SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 12, 2010
EARTH SEARCH SCIENCES, INC.
(Exact name of registrant as specified in Charter)
| Nevada | | 000-19566 | | 87-0437723 |
(State or other jurisdiction of incorporation or organization) | | (Commission File No.) | | (IRS Employee Identification No.) |
306 Stoner Loop Road, Lakeside, MT 59922
(Address of Principal Executive Offices)
(406) 751-5200
(Issuer Telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 4 — Matters Related to Accountants and Financial Statements
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
While preparing Earth Search Sciences, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, the Company became aware of prior period misstatements related to the capitalization of research and development costs.
Based on this discovery and the conclusion made by Management, as described below, the Annual Reports for the periods ended March 31, 2010 and March 31 2009, and the Quarterly Reports for the periods ended December 31, 2009, September 30, 2009, June 30, 2009, December 30, 2008 and September 30, 2008 should not be relied upon and should be restated.
The purpose of this filing is to disclose the restatements of the affected periods (annual periods ended March 31, 2010 and March 31, 2009 and quarterly periods ended December 31, 2009, September 30, 2009, June 30, 2009, December 31, 2008 and September 30, 2008) under Item 4.02 of Form 8-K. No further restatement of the Company’s financials is anticipated.
Decision to Restate and Effect of the Restatement
On August 13, 2010, during the Company’s quarter-end close procedures, MaloneBailey LLP, the Company’s registered independent public accounting firm, discovered and informed the Company of an error related to the capitalization of the costs for our Prototype development. Beginning in the quarter ended September 30, 2008, the Company capitalized all costs associated with the development of our prototype in the belief it should be treated as the construction of equipment. Upon re-examination management has concluded that such costs should have been treated as research and development costs and expensed when occurred.
The following tables illustrate the impact of this error on the Company’s financial statements for the respective periods:
The twelve months ended March 31, 2010:
| March 31, 2010 | | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Balance Sheet | | | | | | |
| Deposits | | $ | 903,684 | $ | (903,684) | $ | - |
| TOTAL ASSETS | | | 1,045,771 | | (903,684) | | 142,087 |
| | | | | | | | - |
| Accumulated deficit | | | (73,105,699) | | (903,684) | | (74,009,383) |
| Total stockholders’ deficit | | (17,898,081) | | (903,684) | | (18,801,765) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 1,045,771 | | (903,684) | | 142,087 |
| | | | | | | | |
| | | | | | | | |
| For the Year Ended March 31, 2010 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Expenses | | | | | | |
| General and administrative | $ | 1,410,485 | $ | (10,832) | $ | 1,399,653 |
| | | | | | | | |
| Total expenses | | | 1,511,957 | | (10,832) | | 1,501,125 |
| | | | | | | | |
| Loss from operations | | | (1,511,957) | | (10,832) | | (1,501,125) |
| | | | | | | | |
| Net Loss | | | (1,267,675) | | (10,832) | | (1,256,843) |
| | | | | | | | |
| For the Year Ended March 31, 2010 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statements of Cash Flows | | | | | | |
| Net loss | | $ | (1,267,675) | $ | (10,832) | $ | (1,256,843) |
| | | | | | | | |
| Accounts payable and accrued expenses | | 861,374 | | (140,832) | | 720,542 |
| NET CASH USED IN OPERATING ACTIVITIES | | (655,793) | | (140,832) | | (785,793) |
| | | | | | | | |
| Cash paid for prototype | | (130,000) | | 130,000 | | - |
| NET CASH USED IN INVESTING ACTIVITIES | | (130,000) | | 130,000 | | - |
| | | | | | | | |
| Capitalized prototype cost in accounts payable | | 10,832 | | (10,832) | | - |
| | | | | | | | |
| For the Year Ended March 31, 2010 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | |
| | | | | | | | |
| Net Loss | | $ | (1,267,675) | | (10,832) | $ | (1,256,843) |
| Accumulated deficit | | | (73,105,699) | | (903,684) | | (74,009,383) |
| Total stockholders’ deficit | | (17,898,081) | | (903,684) | | (18,801,765) |
The nine months ended December 31, 2009:
| December 31, 2009 | | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Balance Sheet | | | | | | |
| Deposits | | $ | 887,076 | $ | (887,076) | $ | - |
| TOTAL ASSETS | | | 1,062,560 | | (887,076) | | 175,484 |
| | | | | | | | |
| Accumulated deficit | | | (72,684,512) | | (887,076) | | (73,571,588) |
| | | | | | | | |
| Total stockholders’ deficit | | (17,465,657) | | (887,076) | | (18,352,733) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 1,062,560 | | (887,076) | | 175,484 |
| | | | | | | | |
| | | | | | | | |
| For the Year Ended December 31, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Expenses | | | | | | |
| | | | | | | | |
| General and administrative | $ | 1,121,375 | $ | (27,440) | $ | 1,093,935 |
| | | | | | | | |
| Total expenses | | | 1,199,261 | | (27,440) | | 1,171,821.00 |
| | | | | | | | |
| Loss from operations | | | (1,199,261) | | 27,440 | | (1,171,821) |
| | | | | | | | |
| Net loss | | | (846,486) | | 27,440 | | (819,046) |
| | | | | | | | |
| For the Year Ended December 31, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| | | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net loss | | $ | (846,486) | $ | 27,440 | $ | (819,046) |
| Accounts payable and accrued expenses | | 715,214 | | (122,440) | | 592,774 |
| Cash paid for equipment | | (95,000) | | 95,000 | | - |
| Deposit included in account payable | | 27,440 | | (27,440) | | - |
| Prepaid compensation in account payable | | - | | | | |
| | | | | | | | |
| For the Year Ended December 31, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | |
| | | | | | | | |
| Balances at March 31, 2009 | $ | (71,838,024) | $ | (914,516) | $ | (72,752,540) |
| Net Loss | | | (270,822) | | 27,440 | | (243,382) |
| Accumulated deficit | | | (72,108,846) | | (887,076) | | (72,995,922) |
| Total stockholders’ deficit | | (17,465,657) | | (887,076) | | (18,352,733) |
The six months ended September 30, 2009:
| September 30, 2009 | | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Balance Sheet | | | | | | |
| Deposits | | $ | 887,076 | $ | (887,076) | $ | - |
| TOTAL ASSETS | | | 989,624 | | (887,076) | | 102,548 |
| Accumulated deficit | | | (72,108,846) | | (887,076) | | (72,995,922) |
| | | | | | | | |
| Total stockholders’ deficit | | (16,990,872) | | (887,076) | | (17,877,948) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 989,624 | | (887,076) | | 102,548 |
| | | | | | | | |
| For the Period Ended September 30, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Expenses | | | | | | |
| | | | | | | | |
| General and administrative | $ | 717,046 | $ | (27,440) | $ | 689,606 |
| | | | | | | | |
| Total expenses | | | 768,970 | | (27,440) | | 741,530 |
| | | | | | | | |
| Loss from operations | | | (768,970) | | 27,440 | | (741,530) |
| | | | | | | | |
| Net income/(loss) | | | (270,822) | | 27,440 | | (243,382) |
| | | | | | | | |
| For the Year Ended September 30, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statements of Cash Flows | | | | | | |
| | | | | | | | |
| Net loss | | $ | (270,822) | $ | 27,440 | $ | (243,382) |
| Accounts payable and accrued expenses | | 501,116 | | (72,440) | | 428,676 |
| Cash paid for equipment | | (45,000) | | 45,000 | | - |
| NET CASH USED IN INVESTING ACTIVITIES | | (45,000) | | 45,000 | | - |
| | | | | | | | |
| Deposit included in account payable | | 27,440 | | (27,440) | | - |
| | | | | | | | |
| For the Six months ended September 30, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | |
| | | | | | | | |
| Balances at March 31, 2009 | $ | (71,838,024) | $ | (914,516) | $ | (72,752,540) |
| Net Loss | | | (270,822) | | 27,440 | | (243,382) |
| Accumulated deficit | | | (72,108,846) | | (887,076) | | (72,995,922) |
| | | | | | | | |
| Total stockholders’ deficit | | (16,990,872) | | (887,076) | | (17,877,948) |
The three months ended June 30, 2009:
| June 30, 2009 | | | As | | | | As | |
| | | | Reported | | Adjustment | | Restated | |
| Consolidated Balance Sheet | | | | | | | |
| Deposits | | $ | 887,076 | $ | (887,076) | $ | - | |
| TOTAL ASSETS | | | 1,082,240 | | (887,076) | | 195,164 | |
| Accumulated deficit | | | (72,437,860) | | (887,076) | | (73,324,936) | |
| | | | | | | | | |
| Total stockholders’ deficit | | (19,053,136) | | (887,076) | | (19,940,212) | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 1,082,240 | | (887,076) | | 195,164 | |
| | | | | | | | | |
| For the Period Ended June 30, 2009 | | As | | | | As | |
| | | | Reported | | Adjustment | | Restated | |
| Consolidated Statement of Expenses | | | | | | | |
| General and administrative | $ | 392,282 | $ | (27,440) | $ | 364,842 | |
| | | | | | | | | |
| Total expenses | | | 418,244 | | (27,440) | | 390,804 | |
| | | | | | | | | |
| Loss from operations | | | (418,244) | | 27,440 | | (390,804) | |
| | | | | | | | | |
| Net loss | | | (599,836) | | 27,440 | | (572,396) | |
| | | | | | | | | |
| For the Year Ended June 30, 2009 | | As | | | | As | |
| | | | Reported | | Adjustment | | Restated | |
| Consolidated Statements of Cash Flows | | | | | | | |
| | | | | | | | |
| Accounts payable and accrued expenses | $ | 203,951 | $ | (35,000) | $ | 168,951 | |
| NET CASH USED IN OPERATING ACTIVITIES | | (222,018) | | (35,000) | | (257,018) | |
| Cash paid for prototype | | (35,000) | | 35,000 | | - | |
| NET CASH USED IN OPERATING ACTIVITIES | | (35,000) | | 35,000 | | - | |
| | | | | | | | | |
| For the Three Months Ended June 30, 2010 | | As | | | | As | |
| | | | Reported | | Adjustment | | Restated | |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | | |
| | | | | | | | | |
| Balances at March 31, 2009 | $ | (71,838,024) | $ | (914,516) | $ | (72,752,540) | |
| Net Loss | | | (270,822) | | 27,440 | | (243,382) | |
| Accumulated deficit | | | (72,437,860) | | (887,076) | | (73,324,936) | |
| Total stockholders’ deficit | | (19,053,136) | | (887,076) | | (19,940,212) | |
The twelve months ended March 31, 2009:
| March 31, 2009 | | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Balance Sheet | | | | | | |
| Deposits | | $ | 914,516 | $ | (914,516) | $ | - |
| TOTAL ASSETS | | | 1,143,696 | | (914,516) | | 229,180 |
| | | | | | | | - |
| Accumulated deficit | | | (71,838,024) | | (914,516) | | (72,752,540) |
| Total stockholders’ deficit | | (18,528,300) | | (914,516) | | (19,442,816) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 1,143,696 | | (914,516) | | 229,180 |
| | | | | | | | |
| | | | | | | | |
| For the Year Ended March 31, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Expenses | | | | | | |
| Research and development expense | $ | - | $ | 914,516 | $ | 914,516 |
| | | | | | | | |
| Total expenses | | | 7,841,381 | | 914,516 | | 8,755,897 |
| | | | | | | | |
| Loss from operations | | | -7,841,381 | | 914,516 | | (8,755,897) |
| | | | | | | | |
| Net Loss | | | (8,496,248) | | (914,516) | | (9,410,764) |
| | | | | | | | |
| Basic and diluted: | | | | | | | |
| Loss per share | | | (0.05) | | (0.01) | | (0.06) |
| | | | | | | | |
| | | | | | | | |
| For the Year Ended March 31, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statements of Cash Flows | | | | | | |
| Net loss | | $ | (8,496,248) | $ | (914,516) | $ | (9,410,764) |
| Accounts payable and accrued expenses | | 511,231 | | 164,516 | | 675,747 |
| NET CASH USED IN OPERATING ACTIVITIES | | (832,476) | | (750,000) | | (1,582,476) |
| | | | | | | | |
| Cash paid for prototype | | (750,000) | | 750,000 | | - |
| NET CASH USED IN INVESTING ACTIVITIES | | (770,000) | | 750,000 | | (20,000) |
| | | | | | | | |
| Capitalized prototype cost in accounts payable | | 162,460 | | (162,460) | | - |
| | | | | | | | |
| For the Year Ended March 31, 2009 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | |
| | | | | | | | |
| Net Loss | | $ | (8,496,248) | $ | (914,516) | $ | (9,410,764) |
| Accumulated deficit | | | (71,838,024) | | (914,516) | | (72,752,540) |
| Total stockholders’ deficit | | (18,528,300) | | (914,516) | | (19,442,816) |
The nine months ended December 31, 2008:
| December 31, 2008 | | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Balance Sheet | | | | | | |
| Deposits | | $ | 914,517 | $ | (914,517) | $ | - |
| TOTAL ASSETS | | | 1,192,592 | | (914,517) | | 278,075 |
| Accumulated deficit | | | (71,041,985) | | (914,517) | | (71,956,502) |
| | | | | | | | |
| Total stockholders’ deficit | | (17,925,250) | | (914,517) | | (18,839,767) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | 1,192,592 | | (914,517) | | 278,075 |
| | | | | | | | |
| | | | | | | | |
| For the Year Ended December 31, 2008 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Expenses | | | | | | |
| | | | | | | | |
| Research and development expense | $ | - | $ | 914,517 | $ | 914,517 |
| Total expenses | | | 7,241,339 | | 914,517 | | 8,155,856 |
| | | | | | | | |
| Loss from operations | | | (7,241,339) | | (914,517) | | (8,155,856) |
| | | | | | | | |
| Net ( loss) | | | (7,700,209) | | (914,517) | | (8,614,726) |
| | | | | | | | |
| Basic and diluted: | | | | | | | |
| Loss per share | | | (0.05) | | (0.01) | | (0.06) |
| | | | | | | | |
| For the Year Ended December 31, 2008 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statements of Cash Flows | | | | | | |
| Net loss | | $ | (7,700,209) | $ | (914,517) | $ | (8,614,726) |
| Accounts payable and accrued expenses | | 27,044 | | 192,460 | | 219,504 |
| Deposits | | | (722,057) | | 722,057 | | - |
| Deposit included in accounts payable | | 192,460 | | (192,460) | | - |
| | | | | | | | |
| For the Year Ended December 31, 2008 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | |
| | | | | | | | |
| Net ( loss) | | $ | (7,700,209) | $ | (914,517) | $ | (8,614,726) |
| Accumulated deficit | | | (71,041,985) | | (914,517) | | (71,956,502) |
| Total stockholders’ deficit | | (17,925,250) | | (914,517) | | (18,839,767) |
The six months ended September 30, 2008:
| September 30, 2008 | | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Balance Sheet | | | | | | |
| | | | | | | | |
| Deposits | | $ | 771,937 | $ | (771,937) | $ | - |
| TOTAL ASSETS | | $ | 1,060,983 | | (771,937) | | 289,046 |
| Accumulated deficit | | | (70,352,640) | | (771,937) | | (71,124,577) |
| Total stockholders’ deficit | | (17,553,180) | | (771,937) | | (18,325,117) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 1,060,983 | | (771,937) | | 289,046 |
| | | | | | | | |
| For the Period Ended September 30, 2008 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Expenses | | | | | | |
| | | | | | | | |
| Research and development expense | $ | - | $ | 771,937 | $ | 771,937 |
| | | | | | | | |
| Total expenses | | | 6,738,156 | | 771,937 | | 7,510,093 |
| | | | | | | | |
| Loss from operations | | | (6,738,156) | | 771,937 | | (7,510,093) |
| | | | | | | | |
| Net income ( loss) | | | (7,010,864) | | (771,937) | | (7,782,801) |
| | | | | | | | |
| Loss per share | | | (0.05) | | (0.01) | | (0.06) |
| | | | | | | | |
| For the Period Ended September 30, 2008 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statements of Cash Flows | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net loss | | $ | (7,010,864) | $ | (771,937) | $ | (7,782,801) |
| Accounts payable and accrued expenses | | (170,574) | | 119,881 | | (50,693) |
| Deposits | | | (652,056) | | 652,056 | | 0 |
| Deposit included in accounts payable | | 119,881 | | (119,881) | | 0 |
| | | | | | | | |
| For the Period Ended September 30, 2008 | | As | | | | As |
| | | | Reported | | Adjustment | | Restated |
| Consolidated Statement of Changes in Stockholders' deficit | | | | | | |
| | | | | | | | |
| Net income ( loss) | | $ | (7,010,864) | $ | (771,937) | $ | (7,782,801) |
| Accumulated deficit | | | (70,352,640) | | (771,937) | | (71,124,577) |
| Total stockholders’ deficit | | (17,553,180) | | (771,937) | | (18,325,117) |
Section 9 — Financial Statements and Exhibits Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Letter from MaloneBailey, LLC dated June 16, 2010
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| | | EARTH SEARCH SCIENCES, INC. |
| | | |
| Dated: August 16, 2010 | By: | //s// Tami Story |
| | | Tami Story Corporate Secretary |
