SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-QSB/Amendment No. 1
 
 QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended: SEPTEMBER 30, 2006
 Commission
File No. 000-19566
 
 EARTH SEARCH SCIENCES,
INC.
 (Exact
Name of Registrant as Specified in its Charter)
 
 UTAH
              
              87-0437723(State
      or other Jurisdiction of Incorporation or Organization)
              
              (IRS
      Employer ID)
 
 
 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 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  T     No  o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  £     No
T
 
 The  number  of
shares outstanding of each of the registrant's classes of common stock, as of
as
of August 17, 2007 was approximately 96,692,760.  The
registrant  has  only  one  class  of  common  stock.
 
 Transitional
Small Business Disclosure Format (check
one):    Yes  £     No  T
  
 
 
 EARTH
SEARCH SCIENCES, INC.
 
 TABLE OF
CONTENTS
 
 FORM
10-QSB
 
 QUARTER
ENDED SEPTEMBER 30, 2006
 
 PART I
 
 FINANCIAL
INFORMATION
 
 
 ITEM
      1.
              CONSOLIDATED
      FINANCIAL STATEMENTS
              PAGEConsolidated
      Balance Sheet as of September 30, 2006 (unaudited)
              3Consolidated
      Statements of Operations for the Three Months Ended September 30, 2006 and
      2005 (unaudited)
              4Consolidated
      Statements of Cash Flows for the Six Months Ended September 30, 2006 and
      2005 (unaudited)
              5Selected
      Notes to Consolidated Financial Statements
              6ITEM
      2.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
              7-9ITEM
      3.
              CONTROLS
      AND PROCEDURES
              10PART
      IIOTHER INFORMATION
      REQUIREDItem
      1.
              Legal
      Proceedings
              10Item
      2.
              Changes
      in Securities
              10Item
      3.
              Defaults
      Upon Senior Securities
              10Item
      4.
              Submission
      of Matters of a Vote of Security Holders
              10Item
      5.
              Other
      information
              10Item
      6.
              Exhibits
      K
              10
  2
  Earth
Search Sciences, Inc.
 Consolidated
Balance Sheets (Unuadited)
 September
      30, 2006
                
                
                March
      31, 2006(Restated)Current
      assets:Cash
                
                $
                5,826
                
                
                $
                40,900Accounts
      receivable, net of  $0 allowance for doubtful
      accounts
                
                
                43,367
                
                
                
                16,971Loan
      costs, net of $295,161 and 62,740 accumulated
    amortization
                
                
                30,397
                
                
                
                166,569Total
      current assets
                
                
                79,590
                
                
                
                224,440Property
      and equipment, net of $761,597 and $735,635 accumulated depreciation and
      amortization
                
                
                361,868
                
                
                
                413,793TOTAL
      ASSETS
                
                $
                441,458
                
                
                $
                638,233LiabilitiesCurrent
      liabilities:Current
      portion of notes payable
                
                $
                843,947
                
                
                $
                880,934Settlement
      obligation
                
                
                3,937,318
                
                
                
                2,820,099Accrued
      officers' compensation
                
                
                1,027,986
                
                
                
                907,983Accounts
      payable
                
                
                11,602,179
                
                
                
                11,641,757Accrued
      payroll & payroll taxes
                
                
                225,144
                
                
                
                179,890Due
      to related parties
                
                
                2,622,188
                
                
                
                2,368,509Total
      current liabilities
                
                
                20,258,762
                
                
                
                18,799,172Long
      Term LiabilitiesNotes
      payable less current portion
                
                
                337,283
                
                
                
                349,303Total
      liabilities
                
                
                20,596,045
                
                
                
                19,148,475Commitments
      and contingenciesStockholders'
      deficitSeries
      A preferred stock; 200,000 shares authorized, none issued and outstanding;
      liquidation preference $1,000,000
                
                
                
                
                
                
                -Common
      stock, $.001 par value; 200,000,000 shares authorized, 81,241,041 and
      77,697,642 issued and outstanding
                
                
                81,241
                
                
                
                77,698Additional
      paid-in capital
                
                
                44,350,076
                
                
                
                43,495,841Treasury
      stock
                
                
                (200,000
                )
                
                
                (200,000
                )Accumulated
      deficit
                
                
                (64,385,904
                )
                
                
                (61,883,781
                )Total
      stockholders' deficit
                
                
                (20,154,587
                )
                
                
                (18,510,242
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                
                $
                441,458
                
                
                $
                638,233
 
 See
accompanying notes to consolidated financial statements
  3
  Earth
Search Sciences, Inc.
 Consolidated
Statement of Operations (unaudited)
 
 Three
      Months Ended September 30,
              
              
              Six
      Months Ended September 30,2006
              
              
              2005
              
              
              2006
              
              
              2005(Restated)
              
              
              
              
              
              (Restated)Revenue
              
              $
              43,250
              
              
              $
              197,785
              
              
              $
              91,429
              
              
              $
              272,667ExpensesGeneral
      and administrative
              
              
              (803,040
              )
              
              
              (325,475
              )
              
              
              (2,042,181
              )
              
              
              (878,803
              )Depreciation
      and Amortization Expense
              
              
              (51,925
              )
              
              
              (69,675
              )
              
              
              (51,925
              )
              
              
              (120,146
              )Loss
      from operations
              
              
              (811,715
              )
              
              
              (197,365
              )
              
              
              (2,002,677
              )
              
              
              (726,282
              )Other
      income (expense)Loss
      on extinguishment of related party note
              
              
              (75,000
              )
              
              
              -
              
              
              
              (75,000
              )
              
              
              -Interest
      expense
              
              
              (310,908
              )
              
              
              (81,299
              )
              
              
              (424,446
              )
              
              
              (288,291
              )Net
      loss
              
              $
              (1,197,623
              )
              
              $
              (278,664
              )
              
              $
              (2,502,123
              )
              
              $
              (1,014,573
              )Basic
      and diluted loss per share
              
              $
              0.00
              
              
              $
              0.00
              
              
              $
              0.01
              
              
              $
              0.01Weighted
      average common
              
              
              
              
              
              
              74,788,690
              
              
              
              
              
              
              
              74,317,270
 
 See
accompanying notes to consolidated financial statements
  4
  Earth
Search Sciences, Inc.
 Consolidated
Statements of Cash Flows (unaudited)
  
 Six
      Months Ended September 30,2006
              
              
              2005(Restated)Cash
      flows from operating activities:Net
      loss
              
              $
              (2,502,123
              )
              
              $
              (1,015,573
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation,
      amortization and depletion
              
              
              51,925
              
              
              
              120,146Loss
      on extinguishment of related party debt
              
              
              75,000
              
              
              
              -Common
      stock issued for extension of loan
              
              
              72,000
              
              
              
              -Common
      stock for services
              
              
              635,015
              
              
              
              420,997Warrants
      for services
              
              
              -
              
              
              
              17,182Changes
      in assets and liabilitiesAccounts
      receivable
              
              
              (26,396
              )
              
              
              (82,002
              )Other
      current assets
              
              
              136,172
              
              
              
              500Accounts
      payable and accrued expenses
              
              
              1,116,230
              
              
              
              103,631Accounts
      payable to related parties
              
              
              328,679
              
              
              
              108,530Accrued
      interest
              
              
              7,428
              
              
              
              107,909Deferred
      officers' compensation
              
              
              120,003
              
              
              
              120,000Net
      cash provided by (used in) operating activities
              
              
              13,933
              
              
              
              (98,680
              )Cash
      flows from financing activities:Proceeds
      from shareholder loans, net
              
              
              -
              
              
              
              80,001Proceeds
      from sale of stock
              
              
              -
              
              
              
              62,500Repayments
      on notes payable
              
              
              (49,007
              )
              
              
              (27,248
              )Net
      cash provided by (used in)financing activities
              
              
              (49,007
              )
              
              
              115,253Net
      increase in cash
              
              
              (35,074
              )
              
              
              16,573Cash
      at beginning of period
              
              
              40,900
              
              
              
              9,175Cash
      at end of period
              
              $
              5,826
              
              
              $
              25,748Supplemental
      disclosures:Income
      taxes paid
              
              $
              -
              
              
              $
              -Interest
      paid
              
              
              -
              
              
              
              -Non-cash
      activities:Common
      stock issued for extinguishment of debt
              
              
              75,000
              
              
              
              -Equity
      issued for loan extension
              
              
              72,000
              
              
              
              216,219
 
 See
accompanying notes to consolidated financial statements
  5
 
 EARTH
SEARCH SCIENCES, INC
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1 -
BASIS OF PRESENTATION
 
 The  accompanying  unaudited  interim  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 10-KSB. 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
financial
statements  for  2006  as  reported  in  the  10-KSB  have  been  omitted.
 
 NOTE 2 -
EQUITY
 
 During
the quarter ended June 30, 2006:
 
 -
              ESSI  issued  1,553,561  common
      shares valued at market of $533,326 to
      various  individuals  for  consulting  services.
 
 -
              ESSI  issued
      400,000 common shares to a debtor for a loan extension to
      September  15,  2006.  The shares were
      valued at market of $72,000 and
      classified  as  shares  payable  as  of  March  31,  2006.
 
 During
the quarter ended September 30, 2006:
 
 -
              ESSI  issued  485,333  common  shares  valued
      at market of $102,452 to various
      individuals  for  consulting  services.
 
 -
              ESSI  issued  375,000  common
      shares valued at market of $150,000 to an
      individual  that  elected  to  convert
      a $75,000 promissory note. ESSI recognized a $75,000 loss of
      extinguishment of debt.
 
 NOTE 3 -
LITIGATION
 
 ESSI
was in dispute with another party over a leaseback purchase agreement for a
Hyperspectral  Probe.  During  the  fourth  quarter
of fiscal 2005, both parties signed  a mutual release in which ESSI
was to return the Probe and ESSI would be
released  of  amounts  owed  to  the  other  party  as  of
the date the Probe is returned. The mutual release also requires the other party
to return a computer and related software belonging to ESSI in exchange for the
Probe ESSI agreed to return the Probe at the end of August 2005; however, as
of  September 30, 2006, ESSI had not returned the Probe. As a result,
ESSI is in default, and based on the terms of the settlement agreement, ESSI is
obligated to pay significant late fees. Based on the terms of the settlement
agreement, as
of  September  30,  2006,  management  estimates
the settlement obligation to be $3,937,318.  The estimated settlement
obligation increased $1,117,219 to $3,937,318 at September 30, 2006, compared to
$2,820,099 at March 31, 2006.  The increase related to interest
expense of $14,517, rent expense of $125,000 and late fees of $977,702, which
are reflected as interest expense and general and administrative expense in our
statement of operations for the six months ended September 30, 2006. As of
September 30, 2006, management has recognized an accrual for the
estimated  obligation.
 
 Note 4
– RECLASSIFICATION
 
 Certain
prior period amounts have been reclassified to confirm with current year
presentation.
 
 Note 5
– RESTATEMENT
 
 Subsequent
to filing our September Form 10-QSB, we discovered several errors in our
reported financial statements.  These errors arose from clerical
errors when compiling the final statements.  The following tables
reflect the as reported and restated amounts:
  6
  The
following table reflects the restated consolidated balance sheet as of September
30, 2006:
 
 As
      Reported
              
              
              RestatedAccounts
      payable
              
              $
              11,224,464
              
              
              $
              11,602,179Due
      to related parties
              
              
              2,622,192
              
              
              
              2,622,188Investor
      deposits
              
              
              377,715
              
              
              
              -Total
      current liabilities
              
              
              20,258,766
              
              
              
              20,258,765Total
      liabilities
              
              
              20,256,049
              
              
              
              20,596,049Common
      stock
              
              
              80,515
              
              
              
              81,241Additional
      paid-in capital
              
              
              44,314,096
              
              
              
              44,350,076Accumulative
      deficit
              
              
              (61,883,745
              )
              
              
              (64,385,904
              )Total
      liabilities and Stockholders’ Deficit
              
              
              (17,689,134
              )
              
              
              (20,154,587
              )
 
 The
following table reflects the restated consolidated statements of operations for
the three and six months ended September 30, 2006:
 
 Three
      Months EndedSeptember
      30, 2006As
      Reported
              
              
              RestatedGeneral
      and administrative
              
              $
              (841,370
              )
              
              $
              (803,040
              )Loss
      from operations
              
              
              (893,295
              )
              
              
              (803,040
              )Loss
      on extinguishment of related party note
              
              
              -
              
              
              
              (75,000
              )Net
      loss
              
              
              (1,160,953
              )
              
              
              (1,197,623
              )
 
 Six
      Months EndedSeptember
      30, 2006As
      Reported
              
              
              RestatedGeneral
      and administrative
              
              $
              (2,080,511
              )
              
              $
              (2,042,181
              )Loss
      from operations
              
              
              (2,132,436
              )
              
              
              (2,002,677
              )Loss
      on extinguishment of related party note
              
              
              -
              
              
              
              (75,000
              )Net
      loss
              
              
              (2,465,453
              )
              
              
              (2,502,123
              )
 
 The
following table reflects the restated consolidated statement of cash flows for
the six months ended September 30, 2006:
 
 As
      Reported
              
              
              RestatedNet
      loss
              
              $
              (1,602,332
              )
              
              $
              (2,502,123
              )Depreciation,
      amortization and depletion
              
              
              107,254
              
              
              
              51,925Loss
      on extinguishment of related party debt
              
              
              -
              
              
              
              75,000Common
      stock issued for services
              
              
              920,422
              
              
              
              635,015Common
      stock issued for extension of loan
              
              
              -
              
              
              
              72,000Accounts
      receivable
              
              
              (39,873
              )
              
              
              (26,396
              )Other
      current assets
              
              
              -
              
              
              
              136,172Accounts
      payable and accrued expenses
              
              
              591,811
              
              
              
              1,116,230Accounts
      payable to related parties
              
              
              93,900
              
              
              
              328,679Accrued
      interest
              
              
              15,282
              
              
              
              7,428Deferred
      officers compensation
              
              
              120,000
              
              
              
              120,003Net
      cash provided by (used in) operating activities
              
              
              (107,119
              )
              
              
              13,933Repayments
      on notes payable
              
              
              75,000
              
              
              
              (49,007
              )Net
      increase (decrease) in cash
              
              
              32,119
              
              
              
              (35,074
              )Cash
      at beginning of period
              
              
              41,438
              
              
              
              40,900Cash
      at end of period
              
              $
              9,319
              
              
              $
              5,826Non-cash
      activities:Common
      stock issued for extinguishment of debt
              
              
              -
              
              
              
              75,000Equity
      issued for loan extension
              
              
              -
              
              
              
              72,000
  7
  ITEM
2
 
 MANAGEMENT'S
DISCUSSION AND ANALYSIS
 OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 RESULTS  OF  OPERATIONS
 
 Historically  ESSI's
core business has been focused on collecting and processing
airborne  hyperspectral  data for the production of detailed
surface maps. These
maps  indicate  the  exact  chemical  and  physical  characteristics  of
all the materials  exposed on the surface of the Earth. The Company
was one of the early pioneers  in  developing  the
technology globally and has now served a number of
clients  in  many  countries.
 
 The
Company realizes that opportunity exists in using the technology to discover
properties  for  mineral  and  hydrocarbon
exploitation. It was a natural growth
step  to  create  a  strategy  of
developing subsidiary companies in key natural
resource  markets  wherein  exploration  discoveries  could  be  maximized  by
"in-house"  development.  The company is currently pursuing
these avenues in the
mineral  and  oil  and  gas  industries
 
 The
Company recognized revenue of $91,429 in the six months ended September 30, 2006
compared with $272,667 in the six months ended September 30,
2005.
 
 General
and administrative expenses for the six months ended September 30, 2006 were
$2,042,181 compared with $878,803 in the six months ended September 30,
2005.  Interest expense for the six months ended September 30, 2006
and 2005 was $424,446 and $288,291, respectively
 
 The  Company  recognized
revenue of $43,250 in the second quarter of fiscal 2007
compared  with  $197,785  in the second quarter of
fiscal 2006.  Included in the second  quarter of 2007 is $0
in revenue from Oil and Gas Properties compared to
$72,940  in  revenue  in  the  second  quarter  of  2006.
 
 During
the quarter ended September 30, 2006,
ESSI  issued  375,000  common shares valued at
market of $150,000 to an
individual  that  elected  to  convert a
$75,000 promissory note. ESSI recognized a $75,000 loss of extinguishment of
debt.
 
 General  and  administrative
expenses for the second quarter of fiscal 2007 were
$811,715  compared  with  $325,475  in  the  second  quarter  of  fiscal  2006.
 
 Interest  expense  for  the  three  months
ended September 30, 2006 and 2005 was
$310,908  and  $81,299,  respectively.
 
 LIQUIDITY  AND  CAPITAL  RESOURCES
 
 Net
cash provided by operating activities was $13,933 for the six months ended
September  30,  2006.  Net cash used in operating
activities was $98,680 for the
six  months  ended  September  30,  2005.
 
 The  Company  is  experiencing
working capital deficiencies because of operating losses.  The Company
and its subsidiaries have operated
with  funds  received  from  the sale of
common stock, the issuance of notes and operating revenue.  The
ability of the Company to continue as a going concern is
dependent  upon  continued debt or equity financings until
or unless the Company is able to generate cash flows to sustain ongoing
operations.  The Company plans
to  increase  the  number  of  revenue  producing  services  through  the
use of additional  hyperspectral  instruments  and
thereby continue as a going concern.
There  can  be  no  assurance that the
Company can generate sufficient operating
cash  flows  or  raise  the  necessary  funds  to  continue  as
a going concern.
 
 FUTURE  OPERATIONS
 
 In  the  future,  the  Company
intends to continue with its efforts to establish
subsidiary  companies  that  are  capable  of  driving  demand
for hyperspectral services  in a particular industry. This is in
addition to attending to the core business  segment of hyperspectral
services, including surveying and processing,
to  third  parties  in the national security,
mineral, hydrocarbon, forestry and
environmental  areas.
  8
  Each
subsidiary will focus on a specific sector of commercial remote sensing and have
a management team with relevant skills and expertise.  The Company
will provide a license to use
 the
Company's hyperspectral instruments and processing support. This strategy
creates a ready market for the Company, as well as positioning the Company to
receive a royalty from any  resource development that occurs as a
result of the subsidiaries' use of the Company's instruments and technology.
Additional capital will be raised for each subsidiary
by  means  of  private  placements  or  public
offerings.
 
 The  Company's
intent is to create partnerships, strategic alliances, mergers or acquisitions
for the subsidiaries as the most expeditious and cost-effective way
to  grow  the  commercial  hyperspectral  remote  sensing  market.
 
 In  this  regard,
the Company has entered into a license agreement through its majority-owned
subsidiary
company,  Petro  Probe,  Inc.  (PPI)
with a private company
General  Synfuels  International,  Inc.  (GSI).  GSI
granted to PPI a nonexclusive license for $500,000 and the issuance of 500,000
shares of the Common Stock, $.001 par value per share, of PPI.  The
fee is to be paid in such amounts and at such times as agreed to between the
Parties and set forth in a written Payment Addendum to the License
Agreement.  PPI assigned to GSI an overriding net interest of 5.5% of
the hydrocarbonaceous products produced by PPI using the proprietary rights,
payable quarterly.
 
 Test
plant specifications, location, permitting and construction processes are
subject to successfully funding the oil and shale project. This is expected to
be carried over to 2007.
 
 Petro
Probe, Inc. has also entered into an alliance with two other companies to
provide further development opportunities with oil shale. Independent Energy
Partners, Inc. (IEP) and Phoenix Wyoming Inc., (PWI) both Colorado private
companies, have their own non-competitive interests in oil shale. IEP owns the
exclusive rights to a broad, patented Geothermic Fuel CellTM (GFC) method, (US
Patent No. 6,684,948 B1-Apparatus and Method For Heating
Subterranean Formations Using Fuel Cells), to economically produce oil
and natural gas from unconventional
resources such as oil shale, while producing electricity as a
byproduct.
 
 IEP also has acquired
the mineral rights on property in Rio Blanco County, Colorado on some of the
richest "Mahogany Zone" oil shale property in the world, holding an estimated
1.4-2.4 billion barrels of oil.
 
 PWI owns
certain proprietary intellectual property and methods designed to bring the
advantages of microwave technology to an oil shale borehole.
 
 PPI,
PWI and IEP have agreed to cooperate in exploring development opportunities with
oil shale.  The nature and extent of activities to be covered,
responsibility for funding and managing operations and the types of opportunity
to be sought have not yet been determined.  The companies believe the
alliance may be beneficial because:
 
 (1)
              The
      risk of successful commercial development will be
    shared.
 (2)
              Investment
      funds should be easier to
attract.
 (3)
              Permitting,
      licensing, insurance and lease costs can be
  shared.
 (4)
              Infrastructure
      and equipment for processing the oil shale products can be
      shared.
 (5)
              The
      marketing and sale of the oil shale products can be
      shared.
 (6)
              Innovative
      ideas, market intelligence and competitor intelligence can be
      shared.
 (7)
              Oil
      shale test sites can be shared, and additional oil shale land can more
      readily be obtained by the alliance, because an alliance of three
      technology companies is more likely to successfully develop the oil shale
      land than a single company working
alone.
 
 Similar
arrangements are being pursued for the Company's mineral industry subsidiary
company, Geo Probe, Inc.
 
 The
Company's near-term plans are to continue pursuing:
 
 (1)
              contracts
      that produce revenues from the application of remote
    sensing;
 (2)
              the
      development of additional miniaturized remote sensing instruments and
      newer generation airborne instruments to replace the current PROBE-1
      model;
 (3)
              the
      integration of other advanced technology exploration instruments with
      hyperspectral technology to offer clients a "one-stop"
      convenience;
 (4)
              the
      development of promising mineral, oil and gas
  properties;
 (5)
              the
      acquisition of licenses or options to new technologies for minerals or oil
      and gas production that can assist the company to become a resource
      developer and producer as well as an exploration oriented
      business.
 
 The
Company will continue to develop a market for its securities under the new
trading symbol ESSE.
 
 
 Off Balance Sheet
Arrangements
  None.
  9
  ITEM 3.
CONTROLS AND PROCEDURES
 
 The
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Chairman and Chief
Executive Officer of the Company and Chief Financial Officer of the Company, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of the end of
the period covered by this report.  Based upon that evaluation, the
Chairman and Chief Executive Officer and Chief Financial Officer concluded that,
as of the end of the period covered by this report, the Company's disclosure
controls and procedures were not effective.  Specifically, the
Company's independent auditors identified deficiencies in controls related to
revenue recognition, valuation of share-based compensation, and recording of
accrued expenses associated with the Company's settlement
obligation.  The Company intends to take measures to remedy this
situation by working with the auditors and engaging outside advisors to provide
accounting advice and assistance with implementing internal procedures to ensure
that controls and procedures are adequate and effective.   These
deficiencies have been reported to the Company's Board of Directors, and the
Company intends to improve and strengthen its controls and
procedures.
 
 There has
been no significant change in our internal control over financial reporting that
occurred during the period covered by this report that has materially affected,
or that is reasonably likely to materially affect our internal control over
financial reporting.
  10
  PART
II
 
 OTHER  INFORMATION  REQUIRED
 
 Item
      1.
              Legal
      proceedings
 
 In
October of 2002, Terranet, Inc. a subsidiary company, received notice of a
judgment issued by the Supreme Court of British Columbia in regards to monies
owed resulting from a contract with plaintiff Cal Data Ltd., of Vancouver, B.C.
The plaintiff alleged that seventy-five thousand dollars was overdue from
invoices for services dating from January of 2002 to October, 2002. Management
is examining its position and has accrued a $74,603 liability associated with
this demand in its financial statements.
 
 The
Company  entered  into a civil law suit in the United States
District Court for  the  Eastern  District of
Virginia as a plaintiff along with its subsidiary company,  Space
Technology Development Corporation. The company charged that The
Boeing  Company  caused the plaintiffs substantial damages
as a direct result of
their  breach  of  the  covenant  of  good  faith  and  fair  dealing.
 
 ESSI
was in dispute with another party over a leaseback purchase agreement for a
Hyperspectral  Probe.  During  the  fourth  quarter
of fiscal 2005, both parties signed  a mutual release in which ESSI
was to return the Probe and ESSI would be
released  of  amounts  owed  to  the  other  party  as  of
the date the Probe is returned.  The mutual release also requires the
other party to return a computer and related software belonging to ESSI in
exchange for the Probe. ESSI agreed to return the Probe at the end of August
2005; however, as of  September 30, 2006, ESSI had not returned the
Probe because the other party has not delivered the computer and related
software belonging to ESSI. As a result, ESSI is in
default,  and  based on the terms of the settlement
agreement, ESSI is obligated to pay significant late fees. Based on the terms of
the settlement agreement, as
of  September  30,  2006,  management  estimates
the settlement obligation to be $3,937,318.  The estimated settlement
obligation increased $1,117,219 to $3,937,318 at September 30, 2006, compared to
$2,820,099 at March 31, 2006.  The increase related to interest
expense of $14,517, rent expense of $125,000 and late fees of $977,702, which
are reflected as interest expense and general and administrative expense in our
statement of operations for the six months ended September 30, 2006. As of
September 30, 2006, management has recognized an accrual for
the  estimated  obligation.
 
 
 Item
      2.
              Unregistered
      Sale of Equity Securities and Use of
  Proceeds
 
 None.
 
 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
 
 2.1           Agreement
and Plan of Merger by and among Earth Search Sciences, Inc., ESS Acquisition
Corp., Space Technology Development Corporation and the shareholders of Space
Technology Development Corporation, dated December 21, 1999 (Incorporated by
reference to Exhibit 2.1 to the Registrant's Form 10-K for fiscal year ended
March 31, 2000).
 
 3.1           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).
  11
  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           Memorandum
of Understanding between the Registrant and Applied Signal and Imaging
Technology, Inc. dated May 27, 1996 (Incorporated by reference to Exhibit 10.1
to the Registrant's Form 10-K for fiscal year ended March 31,
1996).
 
 10.2           Contract
of Sale and Leaseback dated June 10, 1997 between Registrant and Accuprobe, Inc.
(Incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-K for
fiscal year ended March 31, 2000).
 
 10.3           Operating
Agreement of ESSI Probe1 LC, dated June 3, 1997 (Incorporated by reference to
Exhibit 10.3 to the Registrant's Form 10-K for fiscal year ended March 31,
2000).
 
 10.4           Hyperspectral
Technology License Agreement between Earth Search Sciences, Inc. and Noranda
Mining and Exploration, Inc. made as of December 16,
1997  (Incorporated by reference to the Registrant’s for 8-K filed on
February 6, 1998).
 
 10.5           Agreement
between the Office of Naval Research and Space Technology Development
Corporation Agreement for NAVY EARTHMAP OBSERVER (NEMO) dated December 10, 1997
(Incorporated by reference to Exhibit 10.5 to the Registrant's Form 10-K for
fiscal year ended March 31, 2000).
 
 10.6           Sales
Contract between Science Applications International Corp. and Space Technology
Development Corp. Dated: 30 March 1998, Contract No.: STDC-98-NEMO-0003
(Incorporated by reference to Exhibit 10.6 to the Registrant's Form 10-K for
fiscal year ended March 31, 2000).
 
 10.7           Sales
Contract between Science Applications International Corp. and Space Technology
Development Corp. Dated: 30 March 1998, Contract No.: STDC-98-NEMO-004
(Incorporated by reference to Exhibit 10.7 to the Registrant's Form 10-K for
fiscal year ended March 31, 2000).
 
 10.8           Sales
Contract between Space Systems/Loral (SS/L) and Space Technology Development
Corporation (STDC). Dated 21 January 1999, Contract Number: STDC-98-NEMO-0001
(Incorporated by reference to Exhibit 10.8 to the Registrant's Form 10-K for
fiscal year ended March 31, 2000).
 
 10.9           Sales
Contract between Litton Systems, Inc., Amecom Division (Litton Amecom) and Space
Technology Development Corp. (STDC). Date 29 October 1998, Contract Number:
STDC-98-NEMO-0009 (Incorporated by reference to Exhibit 10.9 to the Registrant's
Form 10-K for fiscal year ended March 31, 2000).
 
 10.10 
       Common Stock Purchase Agreement
between Alpha Venture Capital, Inc. and Earth Search Sciences, Inc.. Dated May
23, 2001. (Incorporated by reference to Exhibit 10.10 to the Registrant's Form
10-K for fiscal year ended March 31, 2001).
 
 10.11         Registration
Rights Agreement between Alpha Venture Capital, Inc. and Earth Search Sciences,
Inc.. Dated May 23, 2001. (Incorporated by reference to Exhibit 10.11 to the
Registrant's Form 10-K for fiscal year ended March 31, 2001).
 
 10.12         Common
Stock Purchase Warrant A between Alpha Venture Capital, Inc. and Earth Search
Sciences, Inc. Dated May 23, 2001.  (Incorporated by reference to
Exhibit 10.12 to the Registrant's Form 10-K for fiscal year ended March 31,
2001).
 
 10.13         Common
Stock Purchase Warrant B between Alpha Venture Capital, Inc. and Earth Search
Sciences, Inc. Dated May 23, 2001.  (Incorporated by reference to
Exhibit 10.13 to the Registrant's Form 10-K for fiscal year ended March 31,
2001).
 
 10.14         Larry
F. Vance employment agreement (Incorporated by reference to Exhibit 10.1 to the
Registrant's Form 10-Q for fiscal quarter ended December 31,
2000).
 
 10.15         John
W. Peel employment agreement (Incorporated by reference to Exhibit 10.2 to the
Registrant's Form 10-Q for fiscal quarter ended December 31,
2000).
 
 10.16         Rory
J. Stevens employment agreement (Incorporated by reference to Exhibit 10.3 to
the Registrant's Form 10-Q for fiscal quarter ended December 31,
2000).
 
 10.17         Tami
J. Story employment agreement (Incorporated by reference to Exhibit 10.4 to the
Registrant's Form 10-Q for fiscal quarter ended December 31,
2000).
  12
  10.18         John
J. Sciuto employment agreement (Incorporated by reference to Exhibit 10.18 to
the Registrant's Form 10-K for fiscal year ended March 31,
2001).
 
 10.19         Unrestricted
License Agreement for Recovery of Products from Oil Shale bgetween GENERAL
SYNSFUELS INTERNATIONAL and PETRO PROBE, INC. (Incorporated by reference to
Exhibit 10.19 to the Registrant’s Form 10KSB for the fiscal year ended March 31,
2007).
 
 10.20         Multi-platform
HyperSpectral imaging "Micro Sectrometer" Development Proposal Number
05080901.  (Incorporated by reference to Exhibit 10.19 to the
Registrant’s Form 10KSB for the fiscal year ended March 31,
2007).
  10.21         Promissory
Note due February 2008, dated February 2007. (Incorporated by reference to
Exhibit 10.19 to the Registrant’s Form 10KSB for the fiscal year ended March 31,
2007).
 
 31.1           Certification
of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934, filed herewith
 
 31.2            Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934, filed herewith
 
 32.1           Certification
of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, filed
herewith
 
 32.2            Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, 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
      19, 2008
              /s/ Larry F.
      VanceLarry
      F. Vance
                Chief
      Executive OfficerDate:
      February 19, 2008
              /s/ Larry F.
      VanceLarry
      F. VanceChief
      Executive Officer
                (principal
      executive officer)Chief
      Executive OfficerDate:
      February 19, 2008
              /s/
      Tami J. StoryTami
      J. StoryChief
      Financial Officer(principal
      financial officer)
   13