SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K


[X]      Annual  report  pursuant  to  Section  13 or  15(d)  of the  Securities
         Exchange Act of 1934 For the fiscal year ended March 31, 1998 or
[ ]      Transition  report  pursuant to Section 13 or 15(d) of the Securities
         exchange Act of 1934 For the transition period from ______ to _______

                         Commission file number 0-19566

                           EARTH SEARCH SCIENCES, INC.
             (Exact name of registrant as specified in its charter)

               Utah                                            87-0437723
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

      502 North 3rd Street, #8
         McCall, Idaho                                            83638
Address of principal executive offices)                         (Zip Code)

                         Registrant's telephone number,
                       including area code: (208) 634-7080

Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:   Common Stock

     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  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 requirements for the past 90 days. Yes X No ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive  proxy or information  statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

     Aggregate  market  value  of  Common  Stock  held by  nonaffiliates  of the
Registrant  at March 31, 1998  $29,416,287.  For  purposes of this  calculation,
officers and directors are considered affiliates.

  Number of shares of Common Stock outstanding at March 31, 1998: 86,518,490


This Form 10-K consists of 39 pages.


<PAGE>
                                TABLE OF CONTENTS

Item of Form 10-K
Page

PART I   .............................................................    3

Item 1 -   Business  ...............................................     3-6
Item 2 -   Properties   ............................................      6
Item 3 -   Legal Proceedings  .......................................     7

Item 4 -   Submission of Matters to a Vote of
            Security Holders  .........................................   7

Item 4(a)  Executive Officers of the Registrant.....................      7

PART II. ..........................................................       7

Item 5 -   Market for the Registrant's Common
            Equity and Related Shareholder Matters ...............        7
Item 6 -   Selected Financial Data   ...... .........................     8
Item 7 -   Management's Discussion and Analysis of Financial Condition
            and Results of Operations..............................       8
Item 8 -   Financial Statements and Supplementary Data ............       10
Item 9 -   Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure   ..............       10

PART III ..........................................................       10

Item 10 -   Directors and Executive Officers of the Registrant   ..       10
Item 11 -   Executive Compensation   ..............................       10
Item 12 -   Security Ownership of Certain Beneficial Owners and
             Management      ......................................       10
Item 13 -   Certain Relationships and Related Transactions   ......       11

PART IV  ..........................................................       11

Item 14 -   Exhibits, Financial Statement Schedules, and Reports
             on Form 8-K   ........................................       11

SIGNATURES  .......................................................       11

<PAGE>
                                     PART I

ITEM 1.  BUSINESS

General

         Earth Search  Sciences,  Inc.  (formerly  Turnabout  Corporation)  (the
"Registrant" or the "Company") was incorporated as a Utah corporation on May 15,
1984. The Company,  up until 1985, had limited  activity except for expenditures
for exploration and acquisition of mining claims in Alaska. On December 5, 1985,
the  Registrant  acquired  all of the  outstanding  common stock of Earth Search
Sciences,  Inc.  ("ESSI"),  in exchange for 13,639,600  shares of its previously
authorized,  unissued  $.001 par value common  stock.  On August 11,  1987,  the
Registrant  changed its name to Earth Search Sciences,  Inc. and on November 19,
1987, the former subsidiary was dissolved.

         The  Company  has been in a research  and  development  stage since its
inception,  and has reported immaterial revenues.  The Company and its chairman,
Larry Vance, have spent the last ten years developing an airborne remote sensing
capability  that can be  economically  configured  into  both  governmental  and
commercial  projects.  The Company  initially  sought to utilize  United  States
Government proprietary airborne remote sensing technology to identify sites with
potential economically recoverable mineral deposits. The Company intended to use
the remote sensing data as a means of limiting the universe of available  mining
sites in a given region.  The Company  anticipated  doing further  investigative
work on the  identified  sites,  taking a land or mineral  interest in promising
sites and thereafter  either  developing the sites into mines  independently  or
seeking a joint venture partner or mining entity to develop the site.

         The Company  has  developed  a  two-prong  strategy  to convert  from a
research and development company to an operating company. With the experience of
Dr. John Peel,  the  Company's  CEO, the Company has a strong base from which to
develop remote sensing business aimed at the United States  Government sector of
customers,  principally with respect to the use of remote sensing in identifying
environmental  exposures  and  aiding the  Government  in  designing  economical
remediation programs.

Imagery Database

         In the summer of 1987,  the Company  obtained  airborne  multi-spectral
scanner imagery over sites in Oregon, Arizona and Nevada. The imagery,  gathered
by an airplane  using a thematic  mapper  scanner,  was recorded on high density
digital tape and later decompressed into computer compatible data. The Company's
cost basis in this database includes imagery produced in photographic form (hard
copy) as well as the data on digital tape. This information was then interpreted
by a geologist  having expertise in the ATM method.  The initial  interpretation
was completed by June, 1988 and produced  approximately  500 anomalies that will
require   exploration   work  to  determine   mineralization.   In  addition  to
identification of potential mineralization, the database can be used for oil and
gas exploration,  environmental  exposure  identification and other purposes for
which geology is a major  consideration.  The Company has fully  depreciated the
cost of acquiring this database but still intends as financial  resources become
available,  to use the data base to focus ESR on promising target properties for
further remote sensing and exploration.

         In 1991,  the  Company  was  invited  to  participate  in the  Visiting
Investigator  Program  (VIP)  sponsored  by the National  Aeronautics  and Space
Administration  ("NASA").  In the VIP program, the Company sought to compare the
benefits  of  using an  Airborne  Visible  and  Infra-Red  Imaging  Spectrometer
("AVIRIS"  instrument) in locating  geologic areas of interest in a test area in
Nevada with other less  advanced  instruments.  The results of that program were
published in January  1993 in a study  entitled  "Developing  the use of AVIRIS,
TIMS  and TM Data to  evaluate  Hydrothermal  alteration  types  as  related  to
geologic structures in the Cuprite,  Nevada Region," Series VIP-002-93,  Stennis
Space Center, Remote Sensing  Technologies.  As a result of participation in the
program the Company acquired a large amount of unprocessed data. The useful life
of this information is expected to be in the range of five to ten years.

         The Company's  data  collected in 1987 and 1991 has been stored and can
be used many times  interactively  to determine the fine detail that go with the
use of remote sensing as an  exploration  tool for locating  mineral  prospects.
That same data can be used for other applications such as environmental  issues,
resource management issues and corridor development.

         The Company  intends to structure  its  relationship  with ESR so Earth
Search  Sciences  receives  licensing  fees for  access  to data and  technology
available  to the  Company  and  overriding  royalties  on  minerals  ultimately
exploited  by ESR or any of its  customers.  ESR is presently  preparing  with a
joint  venture  mining  company  partner to develop data  packages  based on the
imagery data the Company has acquired.  The Company  anticipates that the mining
partner will provide the capital necessary to exploit this very valuable asset.

<PAGE>
         As with ESR, the Company anticipates  structuring its relationship with
its  strategic  alliance  partners  for the  Government  sector in a manner that
provides the Company with  licensing  fees for  exclusive use of the seven meter
imagery on government  programs,  including  but not limited to the U.S.  Forest
Service, Bureau of Land Management,  Environmental Protection Agency, Department
of Energy,  Department of  Agriculture,  and Department of Defense.  The Company
will  reserve  the rights to this  imagery  for the  perpetual  duration  of the
licensing contract.

Original Business Plan

         Based on the imagery  database  accumulated  by the Company in 1987 and
1991, the Company procured mining patents and land leases and sought partners to
develop several prospective mining properties.  The Company in fact entered into
several  arrangements  with mining  entities for the  development of some of the
Company's properties,  but none of those arrangements resulted in development of
operating  mines.  Due to lack of  capital  to fund  advance  royalties  and due
diligence  requirements  on the Company's  mining  properties  and to changes in
mining laws which required increased and more timely due diligence expenditures,
the Company opted to release virtually all of its mining properties between 1991
and 1994.  The new mining  laws  imposed a  financial  burden on the  Company by
requiring a payment in advance of a flat fee per claim plus filing costs instead
of  the  prior  arrangement  under  which  the  Company  could  perform  general
assessment work prior to making a significant financial commitment.

         As an adjunct to the business of  developing  mineral  properties,  the
Company  recognized the need to refine the technology of remote sensing with the
ultimate  goal of  commercializing  the  technology.  To achieve that goal,  the
Company  believes that a miniaturized  hyperspectral  remote sensing  instrument
must be  developed  so that more  economical  aircraft  can be utilized  for the
airborne  sensing.  The Landsat sensor is configured with 11 channels of data in
comparison  with a  hyperspectral  instrument  (AVIRIS) that has 224 channels of
data.  The difference is achieved by splitting the light spectrum 213 times more
than the  Landsat  sensor and by  providing  better  resolution.  The  resulting
improvement  in resolution  enables the Company to be able to read the chemistry
of the spectra giving us more substantial  information.  The comparison  between
the two instruments enables the user to identify what is there instead of merely
learning that something is there.

         On April 12,  1991,  the Company  commenced  entering  into  semiannual
agreements  with  NASA  to  participate  in  the  VIP  program  to  utilize  the
specialized   resources   and  sensing   technology  of  NASA  to  the  goal  of
commercialization.   The  agreements   allowed  the  Company  access  to  NASA's
sophisticated  facilities  that are  capable of a full  range of remote  sensing
activities. Pursuant to the agreement NASA supplied administrative and technical
support  and the  Company  was  responsible  for the  expenses  and costs of the
project .The Company has gained  several years  experience in the  hyperspectral
field under this  agreement.  The  mission of JPL/NASA is to conduct  high risk,
proof of principle investigations and release the findings to the general public
through programs such as the VIP and Space Act Agreement.  Industry participants
must  submit a  scientific  project  of merit for  evaluation  by NASA.  The non
proprietary,  non exclusive  data resulting  from NASA's  investigations  can be
utilized by private industry in their own decision making process  regarding the
development  of  commercial  hyperspectral  imaging  technologies.  Earth Search
Sciences,  in its early stages of development utilized cost shared hyperspectral
image  collections  from the NASA/ JPL AVIRIS  instrument  to  provide  proof of
principle  images to its  managers  and  directors  during the  decision  making
process over the issue of whether or not to proceed with the  development of the
company's own proprietary, privately funded instrument, PROBE-1.

         In July,  1993, the Company flew an EPA superfund site at  Summitville,
Colorado, jointly with the EPA, USGS, Colorado DEQ, JPL and NASA to characterize
the extent of the environmental  exposure at the site and to prove the Company's
remote sensing capabilities.  The final report has been completed by the Company
and  Analytical  Imaging  and  Geophysics  and the  findings  will  be used  for
environmental and mineral purposes.  The Summitville flight provided the Company
with the  opportunity  to prove the value of remote  sensing in a commercial and
governmental  setting,  and ultimately  led to the  development of the Company's
current business plan.

Current Business Plan

         The Company believes that hyperspectral remote sensing technology,  can
play a central role in a multitude of settings,  and has application both in the
United  States and  abroad.  The  Company has  identified  applications  in such
diverse markets as watershed analysis,  pollution  detection,  pipeline easement
mapping and routing,  plume analysis,  vegetation stress analysis,  agriculture,
disaster  assessment,  mineral  exploration,   forestry,  fisheries,  heat  loss
detection, wetlands delineations,  stormwater management, emergency planning and
evacuation  route  assessment,  land use,  prescription  farming and  unexploded
ordnance detection.
<PAGE>
         The  key  to   accessing   these  market   opportunities   remains  the
miniaturization  of the remote sensing technology and usage of the technology on
an economical  basis.  The Company plans to continue its efforts to  miniaturize
and  downsize  the  technology  with  continued  economic  improvements  in  the
operation and maintenance of the sensor the ultimate objective.

         Earth Search  Sciences,  Inc. and Integrated  Spectronics Pty Ltd. have
jointly developed a remote sensing instrument, the ESSI PROBE-1, that spectrally
measures the  reflectance of the sun from the earth and is considered one of the
most advanced hyperspectral instruments in the world. The Company and Integrated
Spectronics  have  signed  a series  of  agreements  to  engineer,  develop  and
manufacture  sensors as needed for each  market  that the  Company  contemplates
entering.

         Earth Search Sciences has developed a financial  strategy,  and through
that  strategy has acquired  the  necessary  capital for the purchase of its own
miniaturized  hyperspectral  remote measurement  instrument,  ESSI PROBE-1.  The
financial  strategy is centered  around the direct funding of the manufacture of
ESSI's  own  sensor  design  by  existing   qualified   Earth  Search   Sciences
shareholders  familiar with the company's business strategy.  The manufacture of
the PROBE-1  sensor was  accomplished  through the  strategic  alliance that the
Company has been developing since 1994 between Integrated Spectronics Pty. Ltd.

         ESSI  believes  it  can  offer  territorial  concessions  to  qualified
entities who fund the  acquisition of PROBE-1s.  The terms of these  concessions
include  ownership  in a  subsidiary  that is licensed by the Company to use the
PROBE-1 in a specified  location  utilizing  services provided by the Company or
ESR (data collection, processing,  interpretation,  technical data packages, and
management and marketing).

         On  June  1,  1997,the  company  took  delivery  of one of two  PROBE-1
instruments  currently  on  order.  This  instrument  was  installed  in a Naval
Research  Laboratory  P-3  aircraft as part of a  deployment  to  Kazakhstan  in
Central Asia for a U.S. Government/ Earth Search Sciences cost shared scientific
mission sponsored by the U.S.  Department of Energy,  Battelle Pacific Northwest
National Laboratory (PNNL), The Remote Sensing Laboratory-Las Vegas, Nevada, and
Sandia National  Laboratory.  Economic  development  issues,  including  natural
resources mapping and environmental  surveillance are being addressed as part of
the mission.

         The mission  occurred on June 19,  1997 to July 5, 1997.  Earth  Search
collected  imagery  with its  PROBE-1  instrument  that  flew  aboard  the Naval
Research Laboratory's P-3 aircraft. The imagery will be utilized by Earth Search
and others for natural resources mapping.  This represented the first deployment
of the PROBE-1 instrument for commercial purposes.

         Subsequent   to  fiscal  year  ended  March  31,   1998,   the  Company
relinquished  both its direct and indirect  interests in its current licenses on
mineral properties in the Republic of Kazakhstan in and around the area known as
the  Polygon.  In the absence of this  relinquishment,  Earth  Search would have
required the  expenditure in 1998 of more than  $5,000,000(US)  for drilling and
exploration  activities  in order to maintain the  conditions  of the  licenses,
which require a minimum annual negotiated investment of several million dollars,
annually.   The   properties   were   relinquished   to  its   partners  in  the
American-Kazakhstani  Joint Stock Company, SEMTECH for settlement of significant
exploration and/or legal costs associated with licensing and exploring the sites
in  question.  In  addition,   the  Company  retained  the  option  to  bid  its
hyperspectral imaging technology in future exploration  activities planned in or
around the  Polygon.  The Company also  retained the option to fund  exploration
activities  on those  sites  where the new owners  may be unable to finance  the
exploration  activities required to maintain the licenses in accordance with the
terms of the Program of Works. Earth Search management's  decision to relinquish
its current holdings was made as part of the Company's focused  restructuring of
its operations in order that it may focus on its core business of remote imaging
from an airborne platform. The Company has discontinued its plans to participate
in the funding of advanced exploration initiatives requiring significant capital
outlays  for  drilling  and  field  exploration,  or  the  funding  of  advanced
activities  including  the siting,  design,  construction,  and/or  operation of
mineral mines.  Management believes that its cash position for 1998 will improve
as a result of its decision to discontinue its plans to fund a five year program
of  works  in  Central  Asia  that  could  have  cost  between  $25,000,000  and
$50,000,000,  overall. Several factors contributing to Earth Search management's
decision to relinquish its interests in Kazakhstan  included:  (1) the worsening
economic  situation in Asia,  and (2) the effects of extremely low metals prices
on  major  mining  company's  operations.  Some  mining  companies  even  ceased
production  at selected  operating  mines due to depressed  metals  prices.  The
political and economic turmoil  recorded in Russia (see The Economist,  July 11,

<PAGE>
1998),  together  with the  continuing  Asian  economic  crisis  contributed  to
management's decision to restrict Earth Search's capital investment in Asia. The
Company does plan to maintain a presence in Kazakhstan through an agreement with
its former Kazakhstani  partner, the  American-Kazakhstani  Joint Stock Company,
SEMTECH,  which  includes  language  that  will  enable  Earth  Search to bid on
airborne  remote  sensing  contracts  to be  offered in the  region;  as well as
language in the agreement  that provides Earth Search and its  shareholders  the
opportunity to fund any program of works that SEMTECH or Polygon Resources might
be unable to fund. Under the terms of the agreement,  Earth Search would have 90
days to fund an entire  Program of Works (in cash) should any such property fall
into the status of having to be relinquished as the result of lack of funding by
the new owners. In essence,  Earth Search will maintain a presence in the region
and the potential to invest in selected  mineral  properties  under the specific
terms and conditions  mentioned above,  while precluding the necessity of having
to lay out significant  sums of capital to fund each year's program of works for
multiple mineral  properties.  Earth Search  originally  withheld its Kazakhstan
territories from the initial Noranda agreement.  However,  as an added result of
the  refocusing,  Earth Search has revisited its agreement  with Noranda and the
global exploration  contract with the major mining company;  and is working with
Noranda to revise the agreement  between Earth Search and Noranda to include Net
Smelter  Royalties and payment for mapping  services for any discoveries made in
Kazakhstan as the direct  result of Noranda  exploration  efforts  utilizing the
Earth Search Sciences Probe-1 hyperspectral imaging technology. Although current
market  conditions have precluded Noranda from undertaking any major exploration
activities in the region,  the Earth Search agreement with Noranda when put into
effect (in regard to  Kazakstan)  will apply to any future  Noranda  exploration
initiative  undertaken in Kazakstan while the contract between the two company's
remains in effect over the next three years, plus any option years exercised.

         On January 16, 1997, the Company  signed an agreement  with  California
Microwave  Inc.  (CMI) and  Applied  Signal and Image  Technology  Inc.  (ASIT).
California Microwave is a leader in wireless and satellite  communications.  CMI
Airborne  Systems  Integration  Division  provided a dedicated  aircraft for the
joint project, ASIT provided the software and hardware for the processing of all
data and ESSI  provided the PROBE-1  sensor.  The first  mission  displayed  the
aircraft,  software  and  hardware  and the  sensor at the  Third  International
Airborne Remote Sensing Conference and Exhibition in Copenhagen,  Denmark,  July
7-10,  1997.  Earth  Search  understands  that CMI is  restructuring  its remote
sensing  operations.  Earth Search is awaiting the outcome of this restructuring
prior to negotiating either an extension to any existing agreements,  or any new
agreements with CMI.

         The Company also believes that a merger with or  acquisition  of one or
more companies may be the most expeditious and cost-effective way to achieve the
goals of  commercializing  the remote  sensing  technology  and  converting  the
Company to an operating, revenue-producing entity. A merger or acquisition would
provide  the  Company  with a  revenue  base and with more  immediate  access to
prospective users of remote sensing  technology.  The Company would not rule out
the creation of a joint venture or "newco" as part of this strategy.

         The  Company  intends  over  the next  year to  continue  pursuing  (a)
acquisitions that aid in the  commercialization  of hyperspectral remote sensing
technology,  (b) contracts that produce  revenues from the application of remote
sensing  to the  existing  markets  in  environmental  remediation  and  mineral
identification  and  to  undeveloped  markets  for  other  appropriate  projects
involving a multitude of applications  of the technology,  (c) financing to fund
the development of miniaturized remote sensing instruments,  and (d) development
of promising  potential mineral  properties in which the Company has an interest
or  acquires  an interest  as a result of its  existing  database of  geological
information.

         The Company is not aware of any present  commercial  competition in the
field of hyperspectral  spectroscopy.  The only knowledge the Company has of any
other use of hyperspectral data today is in academic and federal research.

         The Company is not aware of any environmental  concerns associated with
remote sensing technology.

Employees

         As of March 31, 1998, the Company had 5 full-time employees, which also
include the following Officers: Larry F. Vance, Chairman, John W. Peel, III,
Chief Executive  Officer,  Brian Savage,  President,  Tami J. Story, Company
Secretary/Treasurer.  The Company also retains several independent contractors.

ITEM 2.  PROPERTIES

         The  Company  leases  its  corporate   headquarters   and  all  of  the
furnishings  from an unrelated third party, and has  approximately  2,000 square
feet of office  space in McCall,  Idaho.  The Company  believes  its offices are
adequate to meet its needs for the foreseeable future.

<PAGE>
ITEM 3.  LEGAL PROCEEDINGS

         On December 19, 1997 the Idaho Department of Finance  announced that it
had  resolved  its  differences  with  ESSI and the law suit  (Civil  No.  CV OC
9700155D,  in the District Court of the Fouth  Judicial  Circuit of the State of
Idaho  in and for the  County  of Ada) was  withdrawn.  Under  the  terms of the
agreement,  the Company and  Chairman  Larry Vance were not  required to pay any
fines,  penalties  or costs to the State.  In  addition,  the Company  agreed to
proceed  with a formal  offer of  rescission  to  persons  who  purchased  stock
directly from the Company between November 1, 1992 and December 15, 1997 and who
were Idaho residents.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  Not applicable

ITEM 4(a).  EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth certain  information with respect to the
executive officers of the Company as of July 1, 1998.

                         Name               Age         Position

                         Larry Vance        63          Chairman
                         John W. Peel       52          Chief Executive Officer
                         Tami J. Story      35          Secretary/Treasurer


          Larry F. Vance served as Chief Executive Officer of the Company from
1985 until  April 8, 1995.  Since April 8, 1995,  Mr.  Vance has served as
Chairman of the  Company.  Mr.  Vance is a director  of the  Company.  Mr.
Vance is a full-time employee of the Company and has been since 1985.

         John W. Peel,  III joined the  Company as Chief  Executive  Officer in
April  1995.  Prior to joining  the Company,  Dr. Peel served for the past six
and-one-half  years as Senior Vice  President  of Tetra Tech,  Inc.,  a major
publicly held  environmental  remediation  consulting  firm. Dr. Peel holds a
Bachelor of Sciences in Biology from  Millsaps  College,  a Master of Sciences
in  Parasitology  and  Invertebrate  Zoology from the  University of Mississippi
and a Ph.D. in Environmental  Health/Health  Physics from Purdue  University.
Dr. Peel is a full-time employee of the Company and has been since 1995.

         Tami J. Story joined the Company as Secretary and Treasurer in 1993.
Ms. Story has been with the Company for 6 years in an administrative  support
capacity as an independent contractor.  Ms. Story also serves as a director of
the  Company.  Ms. Story holds a degree with a major in Nursing and a minor in
Business Administration.

                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK EQUITY AND
              RELATED STOCKHOLDER MATTERS

         (a) Principal Market or Markets.  The Company's Common Stock has in the
past traded in the  over-the-counter  market,  based on inter dealer bid prices,
without markups, markdowns,  commissions, or adjustments (which do not represent
actual transactions) as reported in the "pink sheets."

              Quarter Ended                        High        Low

             June 30, 1995                        $0.28       $0.24
             September 30, 1995                   $0.35       $0.30
             December 31, 1995                    $0.41       $0.38
             March 31, 1996                       $0.84       $0.81

             June 30, 1996                        $0.75       $0.68
             September 30, 1996                   $0.37       $0.34
             December 31, 1996                    $0.20       $0.17
             March 28, 1997                       $0.41       $0.38

             June 30, 1997                        $0.49       $0.46
             September 30, 1997                   $0.47       $0.42
             December 31, 1997                    $0.39       $0.31
             March 31, 1998                       $0.34       $0.30

         (b) Approximate Number of Holders of Common Stock. The number of record
owners of the  Company's  $.001 par value common  stock at March 31,  1998,  was
approximately  840. This does not include  shareholders that hold stock in their
accounts at brokers/dealers.
<PAGE>
         (c)  Dividends.  Holders of common  stock are  entitled to receive such
dividends as may be declared by the Company's  Board of Directors.  No dividends
have been paid with respect to the  Company's  common stock and no dividends are
anticipated to be paid in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

         The following table sets forth certain selected financial data for each
of the last five fiscal  years with  respect to the Company and is  qualified in
its entirety by reference to the  Company's  audited  financial  statements  and
notes thereto.

<TABLE>
<CAPTION>

         <S>                      <C>            <C>            <C>            <C>            <C>            <C>
                                  Cumulative
                                    Amounts
                                  During the
                                  Development                   As of or for the fiscal year ended
                                     Stage          1998           1997            1996           1995           1994
                                  -----------     ---------      --------       ---------      ----------     ----------
          Operating
           Revenue                 $    76,332    $   55,000     $    -0-       $    6,332     $    -0-       $    -0-

          Net Loss                 (14,083,201)   (5,849,999)    (2,549,823)    (2,408,292)    (1,122,541)     (340,004)
          Net Loss per
           Common Share                  (0.08)        (0.04)         (0.05)         (0.02)         (0.01)
          Total Assets               4,880,652     4,880,652      3,951,914        922,377         95,861        49,598
          Long-term
           Obligations               5,767,961     5,767,961        873,462        736,209      1,231,217       300,052
          Stockholders'
           Deficit                  (3,005,765)   (3,005,765)    (2,960,610)    (1,295,908)    (1,899,435)     (843,440)
          Cash Dividends
           Declared                          0             0              0              0              0             0

</TABLE>

ITEM     7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS

         Financial  comparisons  will be made  between the years ended March 31,
1998 and 1997 and 1996.

LIQUIDITY AND CAPITAL RESOURCES

         During the fiscal  year ended March 31,  1996,  the Company had limited
operating  revenues of $6,332 that derived from two  consulting  agreements  for
time and material  with  Lockheed  Martin Group.  The Company  obtained  working
capital  through the placement of its unissued  common stock and the issuance of
short-term notes. Aggregate amount received was approximately $192,400 for stock
and $569,267 from the issuance of notes.  In addition,  the Company's  operating
payables and accrued liabilities increased approximately $178.832.

         During the  fiscal  year  ended  March 31,  1997,  the  Company  had no
operating revenues.  This does not reflect the working capital held back per the
ESSI agreement with ISPL discussed below in the section on Accuprobe, Inc. These
funds are accounted for separately in the financial section of this report as it
is  considered  a  sales/leaseback   transaction  for  accounting  purposes.  In
addition,  the Company's operating payables and accrued  liabilities  increased.
The large operating  payables and short-term notes create a substantial  working
capital deficiency.

         During the fiscal  year ended March 31,  1998,  the Company had limited
operating  revenues from one contract for $55,000 from work invoiced against its
$5,750,000 (base) task order contract.

         In 1997, the Company formed a new company,  ESSI Probe 1 LC, to acquire
a second PROBE-1 instrument  manufactured by Integrated  Spectronics Pty Ltd. of
Australia.  The new company is a joint venture  managed by Earth Search Sciences
and owned 50% by Earth Search  Sciences,  who  contributed  $500,000 and certain
rights  to  its  proprietary  technology  and  50%  by  two  shareholders,   who
contributed $1 million for their interest in the company. Under the terms of the
joint venture arrangement, Earth Search Sciences will use the PROBE-1 instrument
for the  identification  and  exploitation of minerals as well as  environmental
remediation  and other  projects.  The joint  venture  hopes to receive  certain
royalties on minerals discovered and exploited through use of the instrument, as
well as other fees paid by third  parties for data  gathered by the  instrument.
This instrument is slated for delivery  between the third and fourth quarters of
1998.
<PAGE>
         The Company signed a funding  agreement with Swancorp  Equities Inc. to
provide over $15 million in funding. The funding agreement contemplates Swancorp
assisting  Earth Search in  obtaining $5 million of capital in a direct  private
placement  with a  potential  additional  $5 million  through  the  exercise  of
attached  warrants.  Swancorp is prepared to assist the Company with  subsequent
funding of an  additional  $5  million,  if desired  by Earth  Search  through a
combination of shares and warrants  offered in a private  placement with varying
exercise prices.

         The Company has engaged IBK Capital of Toronto,  Canada to  participate
in the  placement  of $10 million  worth of equity  capital plus  warrants.  IBK
Capital will be working close with Swancorp  Equities Inc. and other  investment
bankers  to raise  the  capital.  There  can be no  assurance  that the  private
placement  will be successful or that Earth Search will be successful in raising
the necessary capital required to meet its financial needs.

         The Company  restructured  the commitment from Accuprobe,  Inc. to fund
two (2)  sensors,  in June 1997,  by agreeing  to sell to  Accuprobe,  Inc.  one
PROBE-1 under a  sale-leaseback  arrangement  with an option to  repurchase  the
instrument outright and by agreeing to a loan from Accuprobe, Inc. for a portion
of the  proceeds to fund a second  PROBE-1  secured by a pledge of the  contract
with  Integrated  Spectronics  Pty Ltd related to the manufacture of such second
PROBE-1. The loan has been retired with Earth Search Sciences, Inc. stock.

         The  Company  has also  signed an  agreement  with  Applied  Signal and
Imaging  Technology  Inc.  ("ASIT"),  pursuant  to which ASIT will work with the
Company to develop a system to provide real time  translation  of remote sensing
data  into  usable   information.   The  Company  expects  that  this  technical
advancement will significantly  enhance the value of air-borne remote sensing in
a large  variety  of  contexts,  where the  present  delay in  receiving  usable
information  of  several  months  has been an  impediment  to the use of  remote
sensing technology. This agreement has been converted to a service agreement and
now includes use of the entire OSP family of software products.

RESULTS OF OPERATIONS

         The company  recognized  revenues from the Noranda Agreement of $55,000
for the year ended March 31, 1998 and  incurred  $132,083 in expenses to service
the  Noranda  Agreement.  For  the  year  ended  March  31,  1998,  the  Company
experienced a net loss of $5,849,999 or $0.077 per share on a diluted basis.

JOINT VENTURE AND OPERATING ENTITY RELATIONSHIP

         During the fiscal year ended March 31,  1998,  the Company  completed a
series of agreements with Noranda Mining and Exploration Inc. and its affiliates
including  Falconbridge  Limited  (collectively,  the  "Noranda  Group").  These
agreements  provide  the  Noranda  Group  with an  exclusive  license to use the
PROBE-1's  for  commercial  mining  exploration,  as long as the  Noranda  Group
continues  to  purchase  remote  sensing  services  from the  Company in certain
specified  quantities.  The Company is entitled to receive fees for services and
net smelter royalties or net profit interest royalties from certain  discoveries
by the Noranda  Group using the  PROBE-1's.  The  licensing  agreement  with the
Noranda Group provided a $1,000,000  equity investment in ESSI by way of 200,000
preferred  shares,  convertible  into  1,000,000  shares of common  stock and an
option to purchase 1,000,000 shares of ESSI common stock at a price of $2.00 per
share.

         During the fiscal  year ended  March 31,  1998,  the  Company  formed a
global partnership with EarthWatch Incorporated (a subsidiary of Ball Aerospace)
to acquire and market remote  sensing  information.  This  partnership  included
signing of a data reseller agreement in which Earth Search Sciences will provide
the  HyperView_Product  Line of  hyperspectral  imagery  through the  EarthWatch
Digital Globe(R) Services for worldwide distribution.

         Subsequent  to fiscal year ended March 31, 1998,  the Company  signed a
Memorandum of Understanding  (MOU) to fly Cherry Creek Drainage,  in conjunction
with the Forest Wildlife Protection Agency,  State of Montana and NASA/Techlink.
The purpose of the flight is to collect data  specific to the  restocking of the
West Slope  Cutthroat  Trout and riparian issues relating to the entire drainage
area.

         Subsequent  to  fiscal  year  end,  the  Company  made  a  decision  to
participate  in Geosat's  "Hyperspectral  Group Shoot  1998".  The Company  will
provide  PROBE-1  hyperspectral  imagery  to the oil and  minerals  exploration,
environmental assessment,  and agriculture end-user community, for an evaluation
by these communities of its applications potential.
<PAGE>
         Subsequent to fiscal year end, the Company collected hyperspectral data
for Desert  Research  Institute  ("DRI") in the Kelso Dunes area in southeastern
California.  The  project  completed  for  DRI  was to  detect  change  in  arid
vegetation cover using  Hyperspectral data in the region known as the Providence
Mountains.  Detection of  disturbance is these regions will aid in assessment of
ecosystem  status and global  climate  change.  The remote sensing data combined
with ground  measurements will examine spectral changes  occurring  concurrently
with  observed  changes in percent  green  cover.  Before and after  disturbance
imagery will be  collected  coincident  with ground  assessments  of  vegetation
cover. Future collaboration is expected with DRI.

         Dr. Larry Lass,  University of Idaho teamed with Earth Search  Sciences
on a joint  proposal  to the Farm Bureau and won a contract to overfly the Snake
River  Basin  (Hell's  Canyon)  to prove the use of  hyperspectral  imagery  for
control and  eradication  of noxious weed  intrusion.  The results of which will
enable Earth Search to determine the applicability of PROBE-1 technology to this
potentially lucrative agricultural market.

         During the fiscal year ended March 31,  1998,  several  proposals  have
been  developed  to partner with private  industry,  universities  and state and
Federal agencies to develop, package and deliver competitive advanced technology
products  and   services.   This   approach   provides   solutions  to  critical
environmental  restoration  and  waste  management  problems,  while  furthering
national business and technology goals.

FUTURE OPERATIONS

         The  Company  continues  to  increase  its  involvement  in the mineral
exploration  and  environmental  areas,  using the results of its  research  and
development over the last five years in remote sensing.  By attempting to obtain
equity  funding,  the  Company  anticipates  developing  instruments  to include
hand-held, airborne and satellite spectrometers and to acquire revenue-producing
companies in the natural resources and environmental monitoring field.

         Through  teaming with other firms,  the Company will identify  possible
technology  applications  for  remote  sensing.  Management  intends  to  pursue
additional  markets for its imagery  databases,  which would generate  operating
revenues and adequate cash flows.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial  statements and supplementary  data required by this item
are included on pages F-1 to F-22 of this report.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

                  None
                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information  with  respect to directors of the Company will be included
under  "Election of Directors" in the Company's  definitive  proxy statement for
its 1998  annual  meeting  of  shareholders  to be filed not later than 120 days
after the end of the  fiscal  year  covered by this  Report and is  incorporated
herein by  reference.  Information  with  respect to  executive  officers of the
Company is included under Item 4(a) of Part I of this Report.

         Based  solely on a review of copies of reports  received by the Company
from  persons  required to file  reports of  ownership  and changes on ownership
pursuant to Section 16(a) of the  Securities  Exchange Act of 1934,  the Company
believes  that  all  of its  executive  officers  and  directors  complied  with
applicable filing requirements for the fiscal year ended March 31, 1998.

ITEM 11.  EXECUTIVE COMPENSATION

         Information  with  respect to executive  compensation  will be included
under "Executive  Compensation" in the Company's  definitive proxy statement for
its 1998  annual  meeting  of  shareholders  to be filed not later than 120 days
after the end of the  fiscal  year  covered by this  Report and is  incorporated
herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT

         Information  with respect to security  ownership of certain  beneficial
owners and  management  will be included  under  "Security  Ownership of Certain
Beneficial  Owners and Management" in the Company's  definitive  proxy statement
for its 1998 annual meeting of shareholders  filed or to be filed not later than
120  days  after  the end of the  fiscal  year  covered  by this  Report  and is
incorporated herein by reference.
<PAGE>
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information   with  respect  to  certain   relationships   and  related
transactions  with management will be included under "Certain  Transactions"  in
the  Company's  definitive  proxy  statement  for its  1998  annual  meeting  of
shareholders  to be filed not later  than 120 days  after the end of the  fiscal
year covered by this Report and is incorporated herein by reference.

PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
             FORM 8-K

     (a)(1) Consolidated Financial Statements              Page in this Report

            Reports of Independent Accountants                   F-1
            Balance Sheet at March 31, 1998 and 1997             F-2
            Statement of Loss for the Years
             Ended March 31, 1998, 1997 and 1996                 F-3
            Statement of Changes in Shareholders'
             Equity (Deficit) for the Years Ended
             March 31, 1998, 1997 and 1996                      F-4/F-5
            Statement of Cash Flows for the Years
             Ended March 31, 1998, 1997 and 1996                 F-6
            Notes to Financial Statements                       F-8/F-22

     (a)(2) Financial Data Schedules                       Electronically Filed

     (b)    Reports on Form 8-K.                           Electronically Filed
            Filed a Form 8-K on April 9, 1997
            Filed a Form 8-K on June 19, 1997
            Filed a Form 8-K on July 9, 1997
            Filed a Form 8-K on August 14, 1997
            Filed a Form 8-K on August 26, 1997
            Filed a Form 8-K on December 19, 1997
            Filed a Form 8-K on January 23, 1998
            Filed a Form 8-K on February 6, 1998
            Filed a Form 8-K on March 31, 1998


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                        EARTH SEARCH SCIENCES, INC.



                                        By /s/ Larry F. Vance
                                        Larry F. Vance
                      Chairman and Chief Financial Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the following capacities on July 15, 1998.


 Signature                            Title

/s/ Larry F Vance            Chairman and Chief Financial
Larry F. Vance               Officer (Principal Executive and Financial Officer)

/s/ John W. Peel, III        Chief Executive Officer
John W. Peel, III            (Principal Executive Officer)

/s/ Tami Story               Director
Tami J. Story

/s/ Rory J. Stevens          Director
Rory J. Stevens

<PAGE>

                                   Report of Independent Accountants


To the Board of Directors and Shareholders of
Earth Search Sciences, Inc.


In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements of loss, of redeemable  common stock and  nonredeemable
shareholders' equity (deficit) and of cash flows present fairly, in all material
respects,  the  financial  position  of  Earth  Search  Sciences,  Inc.  and its
subsidiaries  (collectively,  the Company, a development stage company) at March
31, 1998 and 1997, and the results of their  operations and their cash flows for
each of the three  years in the period  ended  March 31, 1998 and for the period
from  inception  (May 15, 1984)  through  March 31,  1998,  in  conformity  with
generally  accepted   accounting   principles.   These  consolidated   financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain  reasonable  assurance about whether the consolidated  financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial  statements,  assessing the accounting principles used and significant
estimates made by management,  and  evaluating the overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for the
opinion expressed above.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial statements,  the Company is in the development stage and
has not  generated  significant  operating  revenues to date.  In addition,  the
Company has  suffered  recurring  losses since its  inception  and, at March 31,
1998, has a deficit aggregating  $14,083,201  accumulated during its development
stage and an excess of current liabilities over current assets of $882,363. Such
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 1. The consolidated  financial statements do not include any adjustments
that might result from the outcome of this uncertainty.



PRICEWATERHOUSECOOPERS LLP

Portland, Oregon
April 23, 1998



<PAGE>

Earth Search Sciences, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
--------------------------------------------------------------------------------

                                                          March 31,
                                                      1998          1997
                                                  -----------    -----------
Assets
Current assets:
   Cash         $                                      42,600    $    51,666
    Other current assets (Note 1)                     675,648              -
                                                  -----------    -----------

      Total current assets                            718,248         51,666

Property and equipment (Note 3)                     3,979,179      3,840,460
Other long-term assets (Notes 1 and 11)               183,225         59,788
                                                  -----------    -----------

      Total assets                                $ 4,880,652    $ 3,951,914
                                                  ===========    ===========

Liabilities, Redeemable Common Stock and
Nonredeemable Shareholders' Deficit
Current liabilities:
   Notes payable (Note 5)                         $    89,080    $   203,250
   Accounts payable                                   671,332      1,764,836
   Accrued payroll taxes                               18,449         64,733
   Accrued interest (Notes 5 and 6)                   281,750        406,273
   Payable to Probe 1 Joint Venture (Note 1)          500,000              -
   Unearned revenue (Note 1)                           40,000              -
   Cash advances and deposits (Note 5)                      -      3,082,125
                                                  -----------    -----------

        Total current liabilities                   1,600,611      5,521,217

Long-term liabilities:
   Shareholder loans (Note 6)                         104,090         37,090
   Capital lease obligation (Note 3)                2,029,410              -
   Deferred officers' compensation (Note 4)         1,387,461        779,818
   Minority interests (Note 10)                     2,247,000         56,554
                                                  -----------    -----------

        Total liabilities                           7,368,572      6,394,679
                                                  -----------    -----------

Commitments and contingencies (Notes 10 and 12)

Redeemable common stock, $.001 par value,
 1,725,914 shares issued and outstanding
 at March 31, 1998 and 1997 (Note 10)                 517,845        517,845
                                                  -----------    -----------

Nonredeemable shareholders' deficit(Notes 1, 8, 9 and 10):

   Series A preferred stock; 200,000 shares
    authorized, issued and outstanding at
    March 31, 1998                                  1,000,000              -
   Common stock, $.001 par value; 200,000,000
    shares authorized; 84,792,576 and 68,530,779
    shares, respectively, issued and outstanding       84,792         68,531
   Additional paid-in capital                       9,827,644      5,204,061
   Common stock subscribed                            165,000              -
   Deficit accumulated during the development
    stage                                         (14,083,201)    (8,233,202)
                                                  -----------    -----------
                                                   (3,005,765)    (2,960,610)

     Total liabilities, redeemable common stock
      and nonredeemable shareholders' deficit     $ 4,880,652    $ 3,951,914
                                                  ===========    ===========

<PAGE>


Earth Search Sciences, Inc.
(A Development Stage Company)
Consolidated Statement of Loss
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                        From inception
                                        (May 15, 1984)
                                            through
                                            March 31,            For the year ended March 31,
                                             1998               1998            1997           1996
                                        --------------      -----------
<S>                                     <C>                 <C>            <C>            <C>
Revenue                                 $      76,332       $    55,000    $         -    $     6,332
Cost of services provided                    (132,083)         (132,083)             -              -
                                        -------------       -----------    -----------    -----------
Gross margin                                  (55,751)          (77,083)             -              -
                                        -------------       -----------    -----------    -----------

Expenses:
    Exploration (Note 1)                    1,960,992           356,988        606,169        150,419
    Depreciation                              290,994            42,768         29,668         20,004
    General and administrative              8,846,908         3,062,669      1,646,063      2,143,013
                                        -------------       -----------    -----------    -----------
                                           11,098,894         3,462,425      2,281,900      2,313,436
                                        -------------       -----------    -----------    -----------

Loss from operations                      (11,154,645)       (3,539,508)    (2,281,900)    (2,307,104)

Interest income                                27,451            17,449              -          6,762
Interest expense (Notes 5 and 6)           (1,434,041)         (689,600)      (305,297)      (107,950)
Other expense (Note 10)                      (473,340)         (473,340)             -              -
                                         -------------      -----------    -----------    -----------
Loss before minority interest             (13,034,575)       (4,684,999)    (2,587,197)    (2,408,292)

Minority interest in losses of
 consolidated subsidiaries                     37,374                 -         37,374              -
                                        -------------       -----------    -----------    -----------

Loss before extraordinary item            (12,997,201)       (4,684,999)    (2,549,823)    (2,408,292)
Extraordinary items, net (Notes 3 and 5)   (1,086,000)       (1,165,000)             -              -
                                        -------------       -----------    -----------  -------------

Net loss                                $ (14,083,201)      $(5,849,999)   $(2,549,823)   $(2,408,292)
                                        =============       ===========    ===========    ===========

Shares applicable to basic and diluted
 loss per share                                              76,369,220     66,566,995     53,150,421

Basic and diluted loss per share                                $(0.077)       $(0.038)       $(0.045)

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EARTH SEARCH SCIENCES, INC.
(A Development Stage Company)
Consolidated Statement of Redeemable Common Stock and Nonredeemable Shareholders' Equity (Deficit)                      Page 1 of 2
------------------------------------------------------------------------------------------------------------------------------------
                                                          Nonredeemable shareholder's equity (deficit)
                                       ----------------------------------------------------------------------------------
                                                                                                           Deficit
                                                                                                         accumulated
                                 Redeemable                                                               during the
                                common stock    Preferred stock              Common stock              developmenTreasury
 Description                   Shares   Amount  Shares    Amount  Shares    Amount   APIC    Subscribed stage     stock    Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>      <C>     <C>       <C>      <C>       <C>      <C>     <C>        <C>       <C>      <C> 
Balance at May 15, 1984
 (date of inception)               -     $ -                             -       -                     $ -             -        -
   Issuance of common stock
   to incorporators for cash
   (Notes 1 and 9)                                               7,000,000   7,000    28,000                                 35,000
   Net loss                                                                                              (604)                 (604)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1985           -      -        -         -  7,000,000   7,000    28,000               (604)         -   34,396
   Issuance of common stock
    in connection with public
    offering net of offering costs
    of $23,892 (Notes 1 and 9)                                   2,129,100   2,129    80,434                                 82,563
   Issuance of common stock in
    connection with merger
    (Notes 1 and 9)                                             13,639,600  13,640   (12,640)                                 1,000
   Net loss                                                                                            (27,451)             (27,451)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1986           -      -        -         - 22,768,700  22,769    95,794             (28,055)        -   90,508
   Net loss                                                                                            (47,625)             (47,625)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1987           -      -        -         - 22,768,700  22,769    95,794             (75,680)        -   42,883
   Acquisition of treasury
    stock (Notes 1 and 9)                                                                                        (33,000)   (33,000)
   Net loss                                                                                           (102,616)            (102,616)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1988           -      -        -        -  22,768,700  22,769    95,794            (178,296)  (33,000) (92,733)
   Net loss                                                                                           (123,463)            (123,463)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1989                                       22,768,700  22,769    95,794            (301,759)  (33,000)(216,196)
   Net loss                                                                                           (256,125)            (256,125)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1990           -      -        -        -  22,768,700  22,769    95,794            (557,884)  (33,000)(472,321)
   Issuance of common stock
    in exchange for services rendered                            1,944,977   1,945    56,655                                 58,600
   Sale of treasury stock (Note 9)                                                    98,500                        26,000  124,500
   Net loss                                                                                           (171,742)            (171,742)
                               -----------------------------------------------------------------------------------------------------
Balance at March 31, 1991           -      -        -        -  24,713,677  24,714   250,949            (729,626)   (7,000)(460,963)
   Issuance of common stock
    for cash                                                     3,335,196   3,335   235,729                                239,064
   Issuance of common stock to
     a director pursuant to stock option                         1,000,000   1,000     9,000                                 10,000
   Issuance of common stock
     in exchange for services rendered                             872,000     872    84,188                                 85,060
   Issuance of common stock in
     exchange for mineral properties
     (Notes 1 and 2)                                             1,500,000   1,500    73,500                                 75,000
   Issuance of common stock
     in exchange for equipment                                     140,000     140     7,768                                  7,908
   Sale of treasury stock
     (Notes 1 and 9)                                                                  54,500                         7,000   61,500
   Net loss                                                                                            (749,259)           (749,259)
                                ----------------------------------------------------------------------------------------------------
Balance at March 31, 1992            -       -       -       -  31,560,873  31,561   715,634           (1,478,885)       - (731,690)
   Issuance of common stock for cash                             2,308,611   2,308    78,192                                 80,500
   Issuance of common stock in exchange
     for services rendered (Notes 1 and 9)                       1,810,000   1,810    52,583                                 54,393
   Issuance of common stock in exchange
     for notes payable or accounts payable                       2,404,697   2,405    98,968                                101,373
   Net loss                                                                                            (333,657)           (333,657)
                                 ---------------------------------------------------------------------------------------------------
Balance at March 31, 1993            -       -       -       -  38,084,181  38,084   945,377           (1,812,542)       - (829,081)
   Issuance of common stock for cash                             2,043,904   2,044    67,456                                 69,500
   Issuance of common stock in exchange
     for services rendered (Note 1 and 9)                          125,000     125     6,125                                  6,250
   Issuance of common stock in exchange
     for notes payable or accounts payable
     (Notes 1 and 9)                                             8,405,094   8,405   241,490                                 249,895
   Net loss                                                                                            (340,004)           (340,004)
                                  --------------------------------------------------------------------------------------------------
Balance at March 31, 1994            -       -       -       -  48,658,179  48,658  1,260,448          (2,152,546)     -   (843,440)

                           The accompanying notes are an integrated part of these financial statements
<PAGE>
EARTH SEARCH SCIENCES, INC.
(A Development Stage Company)
Consolidated Statement of Redeemable Common Stock and Nonredeemable Shareholders' Equity (Deficit)                      Page 2 of 2
------------------------------------------------------------------------------------------------------------------------------------
                                                          Nonredeemable shareholder's equity (deficit)
                                       ----------------------------------------------------------------------------------
                                                                                                           Deficit
                                                                                                         accumulated
                                 Redeemable                                                               during the
                                common stock    Preferred stock              Common stock              developmenTreasury
 Description                   Shares   Amount  Shares    Amount  Shares    Amount   APIC    Subscribed stage     stock    Total
------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1994           -         -       -       - 48,658,179  48,658  1,260,448          (2,152,546)         (843,440)
   Issuance of common stock for cash                               360,000     360     17,640                                18,000
   Issuance of common stock in exchange
     for services rendered, excluding
     treasury stock (Notes 1 and 9)                                200,000     200      9,800                                10,000
   Conversion of debentures into shares
     of common stock, excluding treasury
     stock (Note 9)                                                531,821     532     20,696                                21,228
   Issuance of common stock in exchange
     for equipment (Note 9)                                        250,000     250     12,250                                12,500
   Common stock relinquished to the 
     Company (Notes 6 and 9)                                                                             (705,935)         (705,935)
   Sale of treasury stock (Note 9)                                                                         95,325            95,325
   Issuance of treasury stock in exchange
     for services rendered (Notes 2 and 9)                                                                169,141           169,141
   Conversion of debentures thorugh issuance
     of treasury stock (Note 9)                                                                           273,787           273,787
   Stock purchase warrants and options 
     issued (Notes 2 and 8)                                                           172,500                               172,500
   Adjustment resulting from issuance of
     treasury stock (Notes 1 and 9)                                                  (167,118)            167,118                 -
   Net loss                                                                                            (1,122,541)       (1,122,541)
                                  --------------------------------------------------------------------------------------------------
Balance at March 31, 1995             -        -       -      - 50,000,000  50,000  1,326,216          (3,275,087) (564) (1,899,435)
   Issuance of common stock 
     for cash (Note 9)                                           1,058,880   1,059    191,341                               192,400
   Issuance of common stock in 
     exchange for services (Note 9)                              1,379,355   1,379    271,497                               272,876
   Conversion of debentures into 
     shares of common stock (Note 9)                             3,596,861   3,596    566,978                               570,574
   Liquidation of shareholders' loans 
     for shares of common stock (Note 9)                        10,466,567  10,467    695,468                               705,935
   Adjustment to additional paid-in
     capital related to sale of subsidiary
     common stock (Note 9)                                                            109,970                               109,970
   Stock purchase warrants and options
     issued (Note 9)                                                                1,150,000                             1,150,000
   Shares issued to a related party (Note 9)                        50,000      50      8,450                                 8,500
   Purchase of treasury stock (Note 9)                                                                            (15,000)  (15,000)
   Adjustment resulting from issuance
     of treasury stock                                                                  1,000                      (1,000)        -
   Sale of treasury stock                                                                                          16,564    16,564
   Net loss                                                                                            (2,408,292)       (2,408,292)
                                  --------------------------------------------------------------------------------------------------
Balance at March 31, 1996             -        -       -      - 66,551,663  66,551  4,320,920          (5,683,379)     - (1,295,908)
   Issuance of common stock in   
     exchange for services 
     rendered (Note 9)                                           1,836,140   1,837    535,404                               537,241
   Issuance of common stock in 
     exchange for instrument     1,000,000  400,000                                                                               -
   Conversion of debentures into 
     shares of common stock 
     (Note 9)                                                      828,890     829    345,699                               346,528
   Issuance of common stock for
     shares of subsidiary 
     common stock                                                   40,000      40      2,960                                10,000
   Adjustment to additional paid-in 
     capital related to sale of 
     subsidiary common stock 
     (Note 9)                                                                         116,197                               109,197
   Common stock subject to 
     potential rescission 
     offering                    725,914   117,845                (725,914)   (726)  (117,119)                             (117,845)
   Net loss                                                                                            (2,549,823)       (2,549,823)
                                 ---------------------------------------------------------------------------------------------------
Balance at March 31, 1997   1,725,914   517,845    -       - 68,530,779  68,531  5,204,061          (8,233,202)      -   (2,960,610)
   Issuance of common stock 
     in exchange for services
     (Note 10)                                                   1,286,476   1,286    350,329                               351,615
   Issuance of common stock
     for cash                                                      870,334     870    179,130                               180,000
   Shares issued in conjunction
     with sale/leaseback for 
     purchase of Probe 1 (Note 3)                                1,000,000   1,000    374,000                               375,000
   Issuance of common stock for 
     shares of subsidiary common
     stock (Note 10)                                             1,252,000   1,252     55,302                                56,554
   Issuance of common stock for
     shares of Skywatch common 
     stock (Note 10)                                             1,185,199   1,185    472,155                               473,340
   Conversion of debentures into
     shares of common stock (Note 5)                               865,988     866    160,197                               161,063
   Issuance of common stock in lieu
     of future lease payments (Note 3)                           1,725,000   1,725    498,275                               500,000
   Issuance of stock subscription 
     in lieu of future lease 
     payments (Note 3)                                                                         165,000                      165,000
   Issuance of common stock in lieu
     of debt obligations (Note 5)                                8,076,800   8,077   2,334,195                            2,342,272
   Issuance of warrant for cash proceeds
     to minority holder in Probe 1 LC
     (Note 10)                                                                         200,000                              200,000
   Conversion of note payable for
     Series A preferred stock 
     (Notes 4 and 10)                         100,000    500,000                                                             500,000
   Issuance of Series A preferred
     stock for cash (Note 10)                 100,000    500,000                                                             500,000
  Net loss                                                                                             (5,849,999)       (5,849,999)
                                ----------------------------------------------------------------------------------------------------
Balance at March 31, 1998  1,725,914 $517,845 200,000 $1,000,000 84,792,576 $84,792 $9,827,644 $165,000$(14,083,201) $- $(3,005,765)
                           =========  ======= =======  ========= ==========  ======  =========  ======= ===========   =  ==========
</TABLE>
<PAGE>
Earth Search Sciences, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                       From inception
                                                       (May 15, 1984)
                                                           through
                                                          March 31,          For the year ended March 31,
                                                            1998          1998           1997           1996
                                                       -------------- -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>            <C>
Cash flows from operating activities:
    Net loss                                           $(14,083,201)  $(5,849,999)   $(2,549,823)   $(2,408,292)
    Adjustments to reconcile net loss to net cash
      used in operating activities:
       Notes payable issued for services and
         interest expense                                    36,892             -              -              -
       Common stock issued for services and
         interest expense                                 1,655,755       364,912        730,674        322,974
       Common stock issued for Skywatch stock               473,340       473,340              -              -
       Treasury stock issued for services                   169,141             -              -              -
       Subsidiary common stock issued for compensation    1,000,000     1,000,000              -              -
       Expense resulting from issuance of warrants
         and options to purchase common stock             1,322,500             -              -      1,150,000
       Charge-off of capitalized costs for
         mineral properties                                 206,715             -              -              -
       Extraordinary items                                1,086,000     1,165,000              -              -
       Loss attributed to minority interest                 (37,374)            -        (37,374)             -
       Depreciation                                         415,994       167,768         29,668         20,004
       Amortization of lease discount                       404,410       404,410              -              -
       Loss(gain) on sale of equipment                          997             -              -         (5,765)
       Changes in assets and liabilities:
          Other assets                                     (158,873)      (99,085)        69,988       (128,939)
          Accounts payable                                  888,034      (893,504)     1,576,018         88,916
          Accrued liabilities                               520,666        20,105        129,593         89,916
          Unearned revenue                                   40,000        40,000              -              -
          Deferred officers' compensation                 1,387,461       607,643        187,258        240,320
                                                       ------------   -----------    -----------    -----------
Net cash used for operating activities                   (4,671,543)   (2,599,410)       136,002       (630,866)
                                                       ------------   -----------    -----------    -----------

Cash flows from investing activities:
    Capital expenditures                                 (4,061,927)     (306,487)    (3,347,852)       (87,611)
    Advance deposits                                      3,300,000       217,875      2,582,125        500,000
    Proceeds from sale of property and equipment             33,527             -              -         15,700
                                                       ------------   -----------    -----------    -----------
    Net cash used for investing activities                 (728,400)      (88,612)      (765,727)       428,089
                                                       ------------   -----------    -----------    -----------

Cash flows from financing activities:
    Proceeds from notes payable                           1,919,705       524,956              -        569,267
    Repayments on notes payable                            (250,451)      (40,000)       (95,500)        (9,062)
Proceeds from shareholder loans                           1,288,694       102,000              -              -
    Repayments of shareholder loans                        (942,852)      (35,000)       (59,429)       (68,023)
    Issuance of common stock                                908,027       180,000              -        192,400
    Issuance of subsidiary common stock                     570,095       247,000        165,995        157,100
    Purchase of treasury stock                              (48,000)            -              -        (15,000)
    Proceeds from sale of treasury stock                    297,325             -              -         16,000
    Issuance of Series A preferred stock                    500,000       500,000              -              -
    Proceeds from establishment of joint venture          1,000,000     1,000,000              -              -
    Issuance of warrant to purchase common stock            200,000       200,000              -              -
                                                       ------------   -----------    -----------    -----------

Net cash provided by financing activities                 5,442,543     2,678,956         11,066        842,682
                                                       ------------   -----------    -----------    -----------

Net increase (decrease) in cash                              42,600        (9,066)      (618,659)       639,905
Cash at beginning of period                                       -        51,666        670,325         30,420
                                                       ------------   -----------    -----------    -----------
Cash at end of period                                  $     42,600   $    42,600    $    51,666    $   670,325
                                                       ============   ===========    ===========    ===========

   The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>

Earth Search Sciences, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.   Summary of Operations

     The Company was  incorporated on May 15, 1984,  pursuant to the laws of the
     state of Utah, under the name Turnabout Corporation.  In November 1984, the
     Company commenced a public offering of its common stock.

     In December 1985,  the Company  acquired all of the  outstanding  shares of
     common stock of a privately  held company  known as Earth Search  Sciences,
     Inc.  (ESSI),  a Utah  corporation  formed on August 29, 1985.  The Company
     issued  13,639,600  shares  of its  common  stock in  exchange  for  ESSI's
     outstanding shares. This merger was a reverse acquisition and was accounted
     for as a pooling of interests.  Accordingly,  the assets and liabilities of
     the two companies were combined at their  recorded net book values.  ESSI's
     principal assets were unpatented mining claims in Alaska that were acquired
     from ESSI's incorporators at a cost of $126,715. ESSI's operations were the
     continuing  operations  of the  Company,  and ESSI was the entity which had
     substance and control both before and after the merger. In August 1987, the
     Company  changed its name to Earth Search  Sciences,  Inc., and in November
     1987, the former subsidiary was dissolved.

     The Company has three subsidiaries: Earth Search Resources, Inc.; Bear
     Creek Exploration, Inc. ("Bear Creek"); and Quasar Resources, Inc.
     ("Quasar").  As of March 31, 1996, these entities were not operational;
     however, during the periods from February through April 1996 and from
     October 1997 through February 1998, the Company sold 30 percent of Quasar
     and approximately 10 percent of Earth Search Resources, Inc. in private
     placement offerings. In the current fiscal year the Company repurchased all
     outstanding Quasar common stock.  See Note 10.

     Effective June 3, 1997, the Company formed a new company,  ESSI Probe 1 LC,
     to  acquire  the  second  Probe 1  instrument  manufactured  by  Integrated
     Spectronics  Pty Ltd.  of  Australia.  The new  Company is a joint  venture
     managed by Earth Search Sciences,  Inc and owned 50 percent by Earth Search
     Sciences,  Inc.  which  contributed  certain  rights  and a promise  to pay
     $500,000, and 50 percent by two shareholders who contributed $1 million for
     their  interest in the new  company.  Under the terms of the joint  venture
     arrangement,  Earth Search  Sciences,  Inc. will use the Probe 1 instrument
     for  the   identification   and  exploitation  of  minerals,   as  well  as
     environmental  remediation and other  projects.  The joint venture hopes to
     receive certain royalties on minerals  discovered and exploited through use
     of the  instrument,  as well as other fees paid by third  parties  for data
     gathered by the  instrument.  This  instrument  is  scheduled  for delivery
     during fiscal 1999.

     The Company's remaining obligation to the joint venture includes payment of
     $500,000.  Such amount has not been paid as of year end and is reflected as
     Payable to Probe 1 Joint Venture  within the March 31, 1998 balance.  Since
     the  accounts  of the joint  venture  are  consolidated  with  those of the
     Company, the offsetting receivable to the joint venture is reflected in the
     consolidated financial statements as a current asset.

     The Company's  activities  have included the acquisition of the ATM imagery
     database  which  can  be  utilized  by  the  Company  in  mineral  property
     exploration  activities or the development of information  that can be sold
     to third  parties  (see Note 3). In  addition,  the  Company  has  acquired
     mineral  properties  and has performed  certain  exploration  work.  Direct
     exploration  costs  incurred  to date  have  been  principally  geologists'
     salaries and consulting fees.

     In April 1991, the Company  commenced  entering into semiannual  agreements
     with  the  National   Aeronautics  and  Space   Administration   (NASA)  to
     participate  in the Visiting  Investigator  Program  ("VIP") to utilize the
     specialized  resources  and  sensing  technology  of  NASA  to the  goal of
     commercialization.  The  agreements  allow  the  Company  access  to NASA's
     sophisticated facilities that are capable of a full range of remote sensing
     activities.  Pursuant to the agreement,  NASA supplies  administrative  and
     technical support and the Company is responsible for its expenses and costs
     relating to its participation in VIP.  Information and technology which may
     be developed are to be shared between NASA and the Company.
<PAGE>
     In addition, the Company has established a non-exclusive agreement with the
     University  of Utah Research  Institute  ("UURI") and its center for remote
     sensing to mutually conduct, on a  project-by-project  basis,  research and
     development  activities  relating to remote  sensing.  UURI is obligated to
     provide  technical support for mineral and petroleum  exploration,  related
     environmental  analysis,  and  laboratory and field  training.  The Company
     provides geological personnel and funding for the projects.

     Going concern
     The Company is  experiencing  working capital  deficiencies  because it has
     incurred  operating  losses  and has not  generated  significant  operating
     revenues to date. In addition,  the Company has been unable to meet some of
     its financial  obligations.  The Company has operated  with funds  received
     from the sale of its common stock and the issuance of notes. 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 revenues to sustain ongoing operations.

     Management  expects to continue to raise capital through private  placement
     of unissued stock to meet its financial  obligations and cash requirements.
     In addition,  management  believes that the license and service  agreements
     with the  Noranda  Group (see Note 13) will allow the  Company to  generate
     operating  revenues  and  additional  cash flow.  However,  there can be no
     assurance  that  the  Company  will be able to  raise  such  capital  or to
     generate operating revenues to sustain its operations.

     Development stage enterprise
     The Company is  considered  a  development  stage  company.  The  Company's
     planned principal  operations have commenced,  but have not resulted in any
     significant  revenue to date.  Pursuant to the  requirements  of  Financial
     Accounting Standards Board Statement No. 7, the Company has included in the
     accompanying  financial  statements its  cumulative  results of operations,
     changes  in  shareholders'  deficit  and  cash  flows  from  the  Company's
     inception (May 15, 1984) through March 31, 1998.

     Principles of consolidation
     The consolidated  financial statements include the accounts of Earth Search
     Sciences,   Inc.  and  its  subsidiaries.   All  significant   intercompany
     transactions  have been  eliminated.  The  Company's  financial  statements
     reflect minority  interests in subsidiaries for  non-controlling  interests
     held by third parties in Earth Search Resources and ESSI Probe 1 LC.

     Revenue recognition
     Revenue  generated  and expenses  incurred from the  performance  of remote
     sensing activities are recognized as corresponding  services are performed.
     Revenues of $55,000  generated  during fiscal 1998 were earned  exclusively
     from remote sensing services  performed on behalf of the Noranda Group (see
     Note 13).

     Mineral properties and exploration costs
     Cost  incurred  to  acquire  mineral  properties  are  capitalized.   Costs
     associated  with mineral  properties  determined  to be impaired or to have
     little or no value are  expensed.  Exploration  costs are  expensed  in the
     period  incurred.  The Company  considers  geologist  salaries,  studies of
     geologic structures,  mapping and incidental  expenditures  incurred in the
     field to assess mineral deposits as exploration costs.

     Property and equipment
     Property  and  Equipment  are  stated  at  cost.  The  Company   recognizes
     depreciation on its property and equipment using the  straight-line  method
     over estimated useful lives of five to ten years.

     Depletion of mineral properties is calculated using the  unit-of-production
     method.  There has been no mining activity  performed by the Company on its
     mineral  properties  to date;  therefore,  no depletion is reflected in the
     accompanying financial statements.

     Income taxes
     Effective  April 1,  1994,  the  Company  adopted  on a  prospective  basis
     Statement of Financial Accounting Standards No. 109 ("FAS 109"), Accounting
     for Income Taxes.  FAS 109 requires the  recognition of deferred tax assets
     and liabilities for the expected tax effects from  differences  between the
     financial reporting and tax bases of assets and liabilities.  In estimating
     future tax effects,  FAS 109 generally considers all expected future events
     other than  enactments of changes in tax law or statutorily  imposed rates.
     The adoption of FAS 109 had no effect on loss or shareholders' deficit.
<PAGE>
     Common stock
     Expenses and commissions  incurred in connection with the Company's  public
     offering of its common stock and the  subsequent  sales of common stock for
     cash have been recorded as reductions of proceeds received.

     Common stock issued for other than cash  consideration  is reflected in the
     accompanying  financial  statements at estimated  fair value at the date of
     issue, considering the restricted nature of such shares.

     Dividends
     The Company has not paid any dividends and does not expect to pay dividends
     in the foreseeable future.

     Treasury stock
     Treasury  stock is recorded at cost.  Sales of treasury stock at amounts in
     excess of or below cost,  net of selling  expenses,  have been  recorded as
     increases/decreases in additional paid-in capital.


     Net loss per common share
     Earth Search Sciences, Inc. adopted Statement of Financial Accounting
     Standards No. 128 ("FAS 128"), Earnings Per Share, beginning with the
     Company's third quarter of fiscal 1998. This statement requires the Company
     to disclose "basic" and "diluted" loss per share and to restate all prior
     periods presented for comparative purposes.

     The  computation  of basic loss per share is  computed  using the  weighted
     average number of common stock shares  outstanding.  Diluted loss per share
     is  computed  using the  weighted  average  number of common  stock  shares
     outstanding  adjusted for the incremental  shares attributed to outstanding
     options and warrants to purchase  common  stock,  unless the effect of such
     incremental  shares is  anti-dilutive.  Options  and  warrants  to purchase
     shares of common  stock in fiscal 1998 and 1997,  were not  included in the
     computation  of diluted  loss per common  share  because  their  effect was
     anti-dilutive.

     Changes in classification
     Certain  reclassifications  have been made to the fiscal year 1996 and 1995
     cumulative  financial  statements to conform with the  financial  statement
     presentation for fiscal year 1997. Such  reclassifications had no effect on
     the Company's results of operations or shareholders' deficit.

     Use of estimates in the preparation of financial statements The preparation
     of financial  statements in conformity with generally  accepted  accounting
     principles  requires  management  to make  estimates and  assumptions  that
     affect the reported  amounts of assets and  liabilities  and  disclosure of
     contingent  assets and liabilities at the date of the financial  statements
     and the  reported  amounts of revenues and  expenses  during the  reporting
     period. Actual results could differ from those estimates.

     Financial instruments
     The Company records financial  instruments at cost which  approximates fair
     value, unless otherwise stated.

     Recent accounting pronouncements
     In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
     Reporting  Comprehensive  Income,  and  SFAS  No.  131,  Disclosures  about
     Segments of an  Enterprise  and Related  Information.  The adoption of both
     statements is required for fiscal years  beginning after December 15, 1997.
     Under SFAS No.  130,  companies  are  required  to report in the  financial
     statements,  in addition to net income (loss),  comprehensive income (loss)
     including, as applicable, foreign currency items, minimum pension liability
     adjustments and unrealized gains and losses on certain  investments in debt
     and  equity  securities.  SFAS  No.  131  requires  that  companies  report
     separately, in the financial statements,  certain financial and descriptive
     information about operating segments,  if applicable.  The Company does not
     expect the  adoption of SFAS No. 130 or SFAS No. 131 to have any  financial
     impact on its consolidated  financial statements and is currently assessing
     the impact of the disclosure provisions of the new pronouncements.
<PAGE>
2.    Supplemental Cash Flow Information
<TABLE>
<CAPTION>

                                                                Year ended March 31,
                                                               1998           1997
                                                            ------------   ------------
<S>                                                         <C>            <C>
Non-cash financing and investing activities:
      Common stock issued in conjunction with sale/
         lease of  Probe 1 (Note 3)                         $   375,000    $       -
      Notes payable issued to settle advance
         deposits                                             2,200,000            -
      Notes payable converted into common
        stock (Notes 5 and 10)                                2,740,038      346,528
      Common stock issued in lieu of future lease
        payments (Note 3)                                       500,000            -
      Common stock subscription issued in lieu of future
        lease payments (Note 3)                                 165,000            -
      Common stock issued for subsidiary common
        stock  (Note 10)                                         56,554        3,000
      Note payable converted into Series A
        preferred stock (Note 10)                               500,000            -
      Redeemable common stock issued for
        scanner (Note 10)                                             -      400,000
</TABLE>

3.   Property and Equipment

     Property and equipment consist of the following:
                                                           March 31,
                                                      1998           1997
                                                  -----------    -----------

         Mineral properties (A)                   $     5,833    $     5,833
         ATM imagery database (B)                     134,000        134,000
         Computers and software                        70,446         57,490
         Vehicles and equipment                        95,603         53,053
         Fixed assets under capital lease (C)       2,500,000              -
         Construction in progress (D)               1,520,000      3,770,000
                                                  -----------    -----------
                                                    4,325,882      4,020,376

         Accumulated depreciation                    (346,703)      (179,910)
                                                  -----------    -----------
                                                  $ 3,979,179    $  3,840,460
                                                  ===========    ============

(A)  In December  1993, the Company  acquired a 58% working  interest in mineral
     tracts  aggregating  3,389  acres in  Colorado.  The mineral  interest  was
     acquired through a joint venture with Emerald  Operating Company located in
     Denver,  Colorado.  Presently,  management  is  evaluating  the  commercial
     viability  of  the  property  and  the  Company  has  expended  $15,000  in
     geological exploration costs.

(B)  In the summer of 1987, the Company obtained a database  providing  airborne
     multispectral scanner imagery over sites in Oregon and Nevada. The imagery,
     gathered by an airplane using a thematic  mapper  scanner,  was recorded on
     high density digital tape and later  decompressed into computer  compatible
     data. This database  includes imagery  produced in photographic  form (hard
     copy),  as  well  as the  data on  digital  tape.  Such  imagery  was  then
     interpreted by a geologist having expertise in the ATM method.  The initial
     interpretation  was completed in June 1988, and produced  approximately 500
     anomalies that necessitate exploration work to determine mineralization.

     The Company capitalized the costs of acquiring this database.  The database
     can be used for identification of potential mineralization,  as well as for
     oil and gas  exploration  and other  purposes for which  geology is a major
     consideration.  The Company  intends to utilize this  imagery  database for
     potential  sale of  information  to  third  parties,  such a  large  mining
     companies that desire to investigate  mineralization  of large areas over a
     short period of time, and for use in the Company's own mineral  exploration
     activities.
<PAGE>
     The cost of the ATM imagery database was fully  depreciated as of March 31,
     1994;  however,  the Company  believes  that it continues to have  economic
     value.

(C)   During fiscal 1996, the Company entered into agreements to have an
     Australian company manufacture three airborne hyperspectral scanners for
     $2.5, $2.02 and $1.9 million, respectively.  In June 10, 1997, the Company
     completed a sales-leaseback transaction for the first scanner "Probe 1".
     The instrument was sold for its cost of $2,500,000.  The terms of the
     leaseback are as follows: 1) the Company will lease Probe 1 for $250,000
     per year bearing interest of prime plus 2% for three years; 2) at any time
     during the above lease period but no later than April 10, 2000, the Company
     must repurchase the instrument for $3,500,000 net of any lease payments;
     3)at any time prior to the repurchase, the lessor may convert the remaining
     obligation into shares of Earth Search Sciences, Inc. common stock at a
     conversion rate of 40% of the stock's then fair market value.  In the event
     Earth Search is not the operator at the time of exercise of the option, the
     lessee shall substitute comparable equity securities or other rights
     subject to reasonable approval of lessor; 4) the Company issued to the
     lessor 1,000,000 unregistered shares of the Company's common stock and
     warrants to purchase an additiona1 1,000,000 unregistered shares of the
     Company's common stock at an exercise price of $2 per share; and 5) the
     lessor will receive certain royalty rights to revenues generated from
     mineral sites identified by the instrument.  The Company recorded a capital
     lease obligation of $3,500,000 (net of a debt discount of $1,375,000) and
     $375,000 in shareholders' deficit related to the shares of common stock and
     stock purchase warrants issued in conjunction with the above transaction.

     On January 5, 1998,  1,725,000  restricted  shares of the Company's  common
     stock were issued in lieu of the first two lease  payments due on April 10,
     1998 and 1999.  As further  consideration,  the Company  agreed to issue an
     additional  1,000,000  restricted  shares of the Company's  common stock to
     retire  the  warrant   issued  in  conjunction   with  the   sale/leaseback
     transaction  mentioned above.  These shares were not issued as of March 31,
     1998; the value of these shares is shown as common stock  subscribed in the
     Company's  financial  statements.  The Company  recognized an extraordinary
     loss of $165,000 (basic and diluted loss per share of $0.002) from the debt
     extinguishment  during the fourth quarter of fiscal 1998 as a result of the
     settlement of the lease payments.

     The cost of equipment under capital leases at March 31, 1998 was $2,500,000
     with related accumulated amortization of $125,000.

     Total future  minimum lease  payments  remaining  under the  non-cancelable
     capital  lease is  $3,000,000.  The total amount is due during fiscal 2001.
     The  interest  portion of the  remaining  lease  payment is  $970,590.  The
     present value of the capital lease obligation is $2,029,410.

(D)  The Company accepted  delivery of the first scanner during fiscal 1998. The
     Company has paid  $1,520,000 to date on the second  airborne  hyperspectral
     scanner,  which is recorded as  construction-in-process  at March 31, 1998.
     The Company has a commitment  to pay the  remaining  $500,000 on the second
     instrument  upon its  completion,  expected  to be in fiscal  1999.  During
     fiscal 1998, the Company  violated  payment terms for the third  instrument
     and will no longer receive delivery of this scanner.

4.   Deferred Officers' Compensation

     Deferred compensation consists of the cumulative unpaid compensation due to
     corporate  officers  (Chairman,  Chief  Executive  Officer,  President  and
     Secretary).  Partial  salaries  have been paid to such  officers  since the
     inception  of  the  Company.   The  Company   recorded   deferred   officer
     compensation  of $418,550,  $187,258  and  $240,520  during the years ended
     March 31, 1998, 1997 and 1996,  respectively.  Interest on deferred officer
     compensation is accrued at 8.5% annually.  The Company accrued interest for
     deferred  officer  compensation  of $88,721,  $63,534,  and $35,224 for the
     years ended March 31, 1998,  1997 and 1996,  respectively.  The Company and
     certain  officers  have agreed  that  payment of the  compensation  will be
     deferred  until and unless the  Company  achieves  adequate  cash flow from
     operations. Management has not and does not presently anticipate sufficient
     cash  flow  from  operations  for the  succeeding  year;  accordingly,  the
     deferred  officers'  compensation  has  been  classified  as  a  noncurrent
     liability in the accompanying  consolidated balance sheet at March 31, 1998
     and 1997.
<PAGE>
5.   Notes Payable

     During  the years  ended  March 31,  1996 and 1995,  the  Company  obtained
     interim working capital by issuing  unsecured  promissory notes with rights
     of  conversion.  The terms of these debt  instruments  are typically for an
     initial period of ninety days or one year and are renewable at maturity for
     one year. The notes bear interest at 12.0% to 12.99%.  Holders of the notes
     have  the  right  to  convert  the  principal  amount  plus  interest  into
     restricted shares of the Company common stock,  subject to the terms in the
     promissory  notes.  As of March 31, 1998 and 1997,  the Company has various
     convertible notes aggregating $89,080 and $203,250, respectively.  Interest
     paid on such notes  during the years  ended March 31,  1998,  1997 and 1996
     aggregated $15,384, $11,801 and $2,500, respectively.

     In fiscal 1998 and 1997,  $161,063  and  $346,528,  respectively,  of notes
     outstanding  plus accrued  interest were converted into common stock at the
     agreed upon conversion rates. In 1997,  certain notes contained  conversion
     provisions  at 50% of fair value at the date of  conversion.  As such,  the
     Company  recognized  $61,937  in  additional  interest  expense  due to the
     conversions.

     In June 1997, the Company signed a promissory note for $2,200,000 to settle
     obligations  for cash advances of  $1,200,000  received as deposits for the
     first  hyperspectral  scanner  (see  Note 3).  The  Company  recognized  an
     extraordinary  loss of  $1,000,000  (basic  and  diluted  loss per share of
     $0.013) from debt  extinguishment,  during the first quarter of fiscal 1998
     as a result of the  settlement.  In January 1998,  the Company  settled the
     $2,200,000  note plus  accrued  interest of  $142,000 by issuing  8,076,800
     restricted  shares of the Company's  common stock and a warrant to purchase
     1,000,000  restricted  shares of the Company's  common stock at an exercise
     price of $2 per share. No value was assigned to the warrant.

     In August 1997, the Company signed a promissory note for $500,000. The note
     bore interest at 12 percent. During January 1998, the note was converted to
     100,000 shares of the Company's Series A preferred stock.

6.   Shareholder Loans

     The Company has financed its development  stage activities in part by funds
     received from advances from shareholders, primarily an officer and director
     of the Company.  It is anticipated  that these advances will be repaid when
     and if the Company  generates  cash flow from  operations  and/or  sales of
     shares of its common stock.

     Outstanding  advances bear annual interest at 10%. As of March 31, 1998 and
     1997, interest accrued on such advances, aggregating $231,289 and $224,385,
     respectively,  has been  included in accrued  interest in the  accompanying
     consolidated balance sheet.

7.   Income Taxes

     The Company recorded no provision for income taxes in fiscal 1998, 1997 and
     1996 due to the operating losses incurred from inception to date.

     The tax effect of temporary differences between financial reporting and the
     tax bases of assets and liabilities relate to the following:

                                                           March 31,
                                                      1998           1997
                                                  -----------    -----------
     Net operating loss carryforwards             $(4,080,747)   $(2,981,354)
     Accrued liabilities                             (705,172)      (311,927)
                                                  -----------    -----------
     Gross deferred tax assets                     (4,785,919)    (3,293,281)

     Deferred tax assets valuation allowance        4,785,919      3,293,281
                                                  -----------    -----------
                                                  $         -    $         -
                                                  ===========    ===========

     The deferred tax asset has been fully  reserved in accordance  with FAS 109
     because the Company cannot  anticipate future taxable income to realize the
     potential benefits of the gross deferred tax asset.
<PAGE>
     The benefit for income  taxes  differs  from an amount  computed  using the
     statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
                              Year ended March 31,
                                 1998 1997 1996
                                                       ----------     -----------    ----------
     <S>                                              <C>             <C>            <C>
     Benefit from income taxes at statutory rate       $2,340,000     $ 1,019,929    $ 963,317
      Decrease in benefit resulting from:
       Deferred tax valuation allowance                (2,340,000)     (1,019,929)    (963,317)
                                                       ----------     -----------    ---------
                                                       $        -     $         -    $       -
                                                       ==========     ===========    =========
</TABLE>


     The Company has tax net operating loss  carryforwards  at March 31, 1998 of
     $10,201,868.  Such carry forwards may be used to offset taxable income,  if
     any, in future  years  through  their  expiration  in 2000 to 2013.  Future
     expiration  of tax loss  carryforwards,  if not  utilized,  are as follows:
     2000, $604; 2001,  $27,451;  2002,  $47,625;  2003,  $102,616;  thereafter,
     $10,023,572. The annual amount


     of tax loss  carryforward  which can be utilized  may be limited due to the
     substantial  changes in the Company's  ownership which have occurred or may
     occur in the future.  Such limitations  could result in the expiration of a
     part of the carryforwards before their utilization.

8.   Officer and Director Stock Options

     At March 31, 1995, the Board of Directors awarded the Chairman of the Board
     stock options to purchase  1,500,000  shares of restricted  common stock as
     part of his deferred compensation agreement.

     In April 1995, the Board of Directors  granted options  through  employment
     agreements  for the  Company's  President and Chairman of the Board to each
     purchase  5,000,000  shares of the  Company's  common  stock at an exercise
     price of $0.21 per share.  Fifty percent of the options are  exercisable at
     any time. The remaining fifty percent are deemed "Performance  Options" and
     are exercisable as follows:  (I) one-third shall become  exercisable if and
     when the  Company  reports a  positive  net after tax profit for any fiscal
     year  commencing on or after March 31, 1995;  (II) another  one-third shall
     become  exercisable if and when the Company  reports a net after tax profit
     of greater than $1 million for any fiscal year commencing on or after March
     31, 1996; (III) all of the options shall become exercisable if and when the
     Company  reports a net after tax profit of greater  than $2 million for any
     fiscal year  commencing  on or after March 31, 1996;  and IV) any remaining
     options which have not become  exercisable  as aforesaid  shall become null
     and void when the  Company  reports its net after tax profits or losses for
     the fiscal year ending March 31, 1998. Any options remaining unexercised on
     December  31,  2004 shall  lapse and be deemed  null and void.  The Company
     recognized  $1,150,000 in  compensation  expense during 1996 related to the
     granting of the above non performance  stock options,  which represents the
     difference between fair value and the exercise price at the grant date.

     Notwithstanding the foregoing,  all Performance Options issued during March
     and  April  1995 to  these  employees  become  immediately  exercisable  if
     employment is  terminated  by the Company  without cause or by the employee
     with cause.  In the event of proposed  dissolution  or  liquidation  of the
     Company or in the event of a transfer  of more than 50% of the  outstanding
     shares  of the  Company,  or the  sale of all or  substantially  all of the
     assets of the Company,  to a person or persons who were not, as of April 8,
     1995, shareholders or employees of the Company (a "Change in Control"), all
     Performance Options become immediately exercisable.

     In May 1995,  the Board of  Directors  granted  options  for the  Company's
     Secretary/Treasurer  to  purchase  300,000  shares  of  common  stock at an
     exercise  price of $0.21 per share  exercisable  upon grant.  In  addition,
     options  were  granted to a director of the  Company to purchase  1,000,000
     shares of common  stock of the  Company  at a  purchase  price of $0.21 per
     share. The director's options are exercisable at any time within five years
     after the individual  becomes a full-time  employee of the Company based on
     certain mutually agreeable performance criteria.
<PAGE>
     In June  1996,  the  Board of  Directors,  through  employment  agreements,
     granted to the Company's  Chief  Executive  Officer  options to purchase an
     aggregate  of  2,500,000  shares of the  common  stock of the  Company at a
     purchase price of fifty percent (50%) of the losing market price per share.
     Fifty  percent  (50%) of the  options  are  exercisable  at any  time.  The
     remaining  fifty  percent  (50%)  of the  options  are  deemed  Performance
     Options, and may be exercised upon completion by the Officer of a financing
     for the  Company.  Upon the  Company  reporting  a net after tax  profit of
     greater  than five million  dollars for any fiscal  year,  the Officer will
     receive a bonus equal to the number of options  unexercised  multiplied  by
     the purchase  price per share grossed up for taxes.  Any options  remaining
     unexercised on December 31, 2006 shall lapse and be deemed null and void.

     On  August  5,  1997,  the  Board of  Directors  granted  to the  Company's
     Chairman,  President,  Chief  Executive  Officer and  Secretary  options to
     purchase 1,000,000 shares of the Company's common stock at a price equal to
     $0.50 per  share  exercisable  for a period  of 24 months  from the date of
     vesting.  The options  will be deemed  vested for each  individual  if that
     individual  is  employed  by the  Company  on the  first  date on which the
     closing market price of the Company's  common stock equals or exceeds $0.50
     per share for 30 consecutive  days, and the options shall lapse and be null
     and void if they have not become exercisable by July 31, 1999.

     Also in  August  1997,  the Board of  Directors  granted  to the  Company's
     Chairman, President and Chief Executive Officer options to purchase a total
     of 4,000,000 shares each of the Company's common stock as follows:

     1.  When and if the closing  market price of common stock equals or exceeds
         $1.00  per  share  for 30  consecutive  days,  then  each of the  three
         individuals  shall  become  fully  vested  with an option  to  purchase
         1,000,000  shares of common  stock at a price  equal to $1.00 per share
         exercisable for a period of 24 months from the date of vesting.
     2.  When and if the closing  market price of common stock equals or exceeds
         $1.50  per  share  for 30  consecutive  days,  then  each of the  three
         individuals  shall  become  fully  vested  with an option  to  purchase
         1,000,000  shares of common  stock at a price  equal to $1.50 per share
         exercisable for a period of 24 months from the date of vesting.
     3.  When and if the closing  market price of common stock equals or exceeds
         $2.00  per  share  for 30  consecutive  days,  then  each of the  three
         individuals  shall  become  fully  vested  with an option  to  purchase
         1,000,000  shares of common  stock at a price  equal to $2.00 per share
         exercisable for a period of 24 months from the date of vesting.
     4.  When and if the closing  market price of common stock equals or exceeds
         $2.50  per  share  for 30  consecutive  days,  then  each of the  three
         individuals  shall  become  fully  vested  with an option  to  purchase
         1,000,000  shares of common  stock at a price  equal to $2.50 per share
         exercisable for a period of 24 months from the date of vesting.

     The  individual  must be employed by the Company on the first date of which
     the closing  market price of the  Company's  common stock equals or exceeds
     the relevant  price for the options to vest. The options shall lapse and be
     null and void if they have not become exercisable by July 31, 1999.

     During fiscal 1998,  the Board of Directors  issued  options to various new
     employees to purchase a total of 7,000,000  shares of the Company's  common
     stock.  The exercise prices for these options range from $0.25 to $1.00 per
     share. The options generally expire three (3) years from date of grant.

     The Company  adopted  Statement of Financial  Accounting  Standards No. 123
     ("FAS  123"),  Accounting  for  Stock-Based  Compensation,  in  1996.  This
     statement  allows  companies to choose  whether to account for  stock-based
     compensation under the current intrinsic method as prescribed by Accounting
     Principles  Board  Opinion  No.  25  (APB  25) or use a fair  value  method
     described in FAS 123. The Company continues to follow the provisions of APB
     25. No compensation  cost has been recognized on the Company's stock option
     grants except as described  above, as the options include an exercise price
     equal to or exceeding the fair value on the date of grant.
<PAGE>
     The Company has  determined  that the pro forma effects of applying FAS 123
     would have an immaterial effect on the results of operations for 1998, 1997
     and 1996. This  determination was made using the following weighted average
     assumptions:

                                   Fiscal    Fiscal    Fiscal
                                    1998      1997      1996
                                   ------    ------    ------
    Risk-free interest rate         6.05%     6.75%     6.75%
    Expected dividend yield            -         -         -
    Expected lives                  5.43        10        10
    Expected volatility               87%       95%       75%

9.   Stock Options

The following table summarizes the employee stock option transactions  described
above.

                                  Shares under    Weighted average
                                     option        exercise price
                                   ----------     ----------------

   Balance, March 31, 1995          1,500,000                $0.11
   Options granted                 10,300,000                $0.21
   Options canceled                         -                    -
   Options exercised                        -                    -
                                   ----------     ----------------

   Balance, March 31, 1996         11,800,000                $0.19
   Options granted                          -                    -
   Options canceled                         -                    -
   Options exercised                        -                    -
                                   ----------     ----------------

   Balance, March 31, 1997         11,800,000                $0.19
   Options granted                 23,000,000                $0.18
   Options canceled                         -                    -
   Options exercised                        -                    -
                                   ----------     ----------------

   Balance, March 31, 1998         34,800,000                $0.78
                                   ==========     ================

The weighted  average per share fair value of options granted during fiscal 1998
is $0.11.

The following table summarizes  information  about stock options  outstanding at
March 31, 1998:
<TABLE>
<CAPTION>

                                                                               Options
                                         Options outstanding                 exercisable
                               ---------------------------------------     ----------------
                                    Weighted
                                   Number                average               Number
               Exercise          outstanding            remaining            exercisable
                price            at 3/31/98          contractual life        at 3/31/98
             -------------     ----------------      -----------------     ----------------
               <S>             <C>                   <C>                   <C>
                                     (Years)
                    $0.10            1,500,000                      7            1,500,000
                     0.21           11,300,000                    5.9            5,300,000
                     0.25              750,000                    2.7              750,000
                     0.50            8,750,000                    2.5            1,500,000
                     0.75              250,000                      3                    0
                     1.00            3,250,000                   1.45                    0
                     1.50            3,000,000                   1.33                    0
                     2.00            3,000,000                   1.33                    0
                     2.50            3,000,000                   1.33                    0
                                    ----------
                                    34,800,000
</TABLE>

     In  addition to the above  options,  the Company  also  granted  options to
     purchase 2,500,000 shares at a purchase price of fifty percent (50%) of the
     losing  market price per share.  These  options lapse on December 31, 2006.
     Fifty percent (50%) of these options are exercisable at 3/31/98.
<PAGE>
10.  Redeemable Common Stock and Nonredeemable Shareholders' Equity

     Redeemable common stock
     In 1997, the Company issued to a vendor  1,000,000  unregistered  shares of
     common stock valued at $400,000 for partial  payment of amounts owed to the
     airborne  hyperspectral  manufacturer.  As part of the stock issuance,  the
     Company  granted  "put  rights"  that may  require  the  Company  to redeem
     1,000,000  shares of its  common  stock at a  redemption  price of $.40 per
     share.  The  redemption  period began on January 28, 1997 and will continue
     until  the  contract  is  completed  and  final  payment  is made.  If such
     shareholder  does not place a  redemption  request  during  the  redemption
     period,  the "put  right"  will  expire when the above terms are met by the
     Company.

     The shares of common stock subject to the "put rights" are presented in the
     accompanying  consolidated  balance sheet as redeemable  common stock. Such
     shares have been  recorded at their  approximate  fair market  value at the
     date of  issuance.  Such fair market  value  equals the maximum  redemption
     amount.

     Also included in redeemable common stock are amounts related to a potential
     rescission  offering  related to certain shares sold in the state of Idaho,
     (see Note 12).

     Preferred stock
     During the year ended March 31, 1998,  the Company issued 200,000 shares of
     Series A preferred  stock:  100,000 of these shares were issued as a result
     of the conversion of a note payable (Note 5). Each share of preferred stock
     is convertible  into five shares of the Company's  common stock.  2,000,000
     shares of the  Company's  common stock have been reserved for issuance upon
     the conversion of the Series A preferred stock.


Common stock issued
     During the years ended March 31, 1998,  1997 and 1996,  the Company  issued
     shares of common stock in exchange for services rendered as follows:


                                            1998          1997           1996
                                         ----------    ---------      ---------
     Consulting and other                $  351,615    $ 537,241(a)   $  273,440
                                         ==========    =========      ==========

     Number of shares issued, including
      treasury stock                      1,286,476     1,836,140(a)   1,374,355
                                         ==========    ==========     ==========

     (a) Inclusive  of  shares  issued  in  conjunction  with the  research  and
         development contract disclosed in Note 11.

     During the fiscal  years ended March 31, 1998,  1997 and 1996,  the Company
     issued  865,988,  828,890 and 3,596,861  shares of common stock  (including
     treasury stock) to satisfy $99,126, $146,231 and $521,040, respectively, of
     principal  and $61,937,  $200,297 and  $49,534,  respectively,  of interest
     relating to convertible notes payable (see Note 5).

     During fiscal 1998, the Company issued 1,185,199  restricted  shares of the
     Company's  common  stock in  exchange  for  1,185,199  shares  of  Skywatch
     Exploration, Inc. As a result, the Company now owns 100 percent of Skywatch
     Exploration,   Inc.  No  value  is  attributed  to  the  assets   acquired;
     accordingly the fair value of the shares issued,  $473,340, is reflected in
     other expense on the Consolidated Statement of Operations.

     Common stock loans from shareholder
     In fiscal 1995, a shareholder relinquished to the Company 10,466,567 shares
     of common stock for the Company to use for additional  issuances to outside
     shareholders. The shareholder relinquished all ownership and voting rights;
     however, the Company was obligated to reissue to the shareholder 10,466,576
     replacement  shares  if and  when  the  shareholders  approved  a  proposed
     increase in authorized shares from 50,000,000 to 200,000,000.  These shares
     were accounted for as treasury  stock and the Company  recorded a liability
     of  $705,935  due  to  shareholder   for  the  fair  value  of  the  shares
     relinquished.  Such  obligation  was included in  shareholder  loans in the
     accompanying  consolidated  balance  sheet at March 31,  1995.  The Company
     received  shareholder  approval  in 1996 to  increase  the number of shares
     authorized,  and as such, the above shares were reissued to the shareholder
     in 1996.
<PAGE>
     Treasury stock
     In May 1987,  the Company  acquired 3.3 million  shares of its common stock
     from three of its initial incorporators. The purchase price was $33,000, or
     $.001 per share.  Funding for the stock  acquisition  was obtained  through
     loans from certain shareholders of the Company.

     During the year ended March 31, 1991, the Company sold 2,600,000  shares of
     its treasury stock in eleven separate transactions,  resulting in aggregate
     proceeds of $124,500.  Prices for the shares  ranged from $.03 per share to
     $.12 per  share,  with the  average  price  approximating  $.05 per  share.
     Selling expenses paid from the proceeds totaled $5,000.

     During the fiscal year ended  March 31,  1992,  the  Company  sold the then
     remaining   700,000   shares  of  its  treasury   stock  in  five  separate
     transactions  aggregating  $61,500.  Prices  ranged  from $.05 to $.125 per
     share.

     In fiscal 1995, the Company issued  10,462,066 shares of its treasury stock
     for cash,  services and debt  conversions.  The excess cost of the treasury
     stock  issued over the amounts  received  aggregated  $167,118 and has been
     recorded as a reduction of additional paid-in capital.

     Stock warrants
     Warrants to  purchase  1,500,000  shares of common  stock at $.21 per share
     were issued to an investment  banker in connection with financial  advisory
     services  provided.  The  estimated  fair value of the warrants  aggregated
     $15,000. Such value was recorded as general and administrative expenses for
     the year ended March 31, 1995, with a corresponding  increase to additional
     paid in capital as of March 31, 1995. The warrants expire on March 1, 2000.

     At March 31, 1998,  additional warrants to purchase 4,000,000 shares of the
     Company's common stock are  outstanding,  with exercise prices ranging from
     $1.30 to $2.00 per share.

     Private placement of Quasar common stock
     In 1997 and 1996,  Quasar,  a wholly owned  subsidiary,  issued 331,990 and
     314,200 shares,  respectively,  of its common stock at $.50 per share, in a
     private  placement  offering.  As the Company  owns a majority  interest in
     Quasar,  the  subsidiary's  accounts  are  consolidated  with  those of the
     Company.  Accordingly,  the Company recorded a minority interest of $49,798
     and  $47,130  relating  to the  outside  investors'  share of net equity in
     Quasar. The difference between the stock proceeds of $165,995 and $157,100,
     respectively,   and  the   minority   interest  of  $49,798  and   $47,130,
     respectively, has been recorded as an addition to paid in capital.

     In 1997,  the Company  repurchased  20,000 shares of Quasar common stock by
     issuing 40,000 shares of the Company's  common stock.  In 1998, the Company
     repurchased the remaining 626,190 shares of Quasar common stock outstanding
     by issuing 1,252,000 shares of the Company's common stock. As a result, the
     Company now owns all of the outstanding stock of Quasar Resources, Inc.

     Private  placement of Earth  Search  Resources  common stock During  fiscal
     1998,  Earth Search  Resources,  a wholly owned  subsidiary of Earth Search
     Sciences,  Inc.,  issued  2,494,000  shares of its common stock at $.50 per
     share.  Two  million of the shares  were  issued to  certain  officers  and
     directors  of  the  Company  as   compensation   for   services   rendered.
     Accordingly,  the  costs  of these  shares  are  included  in  general  and
     administrative expenses within the statement of loss. As the Company owns a
     majority interest in Earth Search Resources,  the subsidiary's accounts are
     consolidated  with  those of the  Company.  Accordingly,  the  Company  has
     recorded  a minority  interest  of  $247,000  relating  to the third  party
     investors' share of net equity in Earth Search Resources.

11.  Equity Investments

     In fiscal 1996,  the Company  entered into an agreement to purchase  twenty
     percent of a Kazahstan  "joint  stock"  company,  SEMTECH.  As of March 31,
     1997, the Company has paid all of the $30,000 purchase price. An additional
     $155,000  was invested in SEMTECH  projects  during  fiscal year 1998.  The
     Company has recorded this additional investment as a long-term asset.
<PAGE>
12.  Commitments and Contingencies

     Research and development contract
     In fiscal  1997,  the Company  entered  into a contract to receive  certain
     services related to future remote sensing projects and to have research and
     development  performed  to develop the next  generation  of remote  sensing
     software.  Total  payments  under the  contract  through  January 1998 were
     $260,000.  All payments were recorded as research and development expenses.
     In addition to the above cash  consideration,  the Company issued 1,000,000
     shares of  unregistered  common stock with a fair value of $390,000 as part
     of the  agreement.  This amount was  recorded as research  and  development
     expense  during the year ended March 31, 1997. The contract was modified on
     January 7, 1998.  The  revised  contract  allows for the Company to pay for
     imaging  services on a per project basis.  As of March 31, 1998, no imaging
     projects  have been  performed  under the  terms of the  revised  contract.
     However,  once such services  begin,  the Company will be obligated to make
     minimum payments in the amount of $300,000,  $500,000, and $900,000 for the
     first, second and third years of service,  respectively.  Payments totaling
     $30,000 have been made as of March 31, 1998 for the first year of service.

     Airborne hyperspectral scanner commitments
     As discussed in Note 3, pursuant to the manufacturing  contract,  in fiscal
     1999 the  Company  will be required  to pay the  remaining  $500,000 of the
     contract as specified manufacturing "benchmarks" are met.

     Litigation
     On January 10,  1997,  the  Department  of Finance  filed suit  against the
     Company and its Chairman,  Larry Vance, in the district Court of the Fourth
     Judicial  District  of the  State of Idaho,  in and for the  County of Ada,
     Civil No. CV OC 9700155D. The Department's complaint set forth five counts,
     alleging that the Company and Mr. Vance (1) sold unregistered securities to
     Idaho and  non-Idaho  residents  in  violation  of Idaho law,  (2) acted as
     broker-dealer or securities salesmen without having registered as such, (3)
     made  untrue  statements  of  material  facts  in  violation  of the  Idaho
     antifraud  law,  (4) by making said untrue  statements  of material  facts,
     engaged in a practice  which  operates  as a deceit upon  persons,  and (5)
     distributed press releases and other written literature without filing same
     with the  Director of the Idaho  Department  of Finance in violation of the
     Department's rules.

     On January 10, 1997,  the Company  filed a declaratory  relief  against the
     Idaho  Department of Finance in the District  court of the Fourth  Judicial
     District  of the State of Idaho,  in and for the  County of  Valley,  Civil
     No.CV 97000C.  The Company's  declaratory relief action seeks a declaration
     from the court that the Company did not  violate the Idaho  Securities  Act
     with regard to certain  transactions  taking place  subsequent  to April 1,
     1994.  The  Company's  declaratory  relief  action was filed in response to
     repeated  threats by the  Department  that it would file suit  against  the
     Company.

         In  December  1997,  the Company  settled  its  lawsuit  with the Idaho
     Department of Finance. As a result of the settlement, the Company agreed to
     proceed  with an offering of  rescission  to certain  Idaho  investors.  In
     addition,  the Company has agreed not to rely on any  exemptions  under the
     Idaho Securities Act for a period of five years without first obtaining the
     permission of the Department of Finance.
<PAGE>

     The Company is preparing to offer  approximately  19 Idaho residents offers
     of rescission for certain  convertible  debt  instruments  and common stock
     issued  which,  if  accepted  by  all  offerees,  would  cost  the  Company
     approximately  $143,545.  In conjunction  with the  anticipated  rescission
     offering,  $117,845  related  to  725,914  shares of common  stock has been
     recorded in redeemable common stock as of March 31, 1997 and 1998.

13. Related Party Transactions

     During  fiscal  1998,  the Company  entered into  various  agreements  with
     Noranda  Mining  and  Exploration,   Inc.  and  its  affiliates   including
     Falconbridge Limited (collectively, the "Noranda Group"). The Noranda Group
     is a  shareholder  of the  Company;  additionally,  a member  of  Noranda's
     management  team was appointed to the Company's  Board of Directors  during
     fiscal 1998.  The agreements  executed  between the Company and the Noranda
     Group  provide  the Noranda  Group with,  under  certain  restrictions,  an
     exclusive  license to use  PROBE-1  for  commercial  mining  purposes.  The
     licensing  and  services  agreement  grant the Noranda  Group an  exclusive
     worldwide license (except Kazakhstan and the Company's Canadian claims) for
     mining data  gathered  under the services  agreement,  allowing the Noranda
     Group a 60 day window to determine if it wants to proceed with  exploration
     based on the  hyperspectral  data. The agreements  have a three-year  term,
     with an automatic  three-year  renewal unless the agreements are terminated
     by either  party at the end of the  initial  three-year  period.  Under the
     terms of the agreements, the Company is guaranteed minimum services work of
     $750,000 in year one, $2,000,000 in year two, $3,000,000 in year three, and
     $3,000,000 in each subsequent year.  Furthermore,  the agreement grants net
     smelter royalties to the Company ranging from 1.5 percent to 2.5 percent of
     revenues or net profit  interests of 10 percent on any mineral  discoveries
     leading  to  production  on land not  currently  owned or  optioned  by the
     Noranda  Group.  200,000 shares of the Company's  Series A preferred  stock
     were issued to the Noranda  Group for  consideration  equal to  $1,000,000;
     furthermore,  the Noranda Group was granted  options to purchase  1,000,000
     shares of the Company's common stock at a price of $2.00 per share.  During
     fiscal 1998,  the Company was paid $55,000 by the Noranda  Group to perform
     remote sensing services.

<PAGE>