspectral remote sensing applications, the Company will be in a position to
experience strong gross margins in future years.
11
PART II
OTHER INFORMATION REQUIRED
--------------------------
Item 1. Legal proceedings None
Item 2. Changes in securities
Recent Sales of Unregistered Securities (1)
Amount of Price per Total Cash
Date Securities Sold Share Proceeds ($)
---- --------------- ----- ------------
5/20/02 200,000 0.08 (2)
5/30/02 3,074,273 0.12 (3)
6/7/02 8,332,329 0.09 (4)
6/19/02 377,220 0.05 (3)
6/30/02 300,000 0.09 (5)
6/30/02 500,000 0.12 (3)
(1) Shares sold were common stock, par value $0.001
(2) Consideration received for the shares was consulting services
(3) Consideration received for the shares was employee and consultant
services
(4) Shares exchanged pursuant to debt conversion
(5) Shares issued for debt consideration
Recent Sales of Unregistered Securities (1)
Amount of Price per Total Cash
Date Securities Sold Share Proceeds ($)
---- --------------- ----- ------------
4/16/02 2,142,860 0.07 150,000
6/17/02 2,005,350 0.075 150,000
(1) Sales of securities made pursuant to Registration Statement effective
September 14, 2001file number 333-66100. Securities were sold at a 12%
discount of the average market price on 5 trading days. All proceeds
were used for working capital purposes.
Item 3. Defaults upon senior securities None
Item 4. Submission of matters to a vote of security holders None
Item 5. Other information
Exhibits attached
Statement Under Oath of Principal Executive Officer and Principal
Financial Officer Regarding Facts and Circumstances Relating to Exchange
Act Filings
12
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 /s/ Rory J Stevens
--------------------------------
Rory J Stevens
Chief Financial Officer
13