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EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 - EARTH SEARCH SCIENCES INCex31-1.htm
EX-23.1 - CONSENT OF MALONE & BAILEY - EARTH SEARCH SCIENCES INCex23-1.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 - EARTH SEARCH SCIENCES INCex31-2.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 - EARTH SEARCH SCIENCES INCex32-2.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C SECTION 1350 - EARTH SEARCH SCIENCES INCex32-1.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
     
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2011
OR
     
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
for the transaction period from to
Commission File Number 000-19566
 
EARTH SEARCH SCIENCES, INC.
(Name of Small Business Issuer in its charter)
     
Nevada
 
870437723
(State or other jurisdiction of incorporation)
 
(I.R.S. Employer Identification No.)
     
306 Stoner Loop Road, #6, Lakeside, Montana
 
59922
(Address of principal executive offices)
 
(Zip code)

Issuer’s telephone number (406) 751-5200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  þ Yes  o  No
 
Indicate by check mark if the registrant is not required to file reports pursuant to section 13 and section 15(d) of the Act.  o

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  o    No  o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

o  Large accelerated filer
 
o  Accelerated filer
 
o  Non-accelerated filer
 
þ  Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o   No  þ

Issuer’s revenues for its most recent fiscal year were $0.

The aggregate market value of the issuer’s voting and non-voting common equity held by non-affiliates (110,659,555 shares) was approximately $5,311,659 based on the average closing bid and ask price of $0.05 for such common equity as of March 31, 2011.

As of July 12, 2011, there were 200,687,890 outstanding shares of the issuer’s Common Stock, par value $0.001.

Transitional Small Business Disclosure Format (check one): Yes  o   No  þ
 
 
 

 
 
 

FORWARD LOOKING STATEMENTS

Some of the statements under “Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and “Description of Business” in this Annual Report on Form 10-KSB are 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. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Annual 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 could decline and you could lose all or part of your investment. 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 Annual Report to conform these statements to actual results.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 

TABLE OF CONTENTS

PART I
 
4
     
Item 1 -
Business
4
Item 1A
Unresolved Staff Comments
5
Item 2 -
Properties
5
Item 3 -
Legal Proceedings
5
Item 4 -
Submission of Matters to a Vote of Security Holders
6
     
PART II
 
7
     
Item 5 -
Market for the Registrant's Common Stock Equity and Related Shareholder Matters
7
Item 7 -
Management's Discussion and Analysis or Plan of Operations
9
Item 8 -
Financial Statements
F-1
Item 9 -
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
11
Item 9A(T)
Controls and Procedures
11
Item 9B -
Other Information
12
     
PART III
 
13
     
Item 10 -
Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act
14
Item 11 -
Executive Compensation
14
Item 12 -
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
15
Item 13 -
Certain Relationships and Related Transactions, and Director Independence
15
Item 14 -
Principal Accountant Fee and Services
16
Item 15 -
Exhibits, Financial Statement Schedules
17
     
SIGNATURES 
20





 
 

 
PART I

ITEM 1. BUSINESS

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 GSI were inactive during fiscal 2010 and 2011.

We did not generate any revenue during fiscal year 2011, have no current business operations and are currently focused on two potential business ventures.

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 2011 and subsequent commercial development as early as 2012.  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. The 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 given in the transaction, 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 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 $10 million as a first stage development cost. The purpose of this plant is to prove certain operating variables.
 
 

 
 
4

 
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.

Other
Employees
 
As of March 31, 2011, we had two full-time employees and one part time employee.

Available Information
 
The Securities and Exchange Commission maintains an internet site at http://www.sec.gov that contains reports and financial information filed by us. We maintain an internet site at http://www.earthsearch.com that contains information about our business, markets and technology. Information on our internet site is not incorporated by reference in this report.

Risk Factors That Could Affect Liquidity, Operating Results And Market Price Of Stock

ITEM 1A. UNRESOLVED STAFF COMMENTS
 
None


ITEM 2. PROPERTIES
 
The Company headquarters consist of approximately 1,500 square feet of office space in Lakeside, Montana.

As a 50% member of ESSI Probe I LC, an Idaho limited liability company (“Probe I LC”), the Company owns 50% of the hyper-spectral instrument owned by Probe I LC. The Company shares its ownership with the two other members of ESSI Probe I LC, Arthur W. McClain Trust and Francisco Elmudesi (the “Woodstock members”). Pursuant to an agreement dated June 3, 1997 (the “Equipment Usage Agreement”), the Company had the right to purchase the hyper-spectral instrument until June 3, 2007 for the purchase price of $2,250,000.  The Company continues the process of negotiating an extension to the renewal period.


ITEM 3. LEGAL PROCEEDINGS
 
On March 23, 2005, we entered into a settlement agreement (2005 Settlement Agreement) with Accuprobe to return an airborne hyperspectral sensor (Probe) and to settle the outstanding obligations under the related capital lease. Under the 2005 Settlement Agreement, we were required to return the Probe on or before August 31, 2005.  Due to continuing disputes over various issues, the probe was not returned until 2007.  As the Probe was not returned by the August 2005 due date, we were subject to a shipping, handling and disposition fee of $250,000. In addition, we were subject to interest charges that began accruing on September 2, 2005 at an annual rate of prime plus 4%; rent on the probe of $250,000 per year beginning April 10, 2000 with interest on any unpaid rent accruing at a rate of prime plus 2% through August 31, 2005.  After August 31, 2005, interest related to the unpaid rent ceased and was replaced with a 5% late fee calculated on the entire balance due at the end of each month.
 
 

 
 
5

 
Because we were unable to reach Accuprobe and make arrangements for the return of the Probe, in January 2007, we shipped the Probe to an acquaintance of Accuprobe with instructions to hold the probe until Accuprobe provided further instructions.  We obtained confirmation in December 2007 that Accuprobe had contacted the acquaintance and instructed them to begin certain repairs and calibrations on the probe.  As a result of this confirmation, we discontinued accruing rent, interest and late fees on the Probe.

The estimated settlement obligation as of March 31, 2011 and 2010 was $8,686,824.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
6

 

PART II

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

 
(a)
Principal Market or Markets. The Company's common stock trades on the OTC Bulletin Board under the symbol “ESSE”. The range of reported high and low bid quotations for the Company’s common stock, as set forth below, reflect interdealer bid prices, without retail markups, markdowns, commissions, or adjustments as reported in on the OTCBB and do not represent actual transactions.

Quarter Ended
High
Low
     
June 30, 2009
.01
.00
September 30, 2009
.03
.00
December 31, 2009
.03
.00
March 31, 2010
.05
.00
     
June 30, 2010
.04
.02
September 30, 2010
.04
.01
December 31, 2010
.04
.02
March 31, 2011
.09
.03

 
(b)
Approximate Number of Holders of Common Stock. The number of record owners of the Company's $.001 par value common stock at March 31, 2011 was approximately 1,255. This does not include shareholders that hold stock in their accounts at brokers/dealers.
 
 
(c)
Dividends. Holders of the Company’s common stock are entitled to receive such dividends as may be declared by the Company's Board of Directors. No dividends have been paid with respect to the Company's common stock and no dividends are anticipated to be paid in the foreseeable future.
 
 
(d)
In the last three years, the Company has made the following sales of unregistered securities, all of which sales were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) or as otherwise indicated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7

 
Recent Sales of Unregistered Securities

Date
 
Amount of Securities Sold
 
Price per Share ($)
 
Total Cash Proceeds ($)
     
Date
 
Amount of Securities Sold
 
Price per Share ($)
 
Total Cash Proceeds ($)
 
                                   
3/13/2007
 
11,400,000
 
$0.10
 
$1,140,000
 
(1)
 
3/15/2007
 
250,000
 
$0.10
 
$25,000
(1)
3/16/2007
 
90,750
 
$0.10
 
$9,075
 
(1)
 
3/28/2007
 
2,500,000
 
$0.10
 
$250,000
(2)
3/31/2007
 
800,000
         
(3)
 
4/18/2007
 
65,000
 
$0.40
 
$26,000
(2)
4/27/2007
 
265,451
 
$0.11
 
$29,350
 
(1)
 
6/19/2007
 
34,386
 
$0.29
 
$10,000
(1)
7/18/2007
 
377,130
 
$0.22
 
$82,968
 
(1)
 
8/10/2007
 
98,012
 
$0.24
 
$23,523
(1)
9/14/2007
 
58,824
 
$0.19
 
$11,177
 
(1)
 
10/16/2007
 
141,763
 
$0.11
 
$15,594
(1)
11/13/2007
 
500,000
 
$0.05
 
$25,000
 
(4)
 
11/30/2007
 
557,143
 
$0.06
 
$35,000
(4)
12/17/2007
 
4,285,714
 
$0.07
 
$300,000
 
(4)
 
1/18/2008
 
1,865,000
 
$0.06
 
$111,900
(1)
2/13/2008
 
1,893,387
 
$0.06
 
$113,603
 
(1)
 
3/1/2008
 
500,000
 
$0.05
 
$25,000
(4)
4/14/2008
 
1,000,000
 
$0.06
 
$62,000
 
(1)
 
5/9/2008
 
392,736
 
$0.06
 
$2
(1)
5/9/2008
 
1,694,418
 
$0.08
 
$128,868
 
(6)
 
5/12/2008
 
14,472
 
$0.08
 
$1,101
(6)
5/12/2008
 
582,770
 
$0.05
 
$29,131
 
(1)
 
6/10/2008
 
3,000,000
 
$0.03
 
$95,000
(4)
6/11/2008
 
5,000,000
 
$0.05
 
$250,000
 
(4)
 
6/19/2008
 
2,841,667
 
$0.06
 
$170,500
(1)
7/7/2008
 
7,500,000
 
$0.04
 
$300,000
 
(4)
 
7/7/2008
 
2,000,000
 
$0.06
 
$120,000
(1)
7/14/2008
 
368,228
 
$0.08
 
$27,617
 
(1)
 
7/14/2008
 
1,250,000
 
$0.04
 
$50,000
(4)
7/22/2008
 
350,877
 
$0.05
 
$17,544
 
(6)
 
7/22/2008
 
400,001
 
$0.06
 
$24,800
(6)
7/29/2008
 
6,779,999
 
$0.08
 
$508,500
 
(4)
 
8/8/2008
 
625,000
 
$0.09
 
$56,250
(1)
8/8/2008
 
1,200,000
 
$0.05
 
$60,000
 
(4)
 
8/15/2008
 
34,753,788
 
$0.09
 
$3,127,841
(5)
9/26/2008
 
229,906
 
$0.06
 
$14,254
 
(6)
 
9/26/2008
 
2,463,672
 
$0.07
 
$172,457
(1)
10/6/2008
 
1,397,773
 
$0.06
 
$83,866
 
(1)
 
11/5/2008
 
2,608,844
 
$0.03
 
$78,265
(1)
12/10/2008
 
2,160,087
 
$0.02
 
$45,362
 
(1)
 
12/10/20088
 
312,504
 
$0.06
 
$19,375
(6)
12/10/2008
 
759,230
 
$0.05
 
$34,925
 
(6)
 
2/10/2009
 
6,000,000
 
$0.01
 
$72,000
(1)
9/30/2009
 
350,000
 
$0.02
 
$7,000
 
(1)
 
8/24/2009
 
350,000
 
$0.02
 
$7,000
(1)
11/5/2009
 
4,482,188
 
$0.02
 
$89,644
 
(1)
 
4/7/2010
 
1,200,000
 
$0.05
 
$54,000
(3)
 
(1) Consideration paid for the shares was employee and/or consulting services.
(2) Shares issued for debt consideration. 
(3) Consideration paid for Directorship.
(4) Consideration received in a private placement.
(5) Shares issued in connection with the acquisition of assets from the shareholders of General Synfuels International.
(6) Shares issued for stock payable.

Securities authorized for issuance under Equity Compensation Plans
 
The following table sets forth certain information on the Company’s Equity Compensation Plans as of March 31, 2011 See Note 10 to the Notes to Consolidated Financial Statements for additional information on equity compensation including material terms of options granted that have not been approved by security holders.

   
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
Weighted-average exercise price of outstanding options, warrants and rights
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Plan category
 
(a)
 
(b)
 
(c)
Equity compensation plans approved by security holders
 
-
 
-
 
 -
             
Equity compensation plans not approved by security holders
 
-
 
-
 
 9,244,555
             
Total
 
-
 
-
 
 9,244,555

 

 
 
8

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

The following discussion should be read in conjunction with other sections of this Form 10-KSB including Part 1, “Item 1: Business” and Part II, “Item 7: Financial Statements.” Various sections of management’s discussion and analysis (“MD&A”) contain statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially due to factors discussed in this report, as well as factors not within our control. We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.
 
Our MD&A is provided as a supplement to our audited financial statements to help provide an understanding of our financial condition, changes in financial condition and results of operations.

Results of Operations

Our aircraft was grounded in 2006 for required FAA repairs and maintenance and remained grounded through the issuance of this report.  As a result, we have not generated any revenue from our Hyperspectral remote sensing in fiscal year 2011 and 2010.

General and administrative costs were $1,603,961 in fiscal year 2011 compared with $1,399,653 in 2010. This increase was primarily due to additional costs related to the development of GSI’s prototype.

Interest expense was $872,081 in fiscal year 2011 compared to $521,083 in 2010. Our interest expense primarily consists of interest from our notes payable and related party debt.

We recognized a net loss of $1,850,538 in fiscal year 2011 compared with a net loss 2010 of $1,256,843.  The additional loss is related to developing the GSI prototype and related activity.

 
Liquidity and Capital Resources

At March 31, 2011, we had $73,625 of cash and cash equivalents and a working capital deficit of $20,553,359.  During fiscal year 2011, we used $1,116,252 in operating activities, resulting primarily from payments for salaries, services.  Net cash used in operating activities was $785,793 in 2010.

In addition, ESSI evaluated the conversion option of the promissory note under ASC 815-15 and determined that the feature has characteristics of an embedded derivative. The embedded derivative was bifurcated and recorded as a derivative liability and debt discount. At March 31, 2010, the derivative liability was valued at $30,924 using the Black-Scholes Option Pricing Model.

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.

Net cash provided by financing activities was $1,278,844 in 2011 as compared to $804,964 in 2010 with the increase due to our ability to raise additional funds from the issuance of notes.  $1,500,000 came from the proceeds from convertible notes and we paid $221,156 in stockholder loans.

We do not intend to pay cash dividends to the holders of its common stock and intends to retain future earnings to finance the expansion and development of its business.

As shown in the accompanying financial statements, we incurred losses from operations of $1,850,538 and $1,256,843 for the years ended March 31, 2011 and 2010, respectively and we have an accumulated deficit of $75,859,921 and negative working capital of $20,553,359 as of March 31, 2011.  These conditions raise substantial doubt as to our ability to continue as a going concern. Management is trying to raise additional capital through sales of stock.  The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
 
 
9

 
There can be no assurance that additional capital beyond the amounts currently forecasted will be required or that any such required additional capital will be available on reasonable terms, at such time or times as required by the Company.

Critical Accounting Policies

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We evaluate long-lived assets to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets.

We issue stock as compensation to employees and outside consultants for services provided to the company.  Employee share-based awards are accounted for in accordance with ASC 718, which requires us to measure the cost of employee services received based on the grant-date fair value of the award.  We account for non-employee share-based awards in accordance with ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquisition, or in Conjunction with Selling, Goods or Services.”

Instruments are reviewed and evaluated for embedded derivatives in accordance with ASC Topic 815. When applicable, the embedded feature is bifurcated from the host instrument and recorded as a derivative liability at its fair market value. Changes in fair value of the derivative liabilities is recorded as a component of income for each reporting period.


Off Balance Sheet Arrangements

None.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
10

 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Report of Registered Independent Public Accounting Firm
F-2
   
Consolidated Balance Sheets as of March 31, 2011 and 2010
F-3
   
Consolidated Statements of Operations for the years ended March 31, 2011 and 2010
F-4
   
Consolidated Statement of Changes in Stockholders' Deficit for the years ended March 31, 2011 and 2010
F-5
   
Consolidated Statements of Operations for the years ended March 31, 2011 and 2010
F-6
   
Notes to consolidated financial statements
F-7 – F-12


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-1

 

Report of Independent Registered Public Accounting Firm
 
To the Board of Directors
Earth Search Sciences, Inc.
Lakeside, Montana


We have audited the accompanying consolidated balance sheets of Earth Search Sciences, Inc. as of March 31, 2011 and 2010, and the related consolidated statements of operations, stockholders' deficit, and cash flows for each of the years then ended. These financial statements are the responsibility of Earth Search's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Earth Search Sciences Inc. as of March 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Earth Search will continue as a going concern. Earth Search has a $20,553,359 working capital deficit as of March 31, 2011, which raises substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/MaloneBailey, LLP
Houston, Texas
www.malonebailey.com
July 14, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
F-2

 
EARTH SEARCH SCIENCES, INC.
CONSOLIDATED BALANCE SHEETS

   
March 31,
 
   
2011
   
2010
 
ASSETS
           
Current assets:
           
Cash
  $ 73,625     $ 89,789  
Investments
    236,900       -  
Prepaid expenses
    -       13,000  
Loan costs, net of accumulated amortization of $262,347 and $258,003, respectively
    8,879       13,223  
Total current assets
    319,404       116,012  
                 
Property and equipment, net accumulated depreciation of $1,149,428 and $1,148,653 respectively
    -       775  
Intangible asset – patents
    300       25,300  
TOTAL ASSETS
  $ 319,704     $ 142,087  
                 
LIABILITIES
               
Current liabilities:
               
Accounts payable
  $ 1,431,274     $ 1,416,298  
Accounts payable – related parties
    408,656       408,656  
Accrued expenses
    5,291,347       4,410,788  
Current portion of notes payable
    1,628,440       2,291,440  
Settlement obligation
    8,686,824       8,686,824  
Derivative liability
    511,614       30,924  
Current portion of notes payable – related parties
    1,477,766       1,698,922  
Total current liabilities
    19,435,921       18,943,852  
                 
Convertible notes payable, net of discount of $725,858
    1,437,142       -  
Total liabilities
  $ 20,873,063     $ 18,943,852  
                 
Commitments and contingencies
    -       -  
                 
STOCKHOLDERS’ DEFICIT
               
Preferred stock, 300,000,000 shares authorized; $.001 par value, 31,250,000 issued and outstanding, respectively
    31,250       31,250  
Common stock, $.001 par value; 300,000,000 shares authorized;200,687,890 and 199,487,893 shares issued and outstanding, respectively
    200,687       199,487  
Additional paid-in capital
    55,274,625       55,176,881  
Treasury stock
    (200,000 )     (200,000 )
Accumulated deficit
    (75,859,921 )     (74,009,383 )
Total stockholders’ deficit
    (20,553,359 )     (18,801,765 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
  $ 319,704     $ 142,087  

See accompanying summary of accounting policies   and notes to financial statements.
 
 
F-3

 
EARTH SEARCH SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

   
Years Ended March 31,
 
   
2011
   
2010
 
Operating expenses
           
Depreciation and amortization
  $ 775     $ 101,472  
General and administrative
    1,975,679       1,399,653  
Impairment loss      25,000          
                 
Total expenses
    1,628,961       1,501,125  
                 
Loss from operations
    (1,628,961 )     (1,501,125 )
                 
Other income (expense)
               
Gain on conversion of debt
    -       781,250  
Gain on change in market value of embedded derivative
    592,360       (15,885 )
Unrealized gain on investment
    58,144          
Interest expense
    (872,081 )     (521,083 )
                 
Net Loss
  $ (1,850,538 )   $ (1,256,843 )
                 
Basic and diluted:
               
Loss per share
  $ (0.01 )   $ (0.01 )
Weighted average common shares outstanding
    200,664,876       196,658,580  
 
See accompanying summary of accounting policies and notes to financial statements.


 
 
 
 
 
 
 
 
 
 
 
F-4

 

EARTH SEARCH SCIENCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
Years Ended March 31, 2011 and 2010


   
Preferred
Stock
   
Stock
Amount
   
Common
Shares
   
Stock
Amount
   
Additional
Paid-in
Capital
   
Treasury
Stock
   
Accumulated
Deficit
   
Total
 
Balances at March 31, 2009
              $ 194,655,705     $ 194,654     $ 53,315,070     $ (200,000 )   $ (72,752,540 )   $ (19,442,816 )
                                                             
Issuance of common stock for services
                4,832,188       4,833       91,811                       96,644  
                                                             
Issuance of Preferred stock for GSI
    31,250,000       31,250                       1,687,500                       1,718,750  
                                                                 
Imputed interest
                                    82,500                       82,500  
                                                                 
Net loss
                                                    (1,256,843 )     (1,256,843 )
                                                                 
Balances at March 31, 2010
    31,250,000     $ 31,250       199,487,893     $ 199,487     $ 55,176,881       (200,000 )     (74,009,383 )     (18,801,765 )
                                                                 
Issuance of common stock for services
                    1,200,000       1,200       52,800                       54,000  
                                                                 
Imputed interest
                                    44,944                       44,944  
                                                                 
Net loss
                                                    (1,850,538 )     (1,850,538 )
                                                                 
Balances at March 31, 2011
    31,250,000     $ 31,250       200,687,893     $ 200,687     $ 55,274,625       (200,000 )     (75,859,921 )     (20,553,359 )
 
See accompanying summary of accounting policies and notes to financial statements.
 
 
 
 
 

 
 
F-5

 

EARTH SEARCH SCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2011 and 2010

   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (1,850,538 )   $ (1,256,843 )
Adjustments to reconcile net loss to cash used in operating activities:
               
Depreciation and amortization
    775       101,472  
Amortization of deferred finance costs
    4,344       4,344  
Imputed interest
    44,944       82,500  
Amortization of debt discount
    347,193       15,039  
Change in fair value of embedded derivative
    (592,360 )     15,885  
Gain on conversion of debt
    -       (781,250 )
Common stock issued for services
    54,000       96,644  
Unrealized gain on investment
    (58,144 )     -  
Impairment Loss     25,000          
                 
Changes in assets and liabilities:
               
Accrued interest – related party
    176,389       196,738  
Accounts payable and accrued expenses
    719,145       720,542  
Accounts payable – related party
    -       18,688  
Prepaid and other current assets
    13,000       448  
NET CASH USED IN OPERATING ACTIVITIES
    (1,116,252 )     (785,793 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of investment
    (178,756 )     -  
NET CASH USED IN INVESTING ACTIVITIES
    (178,756 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from stockholder loans
    -       4,100  
Payment on stockholder loans
    (221,156 )     (112,136 )
Proceeds from issuance of common stock
    -       -  
Proceeds from issuance of convertible notes
    1,500,000       913,000  
Payment on short-term debt
    -       -  
Payment on long-term debt
    -       -  
NET CASH PROVIDED BY FINANCING ACTIVITIES
    1,278,844       804,964  
                 
NET CHANGE IN CASH
    (16,164 )     19,171  
CASH AT BEGINNING OF PERIOD
    89,789       70,618  
CASH AT END OF PERIOD
  $ 73,625     $ 89,789  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Interest paid
  $ 41     $ 76  
Taxes paid
    -       -  
                 
Non-cash financing and investing activities:
               
Preferred stock issued for convertible related party debt
  $ -     $ 1,718,750  
Discount on notes payable from derivative liabilities      1,073,057        -  
 
See accompanying summary of accounting policies and notes to financial statements.
 
 
F-6

 
EARTH SEARCH SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Earth Search Sciences, Inc. (“ESSI”) ceased all revenue generating activity during 2007.

We have five wholly-owned subsidiaries: Skywatch Exploration, Inc., Polyspectrum Imaging, Inc., Geoprobe, Inc., STDC, Inc., and General Synfuels International.  In addition, there are five majority-owned consolidated subsidiaries (these subs have been dormant for several years): Earth Search Resources, Inc., Eco Probe, Inc., ESSI Probe 1 LC, Petro Probe, Inc. and Terranet, Inc.  All of these subsidiaries except General Synfuels International are inactive.

We did not generate any revenue during fiscal year 2011 and 2010, and have no current business operations.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS
 
We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
 
The estimated fair value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities approximate their carrying amounts in the financial statements.

PROPERTY AND EQUIPMENT
 
Property and equipment are stated at cost, less accumulated depreciation.  Depreciation on our property and equipment is recognized using the straight-line method over estimated useful lives ranging from five years for computers and software, vehicles and equipment to ten years for the Airplane and hyperspectral sensors.

IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS
 
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We evaluate long-lived assets to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets.

Intangible valuation impairment is determined using similar processes. The main step is to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets.

DERIVATIVE FINANCIAL INSTRUMENTS

Derivative instruments are not used to hedge exposures to cash flow, market, or foreign currency risks. Earth Search evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, Earth Search uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates.   The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
 
INVESTMENTS
 
Investments consist of the Company's holdings in silver coins and are reported at fair value. The unrealized gains and losses from these investments are included in the Consolidated Statement of Operations as a component of net loss.

INCOME TAXES
 
We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. We provide a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

NET LOSS PER COMMON SHARE
 
Net loss per common share has been computed based on the weighted average number of common shares outstanding. Common stock equivalents have not been considered in the diluted net loss per share calculation because their effect on net loss per share is anti
dilutive.

 
F-7

 
STOCK-BASED COMPENSATION
 
We issue stock as compensation to employees and outside consultants for services provided to the company. Employee share-based awards are accounted for in accordance with ASC 718, which requires us to measure the cost of employee services received based on the grant-date fair value of the award. We account for non-employee share-based awards in accordance with EITF No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquisition, or in Conjunction with Selling, Goods or Services.”

For the years ended March 31, 2011 and 2010, ESSI had no stock option issuances.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows.
 

NOTE 2 - GOING CONCERN

As shown in the accompanying financial statements, we incurred losses from operations of $1,850,538 and $1,256,843 for the years ended March 31, 2011 and 2010, respectively and we have an accumulated deficit of $75,859,921 and negative working capital of $19,116,517 as of March 31, 2011.  These conditions raise substantial doubt as to our ability to continue as a going concern. Management is trying to raise additional capital through sales of stock.  The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.


NOTE 3 - NOTES PAYABLE

Notes payable consists of the following:

   
2011
   
2010
 
Installment note payable, secured by our assets, interest at 15% - in default
  $ 687,533     $ 687,533  
                 
Installment note payable, no security, interest at 15% - in default
    298,907       298,907  
                 
GSI promissory notes, no security, interest at 10%, - in default
    640,000       640,000  
                 
Advance
    -       663,000  
                 
Other
    2,000       2,000  
                 
Total
  $ 1,628,440     $ 2,291,440  

As of March 31, 2011, our subsidiary General Synfuels International issued 10% promissory notes in the amount of $729,000 of which $89,000 is due from the company to CEO Luis Lugo (net $640,000 is reflected in Notes Payable. The remaining $89,000 is reported in related party notes payable).  These one year notes carry an automatic conversion into equity of GSI equity, 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.  If GSI is sold before conversion occurs an amount of 1.5 times the principal amount becomes due and payable.  All of the notes are in default.

For the year ending March 31, 2011 and 2010, we recorded interest expense of $872,081 and $521,083, respectively.


 
F-8

 
NOTE 4 – CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES
 
As of September 30, 2010, we finalized agreements on $2,163,000 in convertible notes payable, of which $1,500,000 was received during the year ended March 31, 2011. These notes have a two year term and bear interest at 5% per annum. The conversion option allows for a conversion price of $0.08 per common share and includes a reset provision that would lower the conversion rate to 80% of the price received for a share of common stock in any future qualified financing. ESSI evaluated the conversion option for derivative accounting consideration under ASC 815-15 and determined that the embedded conversion options should be classified as a liability and recorded at their fair value due to the above noted reset provision. The derivative liabilities were valued using the Black-Scholes Option Pricing Model and at the respective date of issuances were valued at $1,073,050 which was recorded as a discount against the convertible note payable and will be amortized into interest expense using the effective interest rate method over the terms of the notes. During the years ended March 31, 2011 and 2010, $347,193 and $15,039, respectively, of the discount was amortized. At March 31, 2011, the valuation of the derivative liability was $511,614.

During the year ended March 31, 2011, the Company recognized a gain on derivative liabilities of $561,436 as a result of the change in fair value of the derivative described above.  In addition, the Company recognized a gain on derivative liabilities of $30,924 for the write-off of a derivative liability previously recorded as of March 31, 2010 in relation to the GSI promissory notes described in Note 3.

The Company values its conversion option derivatives using the Black-Scholes option-pricing model.  Assumptions used in valuing the derivative liability at March 31, 2011 include (1) 0.61% risk-free interest rate, (2) remaining contractual term of the respective convertible note agreements are the expected term, (3) expected volatility 273%, (4) zero expected dividends (5) exercise price of $0.08 per share, (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted.
 
As of March 31, 2011, the outstanding balance, net of discount on these convertible notes was $1,437,142.

NOTE 5 - NOTES PAYABLE TO RELATED PARTIES

We have financed our operations in part by funds received from shareholders. These advances are in the form of unsecured promissory notes and bear interest at rates ranging from 8% to 10%.  Stockholder loans totaled $1,388,766 and $1,609,922 and accrued interest of $1,204,567 and $1,028,178 for 2011 and 2010, respectively. The principal balance is included in notes to related parties, along with $89,000 of convertible notes issued to related parties.  (See Note 3)
 
In prior years, the Company's directors made payments of $408,656 to vendors on behalf of the Company. These amounts are included in accounts payable - related parties in the consolidated balance sheet as of March 31, 2011 and 2010.

NOTE 6 - ACCRUED OFFICERS' COMPENSATION

Accrued compensation consists of the cumulative unpaid compensation due to two corporate officers (Chairman &Chief Executive Officer and Secretary) and two former corporate officers (Chief Executive Officer and Chief Financial Officer).  We recorded officer compensation of $407,800 and $683,832 during fiscal 2011 and 2010, respectively, and included these amounts in general and administrative expenses. Accrued officers’ compensation, including accrued interest and taxes, totaled $2,855,024 and $2,420,024 for 2011 and 2010 respectively and is included in accrued expenses.
 
 
NOTE 7 - INCOME TAXES

ESSI recorded no provision for income taxes in fiscal 2011 and 2010 due to the operating losses incurred from inception to date.

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

At March 31, 2010, deferred tax assets consisted of the following:

Deferred tax assets:
     
Net operating losses
 
$
9,434,983
 
Less: valuation allowance
   
(9,434,983
)
Net deferred tax asset
 
$
-
 


At March 31, 2011, deferred tax assets consisted of the following:

Deferred tax assets:
     
Net operating losses
 
$
10,030,525
 
Less: valuation allowance
   
(10,030,525
)
Net deferred tax asset
 
$
-
 
 
 
 
F-9

 
The cumulative net operating loss carry-forward is approximately $29,501,544 at March 31, 2011, and will expire in the years 2016 through 2031. The deferred tax asset has been fully reserved because we are unable to anticipate future taxable income to realize the potential benefits of the gross deferred tax asset.

The annual amount of tax loss carryforward, which can be utilized, may be limited due to the substantial changes in the company's ownership as defined by section 382 of the Internal Revenue Code. Such limitations could result in the expiration of a part or all of the loss carryforwards before their utilization.


NOTE 8 - COMMON STOCK

During fiscal 2011, we issued:

 
·
1,200,000 shares of stock for services valued at $54,000 using the grant-date quoted price of the stock.  The 1,200,000 shares vest immediately and therefore $54,000 was expensed during the period.

During fiscal 2010, we issued:

 
·
4,832,188 shares of stock for services valued at $96,644 using the grant-date quoted price of the stock.  The 4,832,188 shares vest immediately and therefore $96,644 was expensed during the period.


NOTE 9 - SETTLEMENT AGREEMENT

On March 23, 2005, we entered into a settlement agreement with Accuprobe to return an airborne hyperspectral sensor (Probe) and to settle the outstanding obligations under the related capital lease.  Under this agreement, we were required to return the Probe on or before August 31, 2005.  Due to continuing disputes over various issues, the probe was not returned until 2007.  As the Probe was not returned by the August 2005 due date, we were subject to a shipping, handling and disposition fee of $250,000. In addition, we were subject to interest charges that began accruing on September 2, 2005 at an annual rate of prime plus 4%; rent on the probe of $250,000 per year beginning April 10, 2000 with interest on any unpaid rent accruing at a rate of prime plus 2% through August 31, 2005.  After August 31, 2005, interest related to the unpaid rent ceased and was replaced with a 5% late fee calculated on the entire balance due at the end of each month.

Because we were unable to reach Accuprobe and make arrangements for the return of the probe, in January 2007, we shipped the probe to an acquaintance of Accuprobe with instructions to hold the probe until Accuprobe provided further instructions.  We obtained confirmation in December 2007 that Accuprobe had contacted the acquaintance and instructed them to begin certain repairs and calibrations on the probe.  As a result of this confirmation, we discontinued accruing rent, interest and late fees on the probe.

The estimated settlement obligation as of March 31, 2011 and 2010 was $8,686,824.


NOTE 10 - 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 were settled with preferred stock and therefore do not meet the criteria for troubled debt restructuring or a modification of debt.

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 conversion feature was evaluated under FASB ASC 815 and because the embedded feature is clearly and closely related to the host contract, it is classified as equity.
 

 
 
F-10

 
NOTE 11 - FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 were effective January 1, 2008. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The three levels of the fair value hierarchy defined by ASC 820 are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The following tables set forth assets and liabilities measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as of March 31, 2011 and March 31, 2010. As required by ASC 820, financial assets and liabilities are classified in their entity based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

Liabilities Measured at Fair Value on a Recurring Basis
March 31, 2011
 
 
Level 1
Level 2
 
Level 3
   
Total
 
Derivative liabilities
      $ 511,614     $ 511,614  
                     
 
March 31, 2010
 
 
Level 1
Level 2
 
Level 3
   
Total
 
Derivative liabilities
      $ 30,924     $ 30,924  
                     
The derivatives listed above are carried at fair value. The fair value amounts in current period earnings associated with the Company’s derivatives resulted from Level 2 fair value methodologies; that is, the Company is able to value the liabilities based on observable market data for similar instruments. This observable data includes the quoted market prices and estimated volatility factors.

 
F-11

 
During 2011, we began investing in silver coins and we purchased 9,200 face at $19.43 per dollar. On the date of purchase, November 12, 2010 the coins were valued at $178,756. As of March 31, 2011 the value increased to $236,900.

Assets Measured at Fair Value on a Recurring Basis
 
March 31, 2011
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Investment in silver coins
    -     $ 236,900       -     $ 236,900  
                                 
   
March 31, 2010
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Investment in silver coins
    -       -       -       -  
                                 
The investments listed above are carried at fair value. The fair value amounts in current period earnings associated with the Company’s investments resulted from Level 2 fair value methodologies; that is, the Company is able to value the assets based on observable market data for similar instruments. This observable data includes the quoted vendor prices.


NOTE 12 - SUBSEQUENT EVENTS

In April, May and June of 2011, Earth Search issued 5% convertible promissory notes in the amount of $175,000, $50,000 and $275,000 respectively.   On May 26 2011 we issued 1,000,000 shares of common stock to two consultants for services provided to the Company.




 
 
 
 
 
 
 
 
 
 
 
 

 
 
F-12

 


ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.

ITEM 9A.(T) CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Our management, principally our chief financial officer and 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. In particular, we have identified the following material weakness of our internal controls:

 
-
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.

Management’s Annual Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) for the company.

In order to ensure whether our internal control over financial reporting is effective, management has assessed such controls for its financial reporting as of March 31, 2011. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In performing this assessment, management has identified the following material weaknesses:

There is an absence of adequate segregation of duties relating to oversight and management of our systems. This resulted primarily from the fact that certain parts of the work of our chief financial officer are not monitored or reviewed. The absence of adequate segregation of duties may have an effect on the systems which we use in the evaluating and processing of certain accounts and areas and in the posting and recording of journal entries into certain accounts, as described below:

 
o
Financial statements closing process – There was a material weakness in the process of closing and consolidating our financial statements which resulted from the fact that the work of processing the trial balance, evaluating and implementing accounting policies and practices, and drafting the consolidated financial statements and related footnotes is performed by consultants and not reviewed by qualified accountant within our company.

As a result of these material weaknesses in our internal control over financial reporting, our management concluded that our internal control over financial reporting as of March 31, 2011, was not effective based on the criteria set forth by COSO in Internal Control – Integrated Framework. A material weakness in internal control over financial reporting is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management’s Plan for Remediation of Material Weaknesses
 
Based on our financial condition, there are limitations to the level of remediation possible. If we restart our operations, management will implement the following plan intended to remediate our ineffectiveness and to strengthen our internal controls over financial reporting:

 
o
Hire a qualified accounting staff to manage, review and verify the day-to-day accounting and the financial statement close process.
 
 
o
Improving the control and oversight of the duties relating to the systems we use in the evaluation and processing of certain accounts and areas in the posting and recording of journal entries into certain accounts. This improvement should include reviews by management of the accounting processes as well as a reorganization of some of the accounting functions.
 

 
 
11

 

 
o
The segregation of duties relating to the processing of accounts and the recording of journal entries into certain accounts.
 
This annual report does not include an attestation report of our public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
 
ITEM 9B. OTHER INFORMATION
 
None.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
12

 

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSON AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and Nasdaq. Officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on our review of copies of the Section 16(a) reports filed for the fiscal year ended March 31, 2008, we believe that all filing requirements applicable to its officers, directors, and greater than 10% beneficial owners were complied with.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
 
The following table sets forth certain information with respect to the executive officers of the Company for fiscal 2010 to the present.

Name
Position
   
Larry F. Vance
Chairman & Chief Executive Officer
   
Tami J Story
Director Secretary/Treasurer/Director

 
(1)
Effective December, 2009, Mr. Larry Vance became Chief Executive Officer of the Company.
 
 
(3)
Effective April, 1993, Ms. Story was appointed as Secretary and Treasurer of the Company.

Certain additional information concerning the individuals named above is set forth below. This information is based on information furnished to us by each individual noted.

Larry F. Vance served as Chief Executive Officer of the Company from April 1985 to July 2008 and resumed the CEO position on December 14, 2009. Since April 8, 1995, Mr. Vance has served as Chairman of the Company. Mr. Vance is also a director of the Company and has been a full-time employee of the Company since 1985. Mr. Vance’s training is in business and marketing. He served in a management capacity for the 3M companies, IBM, and Computer Usage Corporation prior to founding the Company.

Tami J. Story, Secretary, Treasurer and Director. Tami J. Story served in an administrative support capacity for the Company from 1991 until April 1993. Since April 1993, Ms. Story has served as Secretary and Treasurer of the Company. Ms. Story also serves as a director of the Company. Ms. Story holds a degree with a major in Nursing and a minor in Business Administration.

Family Relationships
 
There are no family relationships between or among the directors, executive officers or persons nominated or charged by us to become directors or executive officers.

Involvement In Legal Proceedings
 
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Code of Ethics
 
The Company has adopted a code of ethics. The Company will provide to any person without charge, upon request, a copy of its code of ethics upon written request to our corporate headquarters or request emailed to earthsrch@aol.com.

Board of Directors Meetings and Subcommittees Meetings

 
13

 
Our Board of Directors held several meetings during the fiscal year ended March 31, 2011. All board actions were completed through unanimous written consents.

Audit Committee and Financial Expert

Our Board of Directors does not have a separate audit committee. The Board has determined that it does not have a member of its Board that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-B.

To strengthen our controls, during a portion of fiscal year 2009 retained the services of an outside consultant, HF Services LLC to assist with quarterly and annual reviews of our accounting data.

Compensation Committee
 
As all our executive officers are currently under employment agreements, we do not have a separate compensation committee. At this point, we do not intend to establish a separate compensation committee as this function will be performed by our full Board of Directors.

Nominating Committee
 
We do not currently have a separate nominating committee as this function is performed by our full Board of Directors.

Shareholder Communication
 
We communicate regularly with shareholders through press releases, as well as annual and quarterly reports. Our Chief Executive Officer addresses investor concerns on an on-going basis.

Interested parties, including shareholders and other security holders, may communicate directly with our Board of Directors or with individual directors by writing to our Chief Executive Officer at 306 Stoner Loop Road, #6, Lakeside, Montana 59922.

Securities Authorized for Issuance under Equity Compensation Plans
 
For information regarding securities authorized for issuance under Equity Compensation Plans, and the equity compensation plan information table see Part II, “Item 5: Market for Common Equity and Related Stockholder Matters.”


ITEM 11. EXECUTIVE COMPENSATION
 
The following table sets forth, for the years indicated, all compensation awarded to, paid to or earned by the following type of executive officers for the fiscal years ended March 31, 2011 and 2010: (i)individuals who served as, or acted in the capacity of, our principal executive officer and principal financial officer for the years ended March 31, 2011 and 2010; and (ii) our two other most highly compensated executive officers, who together with the principal executive officer are our most highly compensated officers whose salary and bonus exceeded $100,000 with respect to the years ended March 31, 2011 and 2010 and who were employed by us at March 31, 2009.
 
SUMMARY COMPENSATION TABLE

Name and Principal Position
 
Year
 
Salary
($)
 
Bonus
($)
 
Stock
Awards
($) (5)
 
Total Compensation ($)
Larry Vance
Chief Executive Officer
 
2011
2010
 
200,000(1)
200,000(1)
 
0
0
 
18,000
0
 
218,000
200,000
                     
Luis Lugo
 
2011
 
30,000 (2)
 
0
 
18,000
 
48,000
Chief Executive Officer
 
2010
 
203,687 (2)
 
0
 
0
 
203,687
                     
Charles Bridge
 
2011
 
50,000(3)
 
 0
 
0
 
50,000
Chief Financial Officer
 
2010
 
155,146(3)
 
0
 
0
 
155,146
                     
Tami J. Story
Secretary Treasurer
 
2011
2010
 
125,000(4)
125,000(4)
 
0
0
 
18,000
0
 
 
143,000
125,000
 

(1)
The entire amount of Mr. Vance’s salary was accrued during the fiscal years 2011 and 2010.
(2)
The entire amount of Mr. Lugo’s salary was accrued during the fiscal years 2010 and 2011.
(3)
The entire amount of Mr. Bridge’s salary was accrued during the fiscal years 2010 and 2011.
(4)
The entire amount of Ms. Story’s salary was accrued during the fiscal years 2010 and 2011.
(5)
In fiscal year 2011, each of Mr. Vance, Ms. Story and Mr. Lugo received 400,000 shares of our common stock valued at $0.05 per share as compensation for serving as a director of the Company.
 

 
 
14

 
Outstanding Equity Awards at Fiscal Year End
 
There were no outstanding equity awards held by our officers at March 31, 2010.

Director Compensation
 
The Company does not currently have any non-employee directors; in fiscal year 2011, each of Mr. Vance and Ms. Story received 400,000 shares of our common stock valued at $0.05 per share as compensation for serving as a director of the Company.

Employment Contracts
 
On January 1, 2009, the Company entered into an employment agreement with Mr. Larry Vance. Pursuant to the agreement, the Company will pay Mr. Vance an annual salary of $200,000. In the event of termination of Mr. Vance without cause or due to a change in control, the Company will pay Mr. Vance two years of annual salary. Mr. Vance’s options and vesting criteria are described above and in Note 8 to the attached consolidated financial statements. The term of this agreement is four years. 

On January 1, 2009, the Company entered into an employment agreement with Ms. Tami Story. Pursuant to the agreement, the Company will pay Ms. Story an annual salary of $125,000. In the event of termination of Ms. Story without cause or due to a change in control, the Company will pay Ms. Story two years of annual salary. Ms. Story’s options and vesting criteria are described above and in Note 8 to the attached consolidated financial statements. The term of this agreement is four years. 
 
 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information regarding ownership of the Company’s Common Stock as of March 31, 2011 by each person known by the Company to own beneficially more than five percent of the Common Stock and by all directors and officers and as a group:
 
Name and address of beneficial owner
 
Amount and nature of beneficial ownership (1)
 
Percent of class
Larry Vance
 
65,075,302 (2)
 
79 %
P.O. Box 763
       
Lakeside, MT 59922
       
         
Tami Story
 
17,312,922
 
21%
P.O. Box 763
       
Lakeside, MT 59901
       
         
All directors and officers
 
82,288,224
 
100%
 
___________________________
(1)           Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table. All shares are held directly with sole voting and investment power unless otherwise indicated.

(2)           Includes 4,439 shares held by Universal Search Technology, a private company owned by Mr. Vance.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 
In February 2007, Larry Vance and Tami Story, officers of the Company, together agreed to loan the Company $500,000. $170,000 of the net loan proceeds were received in March 2007 and the balance was received April 2007. The loan, along with accrued interest, is due February 26, 2008 and carries a 15% annual interest rate, compounded monthly. The loan is secured by 10,000,000 shares of the Company's common stock.

None of our directors are independent, as determined under the rules of Nasdaq.

 
15

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The following table presents fees, including reimbursements for expenses, for professional audit services rendered by Malone & Bailey for the audits of our annual financial statements and interim reviews of our quarterly financial statements for the years ended March 31, 2011 and March 31, 2010 and fees billed for other services rendered by MaloneBailey, LLP during those periods.
 
   
Fiscal 2011
   
Fiscal 2010
 
Audit Fees (1)
 
$
22,500
   
$
29,800
 
Audit Related Fees
 
$
-
   
$
-
 
Tax Fees
 
$
-
   
$
-
 
All Other Fees
 
$
-
   
$
-
 
Total
 
$
22,500
   
$
29,800
 


Policy Related to Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Accounting Firm

As we do not currently have an audit committee, our Board of Directors has a policy of pre-approving all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

 
 
 
 
 
 
 
 
 
 
 
 

 
 
16

 

ITEM 15.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
(a)(1) and (2)
Consolidated Balance Sheets as of March 31, 2011 and 2010
F-3
   
Consolidated Statements of Operations for the years ended March 31, 2011 and 2010
F-4
   
Consolidated Statement of Changes in Stockholders' Deficit for the years ended March 31, 2011 and 2010
F-5
   
Consolidated Statements of Operations for the years ended March 31, 2011 and 2010
F-6
   
Notes to consolidated financial statements
F-7 – F-12
 
 
(a)(3)
 
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).
   
3.2
Bylaws (Incorporated by reference to Exhibit 3.2 to the Registrants’ Form 10-K for the fiscal year ended March 31, 1995).
   
4.1
2007 Stock Compensation Plan (Incorporated by reference to Exhibit 4.1 to the Registrants’ Form S-8 Registration No. 333-146798 filed on October 18, 2007 ).
   
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 Probe 1 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).
   
 
 
 
17

 
 
 
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).
   
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).
   
10.22
Equipment Usage Agreement dated June 3, 1997, filed herewith.
   
16.1
Consent of Independent accountants re Registration Statement on Form No. S-1 (No. 333-66100). (Incorporated by reference to Exhibit 16.1 to the Registrant’s form 10-K for fiscal year ended March 31, 2004).
   
16.2
Statement under oath of Principal Executive Officer and Principal Financial Officer regarding facts and circumstances relating to exchange act filings. (Incorporated by reference to Exhibit 16.2 to the Registrant’s form 10-K for fiscal year ended March 31, 2004).
   
21.1.1
List of Subsidiaries (Incorporated by reference to Exhibit 21.1.1 to the Registrant's Form 10-K for fiscal year ended March 31, 2000)
   
 
 
 
18

 
 
   
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19

 

SIGNATURES

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

 
EARTH SEARCH SCIENCES, INC.
   
   
 
By: /s/ Larry Vance
 
Larry Vance
 
Chief Executive Officer
 
Date: July 14, 2011

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


 Signature
Title
   
/s/ Larry Vance
Chief Executive Officer and Director
Larry Vance
 (Principal Executive Officer)
Date:  July 14, 2011
 
   
   
/s/ Tami Story
Secretary Treasurer
Tami Story
 (Principal Financial Officer)
Date:  July 14, 2011
 
 
 


 
 
 
 
 
 
 
20