SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
 ACT OF 1934

                For the quarterly period ended: December 31, 1996
                           Commission File No. 0-19566

                       EARTH SEARCH SCIENCES, INCORPORATED
             (Exact Name of Registrant as Specified in its Charter)

            Utah                                               87-0437723
(State or other Jurisdiction of                        (I.R.S. Employer Identi-
Incorporation or Organization)                                fication Number)


                  502 North 3rd Street, #8, McCall, Idaho 83638
          (Address of Principal Executive Offices, Including Zip Code)


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


Indicate by check mark whether the Registrant

         (1)      has filed all reports required to be filed by Section 13
                  or 15(d) of the Securities and Exchange Act of 1934
                  during the preceding 12 months (or for such shorter
                  period that the Registrant was required to file such
                  reports), and

         (2)      has been subject to such filing requirement for the past
                  90 days.

                                    Yes X    No



As of December 31, 1996, 68,067,448 shares of common stock were outstanding.


<PAGE>




                           EARTH SEARCH SCIENCES, INC.

                                    FORM 10-Q
                                   (Unaudited)

                         QUARTER ENDED DECEMBER 31, 1996

                                     PART I

                              FINANCIAL INFORMATION

                                TABLE OF CONTENTS

Item 1.   Financial Statements                                        Page

          Consolidated Statement of Financial Position
            as of December 31, 1996 and March 31, 1996.                 1

          Consolidated Statement of Operations for the
            Three and Nine Months Ended
            December 31, 1996 and 1995.                                 2

          Consolidated Statement of Cash Flows for the
            Nine Months Ended December 31, 1996.                        3

          Selected Notes to Consolidated Financial
            Statements.                                                 4

Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations               5



                                     PART II

                           OTHER INFORMATION REQUIRED

Item 1.   Legal Proceedings                                             6

Item 2.   Changes in Securities                                         6

Item 3.   Defaults Upon Senior Securities                               6

Item 4.   Submission of Matters of a Vote of
            Security Holders                                            6

Item 5.   Other information                                             6

Item 6.   Exhibits and Reports on Form 8-K                              6



<PAGE>


                           EARTH SEARCH SCIENCES, INC.
                          (A Development Stage Company)

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

                                                            December 31,        March 31,
                                                               1996               1996
                                   (unaudited)

                                     ASSETS
<S>                                                         <C>                 <C>

Current assets:
         Cash                                               $  145,909          $  670,325
         Prepaid expenses                                         -                   -
                                                            ----------          ----------
          Total current assets                                 145,909             670,325



Property and equipment                                       1,651,338             122,276
Deposit and their assets                                       102,738             129,776
                                                             ---------          ----------
          Total assets                                      $1,899,985          $  922,377
                                                            ==========          ==========



                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
         Convertible Notes Payable                             199,863             444,981
         Accounts payable                                      186,359             188,818
         Accrued payroll taxes                                 159,301              34,000
         Accrued interest                                      335,900             314,277
         Customer deposit                                    2,490,125             500,000
                                                             ---------          ----------

          Total current liabilities                          3,371,548           1,482,076


Long-term liabilities:
         Shareholder loans                                      99,590              96,519
         Deferred officers' compensation                       671,989             592,560
         Minority interest                                      93,928              47,130
                                                             ---------          ----------

          Total liabilities                                  4,237,055           2,218,285
                                                             ---------          ----------

Commitments and contingencies Stockholders' deficit:
         Common stock $.001 par value; 200,000,000
         shares authorized; 68,067,448 and
         66,551,663 respectively, issued                        68,067              66,551
Additional paid-in capital                                   4,779,443           4,320,920
Deficit accumulated during the development stage            (7,184,580)         (5,683,379)
                                                            ----------          ----------
                                                            (2,337,070)         (1,295,908)

          Total liabilities and stockholders' deficit       $1,899,985          $  922,377
                                                            ==========          ===========


</TABLE>
<PAGE>



                           EARTH SEARCH SCIENCES, INC.
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (unaudited)


<TABLE>
<CAPTION>
                                              For the Three Months                For the Nine Months
                                               Ended December 31,                  Ended December 31,

                                               1996           1995                 1996           1995
                                             ---------      ---------           -----------    -----------

<S>                                          <C>            <C>                 <C>            <C>
Revenue:                                     $    -         $   6,332           $     -        $     6,332

Expenses:
         Exploration                             1,749         27,972               122,914         69,933
         Depreciation and
           Amortization                          7,000          5,200                19,000         14,800
         General and
           Administrative                      358,158        439,548             1,298,805      1,875,151
                                               -------       --------           -----------    -----------

Loss from operations                          (366,907)      (466,388)           (1,440,719)    (1,953,552)

Interest expense                               (19,946)       (20,845)              (60,482)       (91,350)
                                              --------       --------           -----------    -----------

Net Loss                                     $(386,853)     $(487,233)          $(1,501,201)   $(2,044,902)
                                             =========      =========           ===========    ===========

Loss Per Common Share:                       $    (.01)     $    (.01)          $      (.02)   $      (.04)
                                             =========      =========           ===========    ===========


Weighed average shares
outstanding                                 68,004,720     50,909,773            67,909,224     50,300,257
                                            ==========     ==========           ===========     ==========
</TABLE>

<PAGE>




                           EARTH SEARCH SCIENCES, INC.
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                    For the Nine Months
                                                                     Ended December 30,
                                                                 1996               1995
                                                                 ---------      -----------
<S>     <C>    <C>
Cash flows from operating activities:
  Net Income                                                     $(1,501,201)   $(2,044,902)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
  Common stock issued for services and
    interest expense                                                 105,724        256,530
  Compensation expense related to
    Stock options issued                                                -         1,100,000
  Depreciation and amortization                                       19,000         14,800
   Change in long term other assets                                   27,038       (129,776)
   Prepaids, deposits, etc.                                             -               837
   Change in liability accounts                                    2,214,019        324,052
                                                                  ----------    -----------

Net cash provided by (used in) operating activities                  864,580       (478,459)
                                                                  ----------    -----------

Cash flow used in investing activities:
  Capitol expenditures                                            (1,548,062)        (8,225)
                                                                  ----------    -----------

Net cash used in investing activities                             (1,548,062)        (8,225)
                                                                  ----------    -----------

Cash flow provided (used in) financing activities:
  Proceeds from notes payable                                           -           506,740
  Repayment of notes payable                                            -            (9,062)
  Proceeds from issuance of shareholder
    notes payable                                                     60,000           -
  Repayment of shareholder loans                                     (56,929)       (67,500)
  Proceed form issuance of shareholder notes payable
  Repayment of shareholder loans                                        -            87,500
  Proceeds form issuance of common stock                                -           (15,000)
  Purchase of treasury stock
  Proceeds from sale of treasury stock                                  -            16,000
  Proceeds from issuance of subsidary common stock                   155,995           -
                                                                  ----------    -----------

Net cash provided by financing activities                            159,066        518,678
                                                                  ----------    -----------

Net (decrease) increase in cash and cash equivalents                (524,416)        31,994

Cash and cash equivalents at beginning of year                       670,325         30,420
                                                                  ----------    -----------


Cash and cash equivalents at end of period                       $   145,909    $    62,414
                                                                 ===========    ===========


</TABLE>
<PAGE>

                           EARTH SEARCH SCIENCES, INC
                           A Development Stage Company

               SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1996 (unaudited)

CONDENSED FINANCIAL STATEMENTS

         The  consolidated  statement of  financial  position as of December 31,
1996,  and the  consolidated  statements  of  operations  for the three and nine
months ended  December 31, 1996 and cash flow for the nine months ended December
31, 1996,  and 1995,  have been prepared by the Company  without  audit.  In the
opinion of management,  all  adjustments  (which  include only normal  recurring
adjustments) have been made that are necessary to present fairly the financial 
position,  results of operation, and cash flows at December 31, 1996. The 
statements of loss for the three months and nine months ended December 31, 1996
and the statement of cash flows for the nine months ended December 31, 1996 have
been restated to reflect adjustments arising from the audit of the Company's  
financial  statements  for the year ended March 31, 1996. Such  adjustments
resulted in recognition for $ 505,805 in additional expense.  These expenses
primarily relate to compensation  expense incurred from the grant of stock 
options to certain officers.

         Certain  information  and  footnote  disclosures  normally  included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  It is suggested that these financial
statements be read in  conjunction  with the audited  financial  statements  and
notes  thereto in the  Company's  form 10-K for March 31,  1996.  The results of
operation  for the nine  months  ended  December  31,  1996 are not  necessarily
indicative of the operating results to be expected for the full fiscal year.

NOTES PAYABLE

         The Company  obtained  interim  working  capital by issuing  promissory
notes with rights of conversion. The terms of these debts instruments are for an
initial period of ninety days but renewable  every ninety days for one year, and
bear interest at 12.5% to 12.99%. Holders of the notes have the right to convert
the loan amount plus  interest  into  restricted  shares of the Companys  common
stock, subject to the terms in the promissory notes.

CUSTOMER DEPOSITS

         The  Company  has  received  $  2,490,125   in  deposits   through  its
subsidiaries  for the sale of two  airborne  hyperspectral  scanners  which  are
currently in production. These instruments are expected to be leased back to the
Company in "sale/leaseback"  transactions.  To date, the terms of the agreements
have not been formalized.  As such, the deposits have been recorded as a current
liability at December 31, 1996.

LOSS PER COMMON SHARES

         Loss per common share is based on the weighted average number of shares
outstanding during each period.

ADVANCE FROM SHAREHOLDERS

         The Company has continued in existence through the use of advances from
shareholders,  primarily  an officer and  director of the Company and  Universal
Search Technology owned by that same officer and director.

ISSUANCE OF COMMON STOCK

         During the three months ended  December  31, 1996,  the Company  issued
125,000 shares of its authorized but unissued common stock valued at $13,800 for
services rendered.

<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Material Changes in Financial Condition

         During  the  quarter  ended  December  31,  1996,  the  Company  had no
operating  revenues.  The Company was required to obtain working capital through
deposits obtained from sale-leaseback transactions of its instruments. Aggregate
amounts  received in the third quarter 1997 were  approximately $ 1,000,000.  In
addition,  the Company's  operating payables and accrued  liabilities  increased
approximately $ 66,159.

         If the  Company  cannot  continue  to raise  working  capital  from the
issuance of common stock and/or notes the Company will  experience a substantial
hardship in reducing its operating payables and accrued liabilities.  Management
continues to find difficulty in raising required working capital.

         During much of the last half of 1996,  the Company  Officers  had their
attentions  diverted  by an Idaho  Department  of Finance  investigation  of the
Company's  securities  transactions.  Although the Company worked  diligently to
convenience the Idaho Department of Finance that the allegations being made were
groundless, the Company and the State ultimately reached an impasse.

         In January,  1997, the Company filed suite against the State asking for
a declaratory  judgement that the Company had not violated certain provisions of
the Idaho  Security  Act, and the State filed suit against the Company  alleging
such violations. See Item 1. Legal Proceeding.

         The State's  investigators  have contacted many shareholders and others
who do business  with the Company in an effort that  appears,  in the  Company's
opinion,  aimed at  damaging  or  destoring  the  Company.  Fortunately  for the
Company,  most of the people contacted by the State have reported these contacts
to the Company and have reaffirmed their support for the Company.

         The State's  investigation  and the subsequent law suit have,  however,
delayed  finalization  of the  definitive  Sale/Lease  back  agreement  with the
customer who is funding the manufacturing of the two (2) Probe1's. That customer
presently owes the Company for past due progress payments. The Company continues
to carry on  discussions  with the customer and believes  that the customer will
make the past due payments. The Company has received notice from the manufacture
of the  Probe1's  that the Company will be in default of its  obligations  if it
does not make a progress payment by March 24, 1997. If the customer fails to pay
the past due  amount,  the Company  will be forced to turn to other sources for
that paymentor default in its obligation to the manufacture. Such a default 
could result in cancellation of the Probe1 delivery contracts, which could
materially adversely affect the ability of the Company to survive.

Results of Operations

         The Company to better focus on commercial plans,  formed a wholly owned
subsidiary, Earth Search Resources, Inc. ("ESR") and on June 1, 1996 hired Brian
C. Savage,  formerly director of the investment  banking mining group of Nesbitt
Burns   Securities,   Inc.  in  New  York,   as   president   of  ESR  and  Vice
President-Resource  Development of the Company.  Mr. Savage's  experience in the
mining industry and his investment banking background should provide the Company
with significant assistance in developing the commercial side of the business.

<PAGE>
      
     The Company calls special  attention to the attributes of its long term
working  relationship  with  NASA/JPL as it pertains  to  hyperspectral  imaging
technology  development.  NASA/JPL  has provided  significant  guidance to Earth
Search  Sciences as the Company has proceeded with the design and development of
its own proprietary instrument for commercial applications, the Probe 1. Through
a Space Act  Agreement,  Earth Search was able to  participate  in NASA missions
which  utilized  the NASA  Airborne  Visible and Infrared  Imaging  Spectrometer
(AVIRIS).  It was through this involvement that Earth Search was able to gain an
appreciation  of the  applications  of this  technology  for  natural  resources
development  and  environmental  assessment.  Subject  to  the  availability  of
funding,   the  Company  expects  to  continue  NASA  research  and  development
initiatives  in 1997.  The  Company  is looking  to  acquire  revenue  producing
companies compatible with our systems approach to remote sensing solutions.  The
near term focus will include careful screening of acquisition candidates through
strategic alliances.  Subject to the availability of funding and the strength of
the Company's financial position, those alliances could become acquisitions.

         The Company  continues  to focus on  Kazakstan  as a potential  mineral
active  site and is moving  forward  with its plans to  conclude a joint  remote
sensing mission with the Department of Energy,  several  national  laboratories,
several large industrial partners and the Naval Research Laboratory. The mission
was  originally  planned  for August of 1996 was  delayed at the  request of the
Government of Kazakstan. It has since been rescheduled for June/July 1997.

         During the fiscal year ended March 31, 1996,  the Company  negotiated a
concession license to develop  hydrocarbons and minerals in Kazakstan and formed
a team.  The team includes the Company and  contractors:  Battelle/PNNL  and the
Department of Energy's AMPS program. In addition to the concession,  the Company
acquired a twenty percent (20%)  ownership  from Scientech in a Kazakstan  Joint
Stock  Company,  SEMTECH,  and commenced  the  acquisition  of a complex  mining
license.

         Falconbridge,  Limited  (approximately  $2.5  billion  Canadian  annual
revenue  mining  company)  has signed a  memorandum  of agreement to explore and
develop the base metals on the Polygon  (Kazakstan).  Falconbridge  has provided
assistance  to Earth  Search in  meeting  the terms  and  conditions  of the new
Kazakstan  mining laws that require  that a major mining  company be part of any
team that seeks to develop Kazakstan's  mineral resources.  The mission has been
reschedule for the June/July 1997 time frame.

         In  September  Earth  Search,  Falconbridge,  Behre  Dolbear  and  ASIT
Corporation  spent 7 days on the  concession  in  Kazakstan  acquiring  data and
samples  that  will  allow  Earth  Search,  Falconbridge  and Behre  Dolbear  to
formulate a exploration  policy for the next 5 years.  The Behre Dolbear  report
evaluating  the  collected  data  suggests  the  presence  of  very  significant
potentially viable properties within the Polygon.

         The Company continues to build  relationships with the Kazakstani Joint
Stock Company SEMTECH. We have just completed the new shareholder agreement that
spells out new distribution of equity and revenue from the mineral concession on
the Polygon. The Company also has submitted a complex license application on the
Polygon resource  concession to the Kazakstan Ministry of Geology.  Earth Search
is  awaiting  the  results  of  the  Ministry  of  Geology's  evaluation  of the
application.   Management  will  keep  shareholders  informed  as  these  events
progress.  The current size of the Polygon  concession is substantial  and Earth
Search  continues  to  negotiate  with  other  license  holders  for  additional
territory on and adjacent to the Polygon.

         Earth  Search  recognizes  that while  Central  Asia  holds  promise of
mineral rich deposits,  there are risks  associated with operating in the former
Soviet  Union.   Accordingly   management  has  taken  steps  to  diversify  its
exploration activities to other locations worldwide.

<PAGE>

         On July 31, 1996, the Company signed a contract with Applied Signal and
Imaging Technology, Inc ("ASIT"), to jointly develop software packages that will
enable the  Company  to  process  the data it  collects  in near real time.  The
Company  contracted  ASIT to develop a  proprietary  software  package that will
deliver in the same time frame of our instrument Probe 1.

         During the first quarter,  the Company  signed a Creative  Research and
Development  Agreement (CRADA) with the U.S. Army Cold Weather  Laboratories and
the U.S.  Navel  Research  Laboratories  to fly the Navy's HYDICE  Hyperspectral
instrument  over a site in Idaho that because of its robust  vegetation  mineral
history,  and water resources,  ESSI selected the site utilization as an outdoor
laboratory  collecting  one (1) meter  data over  mineral,  forestry,  and water
targets  that will be used by the  Company to develop  advancements  on our next
generation of commercial instruments.

         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

<PAGE>

PART II

                           OTHER INFORMATION REQUIRED
     
     Item 1.        Legal Proceeding: On January 10, 1997,  the Company  filed 
a  declaratory  relief  action 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-97-000C.  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.

         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.

         The  Department's   complaint  seeks  the  following   relief:   (A)  a
declaration that the Company and Mr. Vance have violated Idaho law, (B) entry of
a permanent  injunction enjoining the Company and Mr. Vance from violating Idaho
law, (C) entry of a permanent  injunction  prohibiting the Company and Mr. Vance
from  claiming the  availability  of,  using or offering or selling  securities,
under any exemptions  under Idaho law without  seeking the prior written consent
of the Director of the  Department,  (D) an order  requiring the Company and Mr.
Vance to make an offer of  rescission  to all persons who  purchased or received
securities  sold by the Company or Mr.  Vance in  violation of Idaho law, (E) an
order  requiring  the Company and Mr. Vance to pay a penalty of $10,000 for each
violation of Idaho law, and (F) an award to the State of its attorneys  fees and
costs.

         With  respect  to sales of  securities  violation  of the  registration
requirements  of Idaho  law,  the  Company  believes  it may have  misunderstood
certain state  regulations in completing  transactions  with a limited number of
Idaho-based investors.  The Company is preparing to offer approximately 19 Idaho
residents offers of rescission  which, if accepted by all offerees,  would costs
the Company an aggregate  of $143,540.  The Company does not believe it violated
the laws of any other state or any federal laws and regulations,  and vehemently
denies all other allegations made in the Department's complaint.

         The Company in particular  intends to vigorously  oppose the Department
on the issue of whether the Company has made any untrue  statements  of material
facts. The Department  included seven specific  allegations of untrue statements
in its complaint. The Department's allegation and the Company's response are set
forth below:

<TABLE>
<CAPTION>

     DEPARTMENT ALLEGATION                             COMPANY RESPONSE

<S>                                                    <C>
A.   Defendants represented to offeree                 The Company has never denied that it pays
     and/or investors that principal corporate         compensation to Dr. Peel and it has accrued
     officers did not receive compensation for         compensation for Mr. Vance that will be
     services rendered, when it fact,                  paid only when the Company generates
     compensation was received by principal            revenues.  All information regarding officer
     corporate officers.                               compensation has been properly disclosed
                                                       in the Company's SEC filings and in the
                                                       Company's audited financial statements.

<PAGE>
B.   Defendants represented to certain                 The Company's 10-K's, 10-Q's,
     offeree and/or investors that ESSI owned          shareholder letters and press releases
     certain remote sensing equipment, when in         accurately reflect that state of development
     fact, ESSI owned no such equipment.               and the Company's ownership interest in
                                                       the ESSI Probe 1 instrument.  In fact, the
                                                       Company has filed a copy of its contract
                                                       with Integrated Spectronics for the
                                                       manufacture and acquisition of ESSI Probe
                                                       as an exhibit to its Form 10-K for the
                                                       year ended March 31, 1996.

C.   Defendants represented to offeree                 The Company has properly disclosed the
     and/or investors that they had contracts          existence and nature of all of its material
     with major well-known corporations and            contracts, and has never misrepresented the
     suggested that such contracts would be            revenue potential of these contracts.  The
     revenue producing, when in fact, such             Company's financial statements and filings
     contracts were not revenue producing.             with the SEC accurately reflect the only
                                                       revenues received by the Company to date
                                                       (from one of such contracts).

D.   Defendants represented to offeree                 In response to their allegation, the Company
     and/or investors that they would have the         only converted promissory notes with the
     right to convert promissory notes into            prior consent or knowledge of investor.  In
     stock, when in fact, promissory notes were        fact, the Company has signed authorization
     automatically converted to stock without the      for all conversions. Earth Search has asked
     prior consent or knowledge of investors.          the Department of Finance to justify the
                                                       basis of this allegation. The Department
                                                       of Finance has failed to provide any evidence
                                                       which supports its allegation.

E.   Defendants represented to offeree                 The Company does not understand the
     and/or investors that ESSI owned subsidiary       Department's allegation regarding
     companies, however, no disclosures                subsidiaries. The Company's financial
     regarding said companies were in financial        statements and SEC filings properly disclose
     documents or SEC filings.                         all material subsidiaries and their respective
                                                       business activities, if any.

F.   Defendants represented to offeree                 The Company has properly disclosed its
     and/or investors that ESSI "holds a majority      interest in the Kazakstan joint stock
     equity interest in the mineral concession in      company SEMTECH and SEMTECH's possession
     a region of Kazakstan" where Defendants           of a mineral concession for the Polygon
     claim there is a "remarkable concentration        region of Kazakstan.  The Company quoted
     of potentially viable precious and base           from a report prepared by Behre Dolbear &
     metals properties," when in fact, ESSI does       Company, independent consultants, regarding
     not have any binding agreement giving it a        the potential quality of the mineral
     majority equity interest in a mineral             deposits in the Polygon region, and has
     concession in Kazakstan.                          made no representation to anyone concerning
                                                       the presence or nature of mineral reserves
                                                       in the Polygon region. The Company recognizes
                                                       that doing business in Kazakstan entails a
                                                       higher degree of unpredictability and  risk
                                                       than doing business in the United States or
                                                       other, more developed nations. The Company
                                                       has disclosed its concerns about the risk
                                                       profile most recently in its Form 10-Q for
                                                       the quarter ended September 30, 1996.

G.   Defendants represented to offeree                 The Company never represented in any of
     and/or investors that ESSI acquired Lamb          its SEC filings that it closed the acquisition
     Associates, Inc., an engineering and              of Lamb Associates, Inc.  The Company had a
     technical services firm, when in fact,            binding agreement to purchase Lamb Associates,
     ESSI did not acquire Lamb Associates, Inc.        Inc., but never obtained the financing
                                                       necessary to close the transaction. All of
                                                       this was fully disclosed in the Company's
                                                       SEC filings, including most recently in
                                                       the Company's Form 10-K for the year ended
                                                       March 31, 1996. In January 1996, the Company
                                                       and William Lamb renegotiated the transaction
                                                       documents to accommodate a closing without
                                                       financing. Mr. Lamb issued a press release
                                                       at the time of the renegotiation indicating
                                                       that the transaction would be closing. The
                                                       Company withdrew its offer to close the
                                                       transaction when it learned that Lamb
                                                       Associates' revenues and earnings were less
                                                       that had been projected by Lamb Associates.
                                                       The Company never misrepresented the nature
                                                       of the Lamb Associates transaction.
</TABLE>
<PAGE>
     The Company is very disappointed that the Department has chosen to file
its complaint.  The Company  requires  financing to complete the development and
implementation  of its  business  plan.  There  can be no  assurance  given  the
existence of the complaint that the Company will obtain the required financing.

         The  Department had offered to settle the complaint on terms that would
have  required  the  Company to admit that it had unmade  untrue  statements  of
material  facts.  The Board of Directors of the Company  considered the offer of
settlement  but  rejected  it  because  the  admission  would  have  potentially
undermined the Company's  credibility.  During the pendency of the  Department's
lawsuit,  the Company intends to defend its credibility  vigorously,  and to try
its hardest to conduct business as though the complaint does not exist.

     Item 2.        Changes in Securities                         None

     Item 3.        Defaults Upon Senior Securities               None

     Item 4.        Submission of Matters to a Vote
                      of Security Holder                          None

     Item 5.        Other Information                             None

     Item 6.        Exhibits and Reports on Form 8-K:
                         Filed a Form 8-K on July    11, 1996
                         Filed a Form 8-K on December 6, 1996
                         Filed a Form 8-K on January 15, 1997


                                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 14, 1997                             /s/ Larry F. Vance
      ----------------------------                   ------------------
                                                     Larry Vance
                                                     Chairman and Director


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                                 EXHIBIT INDEX
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 EXHIBIT                                                  METHOD OF FILING
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<S>            <C>                                     <C>

     27.       Financial Data Schedule . . . . . .     Filed herewith electronically

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