UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 x           QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 For the
quarter ended December 31,
2009
 
  ̈           TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 For the
transition period from _______to_______
 
 Commission
File No. 000-19566
 
 EARTH SEARCH SCIENCES,
INC.
 (Exact
Name of Registrant as Specified in its Charter)
 
 
 Nevada
                87-0437723(State
      or other Jurisdiction of Incorporation or Organization)
                (IRS
      Employer Identification
Number)
 
 
 306 Stoner Loop Road,
Lakeside, MT 59922
 (Address
of Principal Executive Offices, Including Zip Code)
 
 Registrant’s
telephone number, including area code: (406) 751-5200
 
 Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes xNo  ̈
 
 Indicate
by a check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
 Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting companyx
 
 Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ No x
  Number of shares of common stock
outstanding at February 12, 2009: 199,487,890
 EARTH
SEARCH SCIENCES, INC.
 
 TABLE
OF CONTENTS
 
 FORM
10-Q
 
 QUARTER
ENDED December 31, 2009
 
 PART I
                    
                    FINANCIAL INFORMATIONItem
      1. Consolidated Financial Statements (Unaudited)
                  PageConsolidated
      Balance Sheets as of December 31, 2009 and March 31, 2009
                  3Consolidated
      Statements of Expenses for the three and nine months ended December 31,
      2009 and 2008
                  4Consolidated
      Statements of Cash Flows for the nine months ended December 31, 2009 and
      2008
                  5Consolidated
      Statement of Changes in Stockholders’ Deficit for the nine months ended
      December 31, 2009
                  6Selected
      notes to consolidated unaudited financial statements
                  7-8Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
                  9-12Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                  12Item
      4T. Controls and Procedures
                  12PART II
                    
                    OTHER INFORMATION REQUIREDItem
      1. Legal Proceedings
                  13Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                  13Item
      3. Defaults Upon Senior Securities
                  13Item
      4. Submission of Matters of a Vote of Security Holders
                  13Item
      5. Other information
                  13Item
      6. Exhibits
                  13
 EARTH
SEARCH SCIENCES, INC.
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)
 
 December
      31, 2009
                
                
                March
      31, 2009ASSETSCurrent
      assets:Cash
                
                $
                110,263
                
                
                $
                70,618Prepaid
      expenses
                
                
                1,250
                
                
                
                13,448Loan
      costs, net of accumulated amortization of $261,261 and $258,003,
      respectively
                
                
                14,309
                
                
                
                17,567Total
      current assets
                
                
                125,822
                
                
                
                101,633Property
      and equipment, net accumulated depreciation of $1,117,790 and $1,040,180,
      respectively
                
                
                24,362
                
                
                
                102,247Intangible
      asset – patent
                
                
                25,300
                
                
                
                25,300Deposits
                
                
                887,076
                
                
                
                914,516TOTAL
      ASSETS
                
                $
                1,062,560
                
                
                $
                1,143,696LIABILITIESCurrent
      liabilities:Accounts
      payable
                
                $
                1,427,467
                
                
                $
                1,513,631Accounts
      Payable – related parties
                
                
                413,132
                
                
                
                389,968Accrued
      expenses
                
                
                4,226,638
                
                
                
                3,395,875Current
      portion of notes payable
                
                
                2,028,440
                
                
                
                2,128,440Settlement
      obligation
                
                
                8,686,824
                
                
                
                8,686,824Current
      portion of notes payable – related parties
                
                
                1,745,716
                
                
                
                2,557,258Total
      current liabilities
                
                
                18,528,217
                
                
                
                18,671,996Long
      term portion of notes payable
                
                
                -
                
                
                
                500,000Long
      term portion of notes payable – related parties
                
                
                -
                
                
                
                500,000Total
      liabilities
                
                
                18,528,217
                
                
                
                19,671,996STOCKHOLDERS’
      DEFICITPreferred
      stock, 300,000,000 shares authorized, $.001 par value, 31,250,000 and 0
      issued and outstanding, respectively or none issued and
      outstanding
                
                
                31,250
                
                
                
                -Common
      stock, $.001 par value; 300,000,000 shares authorized; 199,487,890 and
      194,655,705 shares issued and outstanding, respectively
                
                
                199,487
                
                
                
                194,654Additional
      paid-in capital
                
                
                55,188,118
                
                
                
                53,315,070Treasury
      Stock
                
                
                (200,000)
                
                
                
                (200,000)Accumulated
      deficit
                
                
                (72,684,512
                )
                
                
                (71,838,024
                )Total
      stockholders’ deficit
                
                
                (17,465,657
                )
                
                
                (18,528,300
                )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                
                $
                1,062,560
                
                
                $
                1,143,696
 
 
 
 
 
 See
accompanying notes to unaudited consolidated financial
statements.
  
  EARTH
SEARCH SCIENCES, INC.
 CONSOLIDATED
STATEMENTS OF EXPENSES
 (UNAUDITED)
 
 
 
 
 Three
      months ended December 31,
                
                Nine
      months ended December 31,2009
                
                2008
                
                2009
                
                2008Revenues
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Operating
      expensesDepreciation
      and amortization
                
                25,962
                
                
                25,962
                
                
                77,886
                
                
                51,924General
      and administrative
                
                382,208
                
                
                6,410,526
                
                
                1,121,375
                
                
                6,686,232Total
      expenses
                
                408,170
                
                
                6,436,488
                
                
                1,199,261
                
                
                6,738,156Loss
      from operations
                
                (408,170)
                
                
                (6,436,488)
                
                
                (1,199,261)
                
                
                (6,738,156)Gain
      on conversion of debt
                
                -
                
                
                
                
                
                781,250
                
                
                -Interest
      expense
                
                (146,230)
                
                
                (153,129)
                
                
                (428,475)
                
                
                (272,708)Net
      loss
                $
                (554,400)
                
                $
                (6,589,617)
                
                $
                (846,486)
                
                $
                (7,010,864)Basic
      and diluted:Loss
      per common share
                $
                (0.00)
                
                $
                (0.04)
                
                $
                (0.00)
                
                $
                (0.05)Weighted
      average common shares outstanding - basic and diluted
                
                199,487,890
                
                
                156,926,195
                
                
                199,487,890
                
                
                134,276,016
 
 
 
 
 
 
 
 
 
 See
accompanying notes to unaudited consolidated financial statements.
 
  
  EARTH
SEARCH SCIENCES, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 Nine
      Months EndedDecember
      31,2009
                
                
                2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (846,486)
                
                
                $
                (7,010,864)Adjustments
      to reconcile net loss to cash used in operating
activities:Depreciation
      and amortization
                
                
                77,886
                
                
                
                51,924Amortization
      of deferred finance costs
                
                
                3,258
                
                
                
                14,008Gain
      on conversion of debt
                
                
                (781,250)
                
                
                
                -Common
      stock issued for services
                
                
                96,644
                
                
                
                843,004Common
      stock issued for vendor payable
                
                
                -
                
                
                
                129,969Common
      stock issued for services related to the purchase of asset – General
      Synfuels International
                
                
                -
                
                
                
                2,994,700Payable
      issued for services related to the purchase of asset- General Synfuels
      International
                
                
                -
                
                
                
                2,500,000Imputed
      interest
                
                
                93,738
                
                
                
                61,117Changes
      in assets and liabilities:Accounts
      payable and accrued expenses
                
                
                715,214
                
                
                
                (170,574)Accounts
      payable – related party
                
                
                25,583
                
                
                
                60,199Accrued
      interest – related parties
                
                
                149,402
                
                
                
                18,478Deposits
                
                
                -
                
                
                
                (652,056)Prepaid
      expenses and other current asset
                
                
                12,198
                
                
                
                (11,960)NET
      CASH USED IN OPERATING ACTIVITIES
                
                
                (453,813)
                
                
                
                (519,999)CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      paid for equipment
                
                
                (95,000)
                
                
                
                -Deposits
                
                
                -
                
                
                
                (652,056)NET
      CASH USED IN INVESTING ACTIVITIES
                
                
                (95,000)
                
                
                
                (652,056)CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from stockholder loans, net
                
                
                (61,542)
                
                
                
                3,000Repayment
      on related party debt
                
                
                -
                
                
                
                (88,541)Proceeds
      from issuance of common stock
                
                
                -
                
                
                
                1,363,500Proceeds
      from issuance of convertible notes
                
                
                650,000
                
                
                
                -Principal
      payments on short-term debt
                
                
                -
                
                
                
                (103,686)NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                588,458
                
                
                
                1,174,273NET
      INCREASE (DECREASE) IN CASH
                
                
                39,645
                
                
                
                2,218CASH
      AT BEGINNING OF PERIOD
                
                
                70,618
                
                
                
                8,821CASH
      AT END OF PERIOD
                
                $
                110,263
                
                
                $
                11,039SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                
                $
                56
                
                
                $
                169,192Taxes
      paid
                
                
                -
                
                
                
                -Non-cash
      financing and investing activitiesCommon
      stock issued for asset
                
                $
                -
                
                
                $
                5,300Deposit
      included in account payable
                
                $
                27,440
                
                
                $
                119,881Prepaid
      compensation in account payable
                
                $
                -
                
                
                $
                75,000Preferred
      stock issued for convertible related party  debt
                
                $
                1,250,000
                
                
                $
                -
 
 See
accompanying notes to unaudited consolidated financial
statements.
  
  EARTH
SEARCH SCIENCES, INC.
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
 Nine
months ended December 31, 2009
 (Unaudited)
 
  AdditionalPreferred
                  
                  Stock
                  
                  Common
                  
                  Stock
                  
                  Paid-in
                  
                  Treasury
                  
                  RetainedDescription
                  Stock
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Stock
                  
                  Deficit
                  
                  TotalBalances
      at March 31. 2009
                  -
                  
                  -
                  
                  194,655,705
                  
                  194,654
                  
                  53,315,070
                  
                  (200,000)
                  
                  (71,838,024)
                  
                  (18,528,300)Imputed
      Interest
                  
                  
                  
                  
                  
                  
                  
                  
                  93,736
                  
                  
                  
                  
                  
                  93,736Issue
      Preferred stock for convertible debt
                  15,625,000
                  
                  15,625
                  
                  
                  
                  
                  
                  453,125
                  
                  
                  
                  
                  
                  468,750Issue
      Preferred stock for convertible related party debt
                  15,625,000
                  
                  15,625
                  
                  
                  
                  
                  
                  1,234,375
                  
                  
                  
                  
                  
                  1,250,000Issue
      Common stock for services
                  
                  
                  
                  
                  4,832,188
                  
                  4,832
                  
                  91,812
                  
                  
                  
                  
                  
                  7,001Net
      Loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (846,486)
                  
                  (846,486)Balances
      at December 31, 2009
                  31,250,000
                  
                  31,250
                  
                  199,487,893
                  
                  199,487
                  
                  55,188,118
                  
                  (200,000)
                  
                  (72,684,510)
                  
                  (17,465,656)
 
 
 
 
 
 
 
 
 
 See
accompanying notes to unaudited consolidated financial statements
 
  
  EARTH
SEARCH SCIENCES, INC
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1 -
BASIS OF PRESENTATION
 
 The
accompanying unaudited interim consolidated financial statements of Earth Search
Sciences, Inc. ("ESSI") have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission ("SEC"), and should be read in
conjunction with the audited financial statements and notes thereto contained in
ESSI's Annual Report filed with the SEC on Form 10-K for the fiscal year ended
March 31, 2009. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have
been reflected herein. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to
the financial statements which would substantially duplicate the disclosure
contained in the audited consolidated financial statements for 2009 as reported
in the 10-KSB have been omitted.
 
 We do not
expect the adoption of recently issued accounting pronouncements to have a
significant impact on our results of operations, financial position or cash
flow.
 
 NOTE 2 -
GOING CONCERN
 
 As shown
in the accompanying financial statements, we incurred a net loss for the nine
months ended December 31, 2009 and had an accumulated deficit and a working
capital deficit as of December 31, 2009. These conditions raise substantial
doubt as to ESSI's ability to continue as a going concern. Management is trying
to raise additional capital through sales of stock and or loans to the Company.
The financial statements do not include any adjustments that might be necessary
if ESSI is unable to continue as a going concern.
 
 NOTE 3 –
CONVERSION OF DEBT TO PREFERRED STOCK
 
 On July 9, 2009, we issued 31,250,000
shares of Series C Convertible Preferred Stock in exchange for $2,500,000 of
convertible debt outstanding at that time. Each preferred share is convertible
into one share of common at the holder’s option until July 9, 2014, at which
time the preferred shares are automatically converted to common stock provided
that the company is in compliance with certain terms. Holders of preferred
shares have voting rights equal to the equivalent number of common shares and
participate in any cash dividends declared by the Board of Directors. In
addition, holders of the preferred shares have a preferential right over other
classes of stock in the event of liquidation. Based on its characteristics, the
preferred shares are reported as equity.
 
 We
evaluated the notes conversion features under FASB ASC 470 and determined that
the convertible notes is settled with preferred stock and therefore do not meet
the criteria for troubled debt restructuring  or a modification of
debt.
 
 The
preferred stock is convertible at $0.08 cents per share and the entire $2.5
million is convertible into an aggregate 31,250,000 shares of series C preferred
shares.
 
 The
Series C Convertible Preferred shares contain dividend participation and voting
rights on an as converted basis.  In addition, the Series C
Convertible Preferred shareholders have preferential rights over other classes
of stock in the event of liquidation. The Series C Convertible Preferred shares
contain a mandatory conversion feature which is triggered on the fifth
anniversary of the closing date, or July 8, 2014.  These preferred
shares are convertible into an aggregate of 31,250,000 common shares. The
conversion feature was evaluated under FASB ASC 815 to determine whether it
should be bifurcated and recorded as a derivative liability. Based on this
evaluation, the embedded feature is clearly and closely related to the host
contract and is therefore not bifurcated under the appropriate accounting
guidance. As a result, there is no derivative liability.
 
 NOTE 4 -
EQUITY
 
 On
November 15, 2009, the Company issued 1,482,188 shares of common stock valued at
$29,644 for consulting services.  Also on November 15, 2009 the
Company issued 3,000,000 shares of common stock valued at $60,000 for
compensation expense.  The value of the stock was based on the quoted
market price on the measurement date, which was primarily the date of
grant.
 
 NOTE 5 -
DEBT
 
 On
September 18, 2009 we issued $400,000 of 10% promissory notes.
 
 On May
22, 2009 our subsidiary General Synfuels International issued $250,000 of 10%
convertible promissory notes. These notes will automatically convert into GSI,
at a price equal to 70% of the purchase price per share paid by equity
investors, upon an equity financing in GSI of at least $3,000,000. The notes
contain a change of control feature and become due and payable at 1.5 times the
principal amount upon a change of control. We evaluated the conversion feature
under FASB ASC 815 and determined that the conversion feature should not be
bifurcated and therefore there is no derivative liability.
 
 In
connection with the notes, we issued a warrant that allows the debt holder to
purchase $250,000 in GSI’s Series A Preferred Stock at fair market value. The
warrants allow the note holder to purchase GSI Preferred stock at the fair
market price. Consequently, there was no value assigned to the
warrant.
 
 NOTE 6 –
SUBSEQUENT EVENTS
 
 The
Company evaluated subsequent events through February 16, 2010 and determined
there were none requiring disclosure.
 
  
  FORWARD-LOOKING
STATEMENTS
 
 This
Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in this Item 2 of Part I of
this Quarterly Report include forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by forward-looking statements.
 
 In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "proposed," "intended," or "continue" or the negative
of these terms or other comparable terminology. You should read statements that
contain these words carefully, because they discuss our expectations about our
future operating results or our future financial condition or state other
"forward-looking" information. There may be events in the future that we are not
able to accurately predict or control. You should be aware that the occurrence
of any of the events described in this Quarterly Report could substantially harm
our business, results of operations and financial condition, and that upon the
occurrence of any of these events, the trading price of our securities. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, growth rates, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this Quarterly Report to conform
these statements to actual results.
 
 MANAGEMENT'S
DISCUSSION AND ANALYSIS
 OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 CORPORATE
FOCUS
 
 Earth
Search Sciences, Inc. (ESSI) is a Nevada corporation. We have five wholly-owned
subsidiaries: Skywatch Exploration, Inc., Polyspectrum Imaging, Inc., Geoprobe,
Inc., STDC, Inc and General Synfuels International (GSI). In addition, there are
five majority-owned consolidated subsidiaries: Earth Search Resources, Inc., Eco
Probe, Inc., ESSI Probe 1 LC, Petro Probe, Inc. and Terranet, Inc. All
subsidiaries except Petro Probe were inactive during fiscal 2007 and 2008.
General Synfuels International became active during the quarter ending December
31, 2008.
 
 We did
not generate any revenue during fiscal year 2008, have no current business
operations and are currently focused on two potential business
ventures.
 
 Effective
December 14, 2009, Luis F. Lugo and Charles G. Bridge resigned as the Chief
Executive Officer and Chief Financial Officer of Earth Search Sciences, Inc.
(the “Company”) respectively.  Both Mr. Lugo and Mr. Bridge will
continue with their positions as President and CEO, and Chief Financial Officer
of Earth Search Sciences wholly own subsidiary General Synfuels..
 
 There
were no disagreements between Mr. Lugo or Mr. Bridge and any officer or director
of the Company.
 Upon the
resignation of Mr. Lugo, Mr. Larry Vance adopted the role of Chief Executive
Officer of the Company effective December 14, 2009.  Mr. Vance, along
with The Board of Directors of the company, has initiated immediately the search
for Mr. Lugo’s replacement by an individual with experience in the core business
of Earth Search Sciences that is Hyperspectral technology as well as mineral
discoveries.
 
 Mr. Lugo
and Mr. Bridge will focus on the continuous development of General Synfuels as
it has increased substantially its business activities and requires full
attention of these officers.
 
 First, we
are working with certain investors to develop and employ technology in the
extraction of oil and gas from oil shale. During the third quarter of 2008 ESSI
acquired General Synfuels International, Inc, owner of the world-wide
proprietary rights, patent, technology, construction plans and materials and
operational capability for a gasification process to recover the oil and gas
from oil shale.GSI
has refined the design and begun development of our first plant. However, the
current state of the financial markets has negatively impacted our ability to
raise the additional funds necessary to complete our plant. Our current plan is
to complete a field test of this technology as early as the fourth quarter of
2009 and subsequent commercial development as early as
2011.  Additionally we have secured oil shale land in both Wyoming and
Colorado.
 
 GSI
continues to develop additional patents related to our technology and as part of
that process we are exploring a tar sands application.  We anticipate
the tar sands application to be used internationally.
 
 Second,
we are seeking joint venture opportunities with private industry,
universities and state and federal agencies to develop, package and deliver,
through the application of our hyperspectral remote sensing solutions,
applications and associated technologies, superior airborne mapping products and
services. Our airborne hyperspectral remote sensing technology is designed to
identify specific surface substances and materials by measuring the reflectance
of light from their surface. Their first spectroscopic instrument, the PROBE 1,
was initially developed with the assistance of NASA and used a small aircraft as
the instrument platform to obtain data from high altitudes over many different
terrains. The information was precise enough to enable detailed analysis of a
dynamic environment or object in a manner previously unattainable, and can be
used for the discovery of certain natural resources.
 
 Exploitation
of Oil and Gas from Oil Shale
 
 On August
15th of
2008 ESSI acquired all of the outstanding shares of General Synfuels
International, Inc. (GSI), an entity controlled by certain management and
directors of ESSI. This transaction was accounted for as an asset purchase due
to the fact that GSI was dormant, did not have customers or employees and only
held certain proprietary rights, patent, technology and construction plans for a
gasification process to recover the oil and gas from oil shale. In addition, the
asset was recorded at its historical cost due to the fact that this transaction
was between entities under common control. Prior to the acquisition, both
entities were controlled by certain members of management. The $5,494,700 value
in excess of the historical cost of the asset was recorded as compensation
expense.
 
 ESSI paid
the individual GSI Shareholders $5,500,000: 33,333,333 shares of common stock
valued at $3,000,000 based on the closing price of ESSI’s stock on the date of
the transaction; and $2,500,000 in the form of promissory notes payable to the
GSI shareholders in five equal payments of $500,000. On July 9, 2009, the
holders of our $2.5 million convertible promissory notes that were issued in
connection with the purchase of GSI agreed to exchange their convertible notes
for convertible preferred stock with an equal face value. The preferred stock is
convertible at $0.08 cents per share and the entire $2.5 million is convertible
into an aggregate 31,250,000 shares of series C preferred shares.
 
 The
Series C Convertible Preferred shares contain dividend participation and voting
rights on an as converted basis.  In addition, the Series C
Convertible Preferred shareholders have preferential rights over other classes
of stock in the event of liquidation. The Series C Convertible Preferred shares
contain a mandatory conversion feature which is triggered on the fifth
anniversary of the closing date, or July 8, 2014.  These preferred
shares are convertible into an aggregate of 31,250,000 common
shares.
 
 GSI is
currently examining various private oil shale sites in Colorado and Wyoming for
a test plant as well as starting the process of applying for a Bureau of Land
Management R&D oil shale lease. The first plant is budgeted for
approximately $8 million as a first stage development cost. The purpose of this
plant is to prove certain operating variables.
 
 During
the quarter ended December 31, 2009, we held $887,076 in deposits related to the
development of a plant related to the oil shale gasification process acquired
through GSI.  During the quarter, nothing was paid with the balance of
$40,020 recorded as accounts payable.  Once the plant is complete,
further investment will be required for commercial production.
 
 Hyperspectral
Remote Sensing Solutions
 
 In the
past, we have utilized an aircraft mounted hyperspectral remote sensing
instrument to gather precise geological data from the surface of the Earth.
Solar energy is reflected from surface materials and the instrument, called
"Probe-1", captures the data in digital form. The Probe-1 is a "whiskbroom
style" instrument that collects data in a cross-track direction by mechanical
scanning and in an along-track direction by movement of the airborne platform.
The instrument acts as an imaging spectrometer in the reflected solar region of
the electromagnetic spectrum (0.4 to 2.5 nm). In the VNIR and SWIR, the
at-sensor radiance is dispersed by four spectrographs onto four detector arrays.
Spectral coverage is nearly continuous in these regions with small gaps in the
middle of the 1.4 and 1.9 nm atmospheric water bands. In order to avoid
geometric distortions in the recorded imagery, the Probe-1 is mounted on a 3
axis, gyro-stabilized mount. Geolocation of nadir pixels is assisted by the
recording of aircraft GPS positional data and tagging each scan line with a time
that is referenced to the UTC time interrupts from the GPS
receiver.
 
 The
spectral data is processed to identify unique spectra in the image. The captured
and processed spectra are compared to a library of known material spectra called
"digital fingerprints" and the output allows the identification of mineral,
compounds and organic matter and the determination of vegetative
conditions.
 
 We are
actively seeking funding to engineer and manufacture a third generation probe
instrument, which will be capable of analyzing substantially more data inputs,
including chemical, light, pressure, vibration, and acceleration. The new design
will operate at extremely high speed with excellent resolution. We expect that
the combination of substantially improved analysis and higher resolution will
open up new markets.
 
 We are
currently evaluating hyperspectral imagery collected to date so that we can
determine whether this archive of information can be used to locate mineral
properties.
 
 Our
aircraft was grounded in 2006 for FAA required maintenance and repairs. As a
result, our hyperspectral remote sensing operations have ceased until such time
that we raise sufficient funding to repair our aircraft or purchase a new
aircraft.
 
 RESULTS
OF OPERATIONS
 
 Our data
collection aircraft was grounded for repairs for FAA required maintenance in
2006 and has not been operational since that time. As a result, we had no
revenues during the nine months ended December 31, 2009 or 2008.
 
 Depreciation
and amortization expense was $77,886 for the nine month period ended December
31, 2009 and December 31, 2008.
 
 General
and administrative expenses were $1,121,375 for the nine month period ended
December 31, 2009, compared to $6,686,232 for the corresponding period of 2008.
General and administrative expenses are higher primarily for the nine month
ended December 31, 2008 is due to the acquisition of General Synfuels
International, Inc.
 
 Interest
expense for the nine month period ended December 31, 2009, was $428,475 compared
to interest expense of $272,708 for the corresponding period in
2008.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Net cash
used in operating activities was $453,813 for the nine month period ended
December 31, 2009 compared to net cash used by operating activities of
$1,172,055 for the nine month period ended December 31, 2008. The decrease in
cash used in operations is primarily due to compensation expense related to the
acquisition of GSI.
 
 Net cash
used by investing activities was $95,000 for the nine month ended December 31,
2009 compared to $0 for the nine month period ended December 31, 2008. The
increase in cash used in investing is entirely due to deposit related to our oil
shale recovery plant.
 
 Net cash
provided by financing activities was $588,458 for the nine month period ended
December 31, 2009 compared to cash provided of $1,174,273 for the same period of
2008. During the nine months ended December 31, 2009, we received $650,000 in
debt financing. This compared to cash proceeds from a private placement of
$1,363,500 and debt financing and shareholder loans of $243,000 for the similar
period in 2008 that was offset by payments on debt and financing costs of
$192,227.
 
 We are
experiencing working capital deficiencies because of operating losses. We have
operated with funds received from the sale of common stock, the issuance of
notes and no operating revenue. Our ability to continue as a going concern is
dependent upon continued debt or equity financings until or unless we are able
to generate cash flows to sustain ongoing operations. We plan to increase the
number of revenue producing services through the development of our oil shale
extraction technology and the use of additional hyperspectral instruments and
thereby continue as a going concern. There can be no assurance that we can
generate sufficient operating cash flows or raise the necessary funds to
continue as a going concern.
 
 ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 As a
smaller reporting company, ESSI is not required to provide disclosure under this
Part I, Item 3.
 
 ITEM 4T.
CONTROLS AND PROCEDURES
 
 Disclosure Controls and
Procedures
 
 Our
management, principally our Chief Executive Officer, evaluated the effectiveness
of our disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, our management concluded that our
disclosure controls and procedures as of the end of the period covered by this
report were not effective such that the information required to be disclosed by
us in reports filed under the Securities Exchange Act of 1934 is (i.) recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms and (ii) accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding disclosure. As part of our
management’s assessment of internal controls over financial reporting as of
March 31, 2009 we identified material weaknesses in our internal controls which
we viewed as an integral part of our disclosure controls and procedures. The
material weakness is identified below and as of December 31, 2009 have been
partially remediated.
 
 There is
an over-reliance upon independent financial reporting consultants for review of
critical accounting areas and disclosures and material non-standard
transactions.
 
 There is
a lack of sufficient accounting staff which results in a lack of segregation of
duties necessary for a good system of internal control.
 
 Changes in Internal Control
Over Financial Reporting
 
 There
have been no changes in our internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or that are reasonably likely to materially affect our internal control over
financial reporting.
 
 
  
  PART
II
 OTHER
INFORMATION REQUIRED
 
 Item
1.   Legal proceedings
 
 None
 
 Item
2.  Unregistered sales of equity securities
 
 On
November 5, 2009, the Company issued 1,482,188 shares of common stock valued at
$29,644 for consulting services and 3,000,000 shares of common stock valued at
$60,000 for compensation expense. The value of the stock was based on the quoted
market price on the measurement date, which was primarily the date of
grant.
 
 Item
3. Defaults upon senior securities
 
 None
 
 Item
4. Submission of matters to a vote of security holders
 
 None
 
 Item
5.  Other information
 
 None
 
 Item
6. Exhibits
 
 Exhibit
      Number
                Description3.1
                Articles
      of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to
      the Registrant's Forms 10-K for the fiscal years ended March 31, 1995 and
      March 31, 1996).3.2
                Bylaws
      (Incorporated by reference to Exhibit 3.2 to the Registrants’ Form 10-K
      for the fiscal year ended March 31, 1995).10.1
                Purchase
      and Sale of Business Agreement between Earth Search Sciences, Inc. and Ken
      Danchuk, Ron McQueen and Larry Vance dated August 15, 2008 (Incorporated
      by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8K
      as filed September 9, 2008)10.2
                Promissory
      Note of Earth Search Sciences, Inc. in favor of Ken Danchuk dated August
      15, 2008 (Incorporated by reference to Exhibit 10.2 to the Registrant’s
      Current Report on Form 8K as filed September 9, 2008)10.3
                Promissory
      Note of Earth Search Sciences, Inc. in favor of Ron McQueen dated August
      15, 2008 (Incorporated by reference to Exhibit 10.3 to the Registrant’s
      Current Report on Form 8K as filed September 9, 2008)10.4
                Promissory
      Note of Earth Search Sciences, Inc. in favor of Larry Vance dated August
      15, 2008 (Incorporated by reference to Exhibit 10.4 to the Registrant’s
      Current Report on Form 8K as filed September 9, 2008)10.5
                Agreement
      for Consulting Services between Earth Search Sciences, Inc. and Ken
      Danchuk dated August 15, 2008 (Incorporated by reference to Exhibit 10.5
      to the Registrant’s Current Report on Form 8K as filed September 9,
      2008)10.6
                Agreement
      for Consulting Services between Earth Search Sciences, Inc. and Ron
      McQueen dated August 15, 2008 (Incorporated by reference to Exhibit 10.6
      to the Registrant’s Current Report on Form 8K as filed September 9,
      2008)10.7
                Agreement
      for Consulting Services between Earth Search Sciences, Inc. and Larry
      Vance dated August 15, 2008 (Incorporated by reference to Exhibit 10.7 to
      the Registrant’s Current Report on Form 8K as filed September 9,
      2008)10.8
                Agreement
      for Debt Settlement between Earth Search Sciences, Inc. and Larry Vance
      dated July 9,200910.9
                Agreement
      for Debt Settlement between Earth Search Sciences, Inc. and Ken Danchuk
      dated July 9,200911.1
                Agreement
      for Debt Settlement between Earth Search Sciences, Inc. and Ron McQueen
      dated July 9,200931.1
                Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed
      herewith)31.2
                Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed
      herewith)32.1
                Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed
      herewith)32.2
                Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed
      herewith)
 
 SIGNATURE
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned. 
 
 EARTH
      SEARCH SCIENCES, INC.Date:
      February 12, 2010
                /s/ Larry VanceLarry
      VancePrincipal
      Executive Officer
 
 
 
 Date:
      February 12, 2010
                /s/ Tami StoryTami
      StoryPrincipal
      Accounting Officer