UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-K

 

  

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED: DECEMBER 31, 20092015

OR

  

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 333-04066

 

GEOSPATIAL HOLDINGS, INC.CORPORATION

(Exact name of registrant as specified in its charter)

 

 

NEVADA
NEVADA87-0554463

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

229 Howes Run Road, Sarver, PA 16055

(Address of principal executive offices)

(724) 353-3400

(Registrant’s telephone number, including area code)

  

(Former name, former address and former fiscal year, if changed since last report)

 

 

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YesYes  No¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

YesYes  ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YesYes  x  No¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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.x

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

  

Large accelerated filer¨ Accelerated filer¨ Non-accelerated filer¨ Smaller reporting Companyx
  (Do not check if a smaller reporting company) 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

YesYes  ¨ Nox

Aggregate market value of voting common stock held by non-affiliates of the registrant at June 30, 2009: $4,646,878.2015: $16,771,360. For purposes of this calculation, executive officers, directors, and persons holding in excess of 5% of the outstanding shares of common stock are considered affiliates.

Number of shares of common stock outstanding as of April 14, 2010: 43,385,623 (which amount includes 1,575,000 outstanding shares of Series A Convertible Preferred Stock on an as converted basis).4, 2016: 143,336,073.

Documents incorporated by reference: None.

 

  

GEOSPATIAL CORPORATION


GEOSPATIAL HOLDINGS, INC.

TABLE OF CONTENTS

 

  Page

PART I:

 
PART I: 

Item 1.

 
Item 1.Business3

Item 1A.

Risk Factors7
Item 2.Properties16
Item 3.Legal Proceedings16
Item 4.Mine Safety Disclosures16
 
Risk FactorsPART II: 8

Item 2.

 Properties17

Item 3.

Legal Proceedings17

Item 4.

Reserved

17

PART II:

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities17
Item 6.Selected Financial Data18

Item 6.

Selected Financial Data20

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations2019

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk2322

Item 8.

Financial Statements and Supplementary Data2423

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure5453

Item 9A(T).

9A.
Controls and Procedures53
Item 9B.Other Information53
 54

Item 9B.

PART III:
 Other Information
 54

PART III:

Item 10.

Directors, Executive Officers, and Corporate Governance5554

Item 11.

Executive Compensation5654

Item 12.

Security Ownership of Certain Beneficial Owners and Management5957

Item 13.

Certain Relationships and Related Transactions6158

Item 14.

Principal Accountant Fees and Services6159

Item 15.

Exhibits and Financial Statement Schedules60

 
62


SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

The statements set forth in this Annual Report on From 10-K, and in particularunder the “Business,captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Result of Operations,” and “Risk Factors” sections“Business,” and other statements included elsewhere in this Annual Report onand Form 10-K, which are not historical, constitute “Forward Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, including statements regarding the expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to our business or our subsidiaries or our management, are intended to identify Forward-Looking Statements. We intend that all Forward-Looking Statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These Forward-Looking Statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance. Forward-Looking Statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements.

Because our common stock is considered to be a “penny stock”, the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995 do not apply to such Forward Looking Statements.

Our business involves various risks, including, but not limited to, our ability to implement our business strategies as planned in a timely manner or at all; our lack of operating history; our ability to protect our proprietary technologies; our ability to obtain financing sufficient to meet our capital needs; and our inability to use historical financial data to evaluate our financial performance. See Risk Factors“Risk Factors” beginning on page 8.7.

PART I

 

Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statement. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligations to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of future events or developments. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I

Item 1.

Item 1.Business.

Business.

Company Overview

The Registrant (formerly known as Kayenta Kreations, Inc.)Company was incorporated on December 26, 1995 in the state of Nevada. Geospatial Mapping Systems,Nevada as Kayenta Kreations, Inc. (“GMSI”) was incorporated on May 26, 2006In connection with a merger in the State of Delaware. On April 25, 2008, the Registrant merged with GMSICompany changed its name to form Geospatial Holdings, Inc., and in 2013, changed its name to Geospatial Corporation (“we” or the “Company”). Upon completion of the merger, the Company adopted the business of GMSI, and GMSI becameGeospatial Mapping Systems, Inc. is the Company’s wholly-owned subsidiary and operating unit.

On May 5, 2008, the Company created Geospatial Pipeline Services, LLC, a wholly-owned subsidiary that operates in the business of pipeline field services. On October 16, 2009, we acquired Utility Services and Consulting Corporation, a newly-formed company that operates in the business of locating underground utility conduits.

General DevelopmentDescription of the Business

We areprovide proven cloud-based geospatial solutions to accurately locate and digitally map in 3D underground pipelines and other infrastructure. Our professional staff offers the expertise, ability and technologies required to design and execute innovative, challenging solutions that push the Company to the forefront of the cloud-based infrastructure mapping industry. Geospatial Corporation is steadfastly committed to our mission – “To provide our clients with an emerging pipeline management service company that is focused on developingunparalleled 3D understanding of the world’s underground infrastructure”.

We carefully listen to each client’s precise needs and producingprovide unique and innovative technologiestechnological solutions to locate, map and manage our clients’ critical infrastructure data. Our clear communication and time-tested technical expertise enable us to think outside the box as we provide underground infrastructure mapping solutions to benefit our clients and the community.

We provide two types of services which offer technically advanced solutions for managing pipeline infrastructure assets. Our strategy is to combine innovative pipelineour clients, data acquisition and mapping technologydata management. Data acquisition entails utilizing various technologies to accurately locate the exact position and depth of underground pipelines and conduits along with professionalinformation on existing aboveground infrastructure. We provide data management services in which we securely manage this critical infrastructure data through the licensing of our cloud-based GeoUnderground GIS (Geographic Information System) software.

Product Development and technically superior pipeline field servicesIntroduction

The GIS technology and mapping industry is characterized by rapid technological change in computer hardware, operating systems and software. In addition, consumers’ requirements and preferences rapidly evolve, as do their expectations of the performance of their software and the accuracy of the collected data managed by their software. To keep pace with these changes, we maintain a vigorous program of new product development to build strong client relationshipsaddress demands in the pipeline service industry. Wemarketplace for our products. Just as the transition from mainframes to personal computers transformed the industry thirty years ago, we believe that by buildingour industry is undergoing a multi-disciplined team, consisting of construction professionals, engineerssimilar transition from the personal computer to cloud, social and Geographic Information System (“GIS”)mobile information management and IT specialists, project managers, estimators and field technicians, we can mobilize quickly and efficiently for any project. Our field service professionals are available to provide economic data collection and mapping solutions to municipalities, utilities, engineering companies, contractors, pipeline operators, government agencies, industrial concerns and military facilities worldwide.sharing.

We believe that ownersdedicate considerable technical and operatorsfinancial resources to research and development to further enhance our existing products and to create new software products and data acquisition technologies. Our software is primarily developed internally, however, we also use independent firms or contractors to perform some of the world’s pipeline infrastructure are faced with competitive pressures and regulatory constraints which are requiring them to manage their pipeline assets in a more efficient and responsible manner. We expect to provide innovative, proprietary technologies and

our product development activities.

services which offer technically enhanced solutions to municipalities, utilities, and oil and gas pipeline operators in the United States and abroad for managing pipeline infrastructure assets.

We arespent $108,264 and $193,637 on research and development during the exclusive licensee of the proprietary Smart Probe™ technology throughout North America, South America and Australia and, as a result, we believe we are uniquely positioned to emerge as a global leader in the use of technology to gather, manage and evaluate pipeline infrastructure data. In addition to our Smart Probe™ technology, our professional field services personnel provide related pipeline services such as our “non-destructive excavation” technologies which allow us to excavate and expose underground utilities of all types without the potential danger of damaging the pipeline or surrounding utilities, pipeline video inspection, pipeline cleaning and post inspection pipeline evaluation. We intend to leverage our exclusive technology and our customer service in order to grow into a global leader in pipeline data acquisition and management.

Proprietary Technology

Our Smart Probe™ technology provides accurate X, Y and Z axes centerline mapping of pipeline infrastructure and seamlessly integrates open format data into three dimensional GIS or Computer Aided Design (“CAD”) databases. GIS is a collection of computer hardware, software, and geographic data for capturing, managing, analyzing, and displaying all forms of geographically referenced information.

Using the Smart Probe™ technology, our mapping surveys measure and map pipelines in three dimensions and produce a precise depiction of its plan view and profile. Multiple gyroscopic inertial measurement units (“IMUs”) within the Smart Probe™ measure 800 angular and linear velocity changes per second in the X, Y and Z axes as the unit moves through the pipeline. Our Smart Probe™ can map most pipelines with a high degree of positional accuracy by establishing reference points with known geographical coordinates and Global Positioning System (“GPS”) data at the start and end of the run, and on very long runs at known intervals between the two. In addition to the unique technological mapping advances of this technology, the Smart Probe™ can function un-tethered to any communication cable because all data will be stored within the unit. This feature provides for greater flexibility in data imaging because there are no depth limitations associated with the Smart ProbeTM. Data acquired and stored within the unit can be uploaded onto a laptop computer or PC and immediately viewed and evaluated in the field. At this stage, digital “plan and profile” sectional drawings of the pipeline surveyed can be produced, overlaid onto an existing plan view of the site and printed immediately in the field. Alternatively, this digital data can be transferred via the internet to any location in the world where it can be evaluated by associated decision makers or stored and entered into the appropriate GIS/CAD database by the program administrator for future reference and use.

License and Distribution Agreements

In August 2006, GMSI entered into an exclusive and perpetual agreement to license the patent pending Smart Probe™ technology from Reduct NV, a Belgian company (“Reduct”) and the developer of the technology (as amended from time to time, the “Original Reduct License Agreement”). The Original Reduct License Agreement granted the Company exclusive control over the rights to the Smart Probe™ technology throughout North America, South America and Australia.

On December 15, 2009, the Company, Reduct, and Delta Networks Ltd., SA (“Delta”), a Luxembourg company and the owner of substantially all of the capital stock of Reduct, entered into the Amended and Restated License and Distribution Agreement (as amended, the “Amended Reduct License Agreement”), which, upon its effectiveness, will supersede and replace the Original Reduct License Agreement.

The Amended Reduct License Agreement will become effective upon an advance payment by the Company for the purchase of Smart Probe™ equipment totaling $4,950,000 (the “Advance Payment”). The Company paid $2,500,000 toward the Advance Payment in March, 2010. The balance of the Advance Payment is due by April 30, 2010. The Amended Reduct Agreement has an initial term of three years and is renewable at the discretion of the Company for successive three-year terms. The Amended Reduct License Agreement restructures the payment and minimum purchase requirements that exist under the Original Reduct License Agreement. Under the Amended Reduct License Agreement, the Company must

make a license payment of $3,000,000 byended December 31, 2010. In addition, the Company must make minimum quarterly payments totaling $10,950,000, $11,750,000,2015 and $6,612,500 in 2010, 2011, and 2012,2014, respectively. If the Amended Reduct License Agreement is renewed, this minimum purchase requirement will increase by 15% annually over the prior year beginning in 2013.

Pursuant to the Amended Reduct License Agreement, the Company granted to Delta warrants to purchase 3,000,000 shares of the Company’s common stock at $0.50 per share until December 31, 2012, and warrants to purchase 500,000 shares of the Company’s common stock at $0.425 per share until December 31, 2013.

While the Company’s rights to the Smart Probe™ technology are still governed by the Original Reduct License Agreement and while the Company has failed to satisfy certain of its payment obligations thereunder, Reduct has agreed to forbear from enforcing any rights or remedies it may have upon a default by the Company under the Original License Agreement until the earlier of April 30, 2010 or the receipt by Reduct of the remaining Advance Payment.

Sales and Marketing Efforts

Along with GeoUnderground, we now provide a cloud-based infrastructure management solution to our clients, which include utilities, municipalities, government agencies, and other facilities. Over the past few years, due to financial constraints, the majority of our sales have resulted from word-of-mouth referrals. We have not had a formal marketing or sales program over the past five years.

We intend to establish Regional Technical Sales Managers (“RTSMs”) in various sales regions across the United States, Canada, the Middle East, and Australia. Each RTSM will report to the Company’s Executive Vice President of Business Development and be responsible for developing and implementing a sales program which meets our specific targets. As business is developed in each sales region, we expect field technicians to be assigned to work under each RTSM to assist the RTSM in performing pipeline mapping services. The Company will attempt

We intend to establish strong strategic partnerships to market the company’s technologies in Mexico, the Caribbean and the balance of Latin America.

To assist the RTSMs in developing their sales regions, we are developing an extensive data base of approximately 30,000 potential customers, which includes municipalities, engineers, GIS consultants, pipeline operators and contractors. We expect to use this potential customer list in order to introduce and promote interest in the relevant markets for our Smart Probe™ proprietary technology. We will engage in direct-sale marketing efforts, whereby we will require that each of our RTSMs establish relationships and schedule groupwebinar meetings with GIS and utilities managers, engineering companies, major utility companies and major utility contractors within each of their respective sales regions in order to demonstrate the Smart Probe™ technologyour data acquisition technologies, GeoUnderground, and its associated benefits. We also willintend to demonstrate the use and functionality of the Smart Probe™GeoUnderground at numerous national and regional trade shows sponsored by related industry groups. In addition, the Company expectswe will expect each RTSM to generate sales leads through electronic mail marketing.social media and webinars.

FundraisingFinancing

In an effort to raise capital, the Company has retained Convertible Capital as its financial advisor. Subsequent to

From January 1, 2014 through December 31, 2009,2015, we raised approximately $3.2 million in cash through the Company sold sharesprivate sale of itsour common stock and exercises of warrants to purchase common stock and Series B Convertible Preferred Stock. In addition, during that period, we raised approximately $1.8 million in cash through the issuance of notes payable, converted approximately $1.7 million of our liabilities to common stock, and issued common stock for an aggregate sale price of approximately $9.7 million, including the conversion of $1,000,000 of indebtednessservices totaling $82,500. We intend to continue to sell our Chief Executive Officer. The proceeds of these fundraising efforts will be usedcommon stock and Series C Convertible Preferred Stock in private transactions to fund our general working capital needs.

Strategic Alliances

On March 2, 2010, the Company entered into a Strategic Advisory Agreement with Ridge Global, LLC (“Ridge”) and Pace Global Energy Services, LLC (“Pace”) pursuant to which Pace and Ridge agreed to provide strategic advisory services to the Company, including assisting the Company and Convertible Capital in raising capital and assisting the Company in its business development efforts. As part of this strategic alliance, Thomas J. Ridge, president and CEO of Ridge, as well as the first Secretary of Homeland Security and former governor of Pennsylvania, and Timothy Sutherland, Chairman and CEO of Pace, agreed to join Geospatial Holdings’ Board of Directors.

Ability to Develop and Protect Patents and Other Intellectual Property and Licenses

Our success, competitive position,

We maintain a program to legally protect our investment in technology through a combination of patent, copyright, trademark and future revenues, if any, dependtrade secret protections, confidentiality procedures and contractual provisions. The nature and extent of legal protection associated with each such intellectual property right depends on, among other things, the type of intellectual property right and the given jurisdiction in part onwhich such right arises. We believe our ability, and that of the licensors of our major technology, to obtain and successfully leverage intellectual property rights coveringare valuable and important to our technology, know-how, methods, processes,business.

Nonetheless, our intellectual property rights may not be successfully asserted in the future or may be invalidated, circumvented or challenged. Enforcement of intellectual property rights against alleged infringers can sometimes lead to costly litigation and counterclaims. Our inability to protect our trade secrets,proprietary information could harm our business.

We retain ownership of all software we develop. All software is licensed to prevent others from usingusers. These licenses contain restrictions on duplication, disclosure and transfer.

We believe that because of the limitations of laws protecting our intellectual property and the rapid, ongoing technological changes in data collection and GIS software industries, we must rely principally upon data acquisition enhancements, GIS software engineering and marketing skills to operate without infringing the intellectual property of third parties. United Statesmaintain and international patent applications filed by Reduct covering the Smart Probe™ technology are currently pending.The Company has filed three additional United States and international patent applications which are currently pending.Our patent strategy includes obtaining patents, where possible, on methods of manufacture, compositions of matter and methods of use. We also rely on know-how, continuing technological innovation, licensing and partnership opportunities to develop and maintainenhance our competitive market position. Lastly, we monitor third parties for activities that may infringe on our intellectual property, as well as the progression of third party patent applications that may cover our products or methods and thus, potentially, interfere with the development of our business.

Customers

To date, we have successfully completed over 50190 projects for a varied group of clients including contractors, municipalities, government agencies, utilities, telecoms, and engineering companies. We are not dependent on one or a few major customers.

Government Contracts

Some

We expect that some of our contracts arewill be with federal and state government entities. These contracts may be subject to various procurement laws and regulations. If we do not comply with these laws and regulations, we may be prohibited from completing our existing government contracts or suspended from government contracting and subcontracting for some period of time. In addition, through our government contracts, we are subject to routine U.S. federal, state and local government audits. If audit findings are unfavorable, we could experience a reduction in our profitability. We are subject to audits for several years after payments for services have been received. Based on these audits, government entities may adjust or seek reimbursement for previously paid amounts.

Competition

The markets for our products and services are highly competitive and subject to rapid change. We strive to increase our competitive standing by investing in research and development, allowing us to enhance our software and data collection capabilities. We also compete by investing in marketing and sales to more effectively reach new and existing customers.

Our business is highly competitive with respect to pipeline asset management services. While we believe that our proprietary technologies provide advantages to our clients, we will compete with numerous public and private engineering firms that provide some or all of the services that we provide. Our competitors range from large national and international firms, such as Parsons Brinkerhoff Inc., CH2M Hill Companies, PBS&J, Tetra Tech, Dycom Industries, Inc., Consolidated Utility Services, Inc., URS Corporation and CDM, to a vast number of smaller, more localized firms.

The software industry has limited barriers to entry, and the availability of computing power with continually expanding performance at progressively lower prices contributes to the ease of market entry. The GIS industry is presently undergoing a platform shift from the personal computer to cloud and mobile computing. This shift lowers the barriers to entry and poses a disruptive challenge to established GIS software companies. In the energy (oiladdition, some of our competitors in certain markets have greater financial, technical, sales and gas) industry there are several large, established pipeline service companies that have various types of smart pigging technologies such as GE Pipeline Systems, Tuboscope, Rosen, TD Williamsmarketing and Enduro. While a fewother resources than we do. Because of these companies have pipeline mapping capabilities, they are mainly focused on pipeline condition assessment which requires larger, more sophisticated and more expensive pigging equipment than is required by our Smart Probe™ technology.

Theother factors, competitive conditions in our business relateindustry are likely to continue to intensify in the naturefuture. Increased competition could result in price reductions, reduced net revenue and profit margins and loss of the contracts being pursued. Public sector contracts, consisting mostlymarket share, any of contracts with federal and state governmental entities, are generally awarded through a competitive process, subject to the contractor’s qualifications and experience. Our business employs cost estimating, scheduling and other techniques for the preparation of these competitive proposals. Private sector contractors compete primarily on the basis of qualifications, quality of performance, available technologies and price of services. Most private and public sector contracts for professional services are awarded on a negotiated basis.which could harm our business.

We believe that the principal competitive factors (in the order of importance) in the areas of services we offer are: (i) quality of available technologies and software, (ii) quality of service, (iii) reputation, (iv) experience, (v) technical proficiency, (vi) local geographic presence, and (vii) cost of service. We believe that we are

well-positioned well positioned to compete effectively by emphasizing the quality and proprietary nature of our technologies and the quality of services that we offer. We are also dependent upon the availability of staff and our ability to recruit qualified employees.management professionals and technicians. A shortage of qualified technical professionals currently exists in the engineeringengineering/GIS industry in the United States.

Seasonality

It is possible that our contract revenue and income from operations may be slightly lower for our first fiscal quarter than for the remaining quarters due to the effect of winter weather conditions, particularly in the Mid-Atlantic and Midwest regions of the United States. Our GIS/data management activities should not be as directly impacted by seasonal weather conditions.

Personnel

We believe that our success will greatly depend on our ability to identify, attract and retain capable employees. As of December 31, 2009,April 4, 2016, we had 60five employees, all of whom are full-time employees. We believe that our relations with these employees are good. None of our employees are represented by a labor union or otherwise represented under a collective bargaining agreement.

Environmental Compliance

As our services are applicable to a large number of pipeline industry segments, we will be working, in many cases, in and around environmentally-sensitive areas, and with pipeline materials that may require specific environmental training and strict environmental procedures and guidelines. Failure to comply with these federal, state, or local environmental regulations could result in substantial penalties or fines. We have not incurred any material costs of environmental regulations during 2015 or 2014.

The enactment of various federal, state, and local environmental regulations, and variations in federal, state, and local funding for environmental compliance and enforcement of these regulations may have an effect on the capital expenditures of our clients, and thus may affect our ability to generate revenue.

Description of Property

Our headquarters office is located in Sarver, Pennsylvania. This building, which we lease from the Company’s Chairman/CEO, has approximately 3,200 square feet of office space and is used by our corporate and operations staff. This property is rented under a month-to-month lease at $6,500 per month.

We believe that the Company’s existing facilities are adequate to meet its business needs for the foreseeable future.

Legal Proceedings

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. We believe that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or the results of operations of the Company.

Item 1A.Item 1A.Risk Factors.

RISK FACTORS

You should carefully consider the following risk factors and all other information contained in this prospectus. Our business and our securities involve a high degree of risk. The following summarizes material risks relating to our business that you should carefully consider. The risks described below are not the only risks that we face.and our common stock. If any of the following risks actually occur, they would likely harm our business, financial condition, and results of operations.

RISK FACTORS RELATED TO THEOUR BUSINESS

Our business is at an early stage of growth and we may not be able to develop the customer base necessary for success.

Our business is still at an early stage of growth. We are still in the early stages of hiring and training our sales force and work force, and identifying and building customer relationships for the services that we expect to offer. We will have to carry out our business plan and generate significant revenues to achieve and sustain profitability in the future. Achieving and maintaining profitability is dependent upon certain factors which are outside of our control, including changes in business conditions, competition, and changes in applicable regulations. We may not be able to achieve our development goals in an efficient manner, or at all, which could have a material adverse effect on our business, financial condition or results of operations in the future.

We have a limited operating history.

The Company currently has a limited operating history. The Company will have to carry out its business plan and generate significant revenues to achieve and sustain profitability in the future. Achieving and maintaining profitability is dependent upon certain factors which are outside of the Company’s control, including changes in business conditions, competition, and changes in applicable regulations.

If we fail to achieve effectiveness of the Amended Reduct License Agreement and if we fail to satisfy our obligations thereunder, we may lose the rights to the key technology on which our business depends.

Our business depends largely on patent pending Smart Probe™ technology that we license from Reduct, the developer of the technology. Currently, we are the exclusive licensee of the Smart Probe™ technology in North America, South America, and Australia pursuant to the Original Reduct License

Agreement which remains in effect until the Amended Reduct License Agreement that we entered into on December 15, 2009 becomes effective. We have failed to satisfy certain payment and other obligations under the Original Reduct License Agreement. Reduct has agreed to forbear from enforcing any rights or remedies it may have upon a default by the Company under the Original License Agreement until the earlier of April 30, 2010 or the receipt by Reduct of the remaining Advance Payment pursuant to the Amended Reduct License Agreement.

The Amended Reduct License Agreement will become effective upon the Company making the Advance Payment for the purchase of Smart Probe™ equipment totaling $4,950,000. The Company paid $2,500,000 toward the Advance Payment in March, 2010. The balance of the Advance Payment is due by April 30, 2010. If we fail to make the remaining Advance Payment of $2,450,000 by April 30, 2010, the Amended Reduct License Agreement may not become effective and we could lose our exclusive license to the Smart Probe™ technology.

In addition, even if we are able to make the remaining Advance Payment by April 30, 2010, causing the effectiveness of the Amended Reduct License Agreement, we will then be obligated to make various payments and minimum purchases under the Amended Reduct License Agreement in order to satisfy our obligations thereunder. Under the Amended Reduct License Agreement, the Company must make a license payment of $3,000,000 by December 31, 2010. In addition, the Company must make minimum quarterly payments totaling $10,950,000, $11,750,000, and $6,612,500 in 2010, 2011, and 2012, respectively. If the Amended Reduct License Agreement is renewed, this minimum purchase requirement will increase by 15% annually over the prior year beginning in 2013. If we fail to make any of these payments or if Reduct believes that we have failed to meet any of our other obligations under the Amended Reduct License Agreement, Reduct could seek to limit or terminate our license rights, which could lead to costly and time-consuming litigation and potentially, a loss of our exclusive license rights. During the period of any such litigation, our ability to carry out the development of client relationships and provide pipeline management services could be significantly and adversely affected.

Our independent auditor has expressed doubts about our ability to continue as a going concern.

Our Company has incurred net losses since inception. Our operations and capital requirements have been funded by sales of our common stock and preferred stock, issuance of notes payable, and advances from our chief executive officer. At December 31, 2009,2015, our current liabilities exceedexceeded our current assets by $3,862,583.$4,885,637, and our total liabilities exceeded our total assets by $4,451,759. Those factors as well as our commitments under the Original Reduct License Agreement and the Amended Reduct License Agreement create uncertainty about our ability to continue as a going concern.

We may have difficulty meeting our future capital requirements. If additional capital is not available, we may have to curtail or cease operations.

We will require significant capital resources in order to profitably grow our business. We estimate that we will be able to conduct our planned operations for approximately three months using currently-available capital resources. We currently use funds in our operations at a rate of approximately $150,000 per month. We anticipate that we will need at least $2 million to fund our planned operations for the next twelve months.

We may seek to obtain such capital resources through strategic collaborations, public or private equity or debt financings or other financing sources. The capital we need may not be available on favorable terms, or at all. Additional equity financings could result in significant dilution to our stockholders. If sufficient capital is not available to us, we may be required to reduce our workforce, reduce the scope of our marketing efforts, and/or customer service, sell all or part of our assets or terminate operations.

If we are unable to adequately protect our proprietary technology from infringement.appropriation or imitation by competitors, our business, financial condition and results of operations may be adversely affected.

Our business development will depend on a combination of patents, licensing agreements and unpatented proprietary know-how and trade secrets to establish and protect our intellectual property rights. To the extent that we license intellectual property from third parties, we will also have to rely in part on their measures to protect our intellectual property rights. However, these measures may not afford complete protection of our intellectual property, and it is possible that third parties may copy or otherwise obtain and use our proprietary information and technology without authorization or otherwise infringe on our intellectual property rights because of acts or omissions of the licensee. We cannot assure you that any of our competitors will not independently develop equivalent or superior know-how, trade secrets or proprietary processes. If we are unable to maintain the proprietary nature of our technologies, our expected profit margins could be reduced as competitors imitating our productstechnologies could compete aggressively against us in the pricing of certain products andservices. As a result, our business, financial condition and results of operations may be materially adversely affected.

In addition, several of our business markets and customers are expected to be located outside of the United States. The laws protecting intellectual property in some countries may not provide adequate protection to prevent our competitors from misappropriating our intellectual property.

We may have difficulty meeting our future capital requirements.

Since our inception, the Company’s activities have largely consisted of organizational and financing activities. We will needIf we are not able to obtain significant capital resources from sources including equity/debt financings in order to profitably grow our business. Additional financing through strategic collaborations, public or private equity financings or other financing sources may not be available on favorable terms, or at all. Additional equity financing could result in significant dilution to our shareholders. Further, if additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish some of our rights with respect to our technologies. If sufficient capital is not available we may be required to reduce our workforce, reduce the scope of our marketing efforts, and/or customer service, any of which could have a material adverse impact on our financial condition or business prospects.

We must adaptrespond adequately to technological advances in the pipeline services industry.industry, our business, reputation, results of operations and financial condition may be adversely affected.

We compete in an industry that has seen the development of increasingly advanced technology to deliver state-of-the-art pipeline management service solutions to a variety of end-users. Our success may depend on our ability to adaptrespond to technological changes in the industry. If we are unable to adaptrespond to technological change, timely develop and introduce new products, or enhance existing products in response to changing market conditions or customer requirements or demands, we will not be able to serve our business and results of operationsclients effectively. Moreover, the cost to modify our services, products or technologies in order to adapt to these changes could be materiallysubstantial and adversely affected.we may not have the financial resources to fund these expenses. We cannot assure you that we will be able to replace outdated technologies, replace them as quickly as our competitors or develop and market new and better products and services in the future.

We compete with many other resource providers and our failure to compete effectively with these providers may be subject to litigation that will be costly to defend or pursueadversely affect our business, results of operations, financial condition and uncertain in its outcome.future prospects.

Our business may bring us into conflictis characterized by competition for contracts within the government and private sectors in which service contracts are often awarded through competitive bidding processes. We compete with our licensor or others with whoma large number of other service providers who offer the principal services that we have contractual or other business relationships, or withoffer. Many of our competitors or others whose interests differ from ours. Ifhave significantly greater marketing and sales resources than we are unabledo. In this competitive environment, we must provide technical proficiency, quality of service and experience to resolve these conflicts on terms that are satisfactoryensure future contract awards and revenue and profit growth.

Our ability to all parties, we may become involved in litigation brought by or against us. This litigation could be expensiverecruit, train and may requireretain professional personnel of the highest quality is a significant amount of management’s time and attention, at the expense of other aspects of our business. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require uscompetitive necessity. Our future inability to pay damages, enjoin us from certain activities, or otherwisedo so would adversely affect our legal or contractual rights, which could have a significant adverse effect oncompetitiveness.

Services in our business.data acquisition and pipeline data management markets are performed by our staff of technical professionals, field services, and management personnel. A shortage of qualified technical professionals currently exists in the engineering and energy services industries in the United States and foreign markets. Our future growth requires the effective recruiting, training and retention of well-qualified personnel. Our inability to do so would adversely affect our business performance and limit our ability to perform new contracts.

Loss of key individuals could disrupt our operations and harmhave a material adverse effect on our business.

Our success depends, in part, on the efforts of certain key individuals, including the members of our senior management team. Although we do not anticipate that we will have to replace any of these individuals in the near future, theThe loss of the services of any of our key employees could disrupt our operations and have a material adverse effect on our business.

Changes and fluctuations in government spending priorities could materially affect our future revenue and growth prospects.

Our primary customers, which comprise a substantial portion of our revenue and backlog, include

We expect that agencies of the U.S. federal government, and state and local governments and government agencies thatand government contractors, will be among our primary customers. These governments and agencies depend on funding or partial funding provided by the U.S. federal government. Consequently, any significant changes and fluctuations in the government’s spending priorities as a result of policy changes or economic downturns may directly affect our future revenue streams. Legislatures may appropriate funds for a given project on a year by year basis, even though the project may take more than one year to perform. As a result, at the beginning of a project, the related contract may only be partially funded, andwith additional funding is committed only as appropriations are made in each subsequent year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, rising raw material costs, delays associated with a lack of a sufficient number of government staff to oversee contracts, budget constraints, the timing and amount of tax receipts, and the overall level of government expenditures. Additionally, reduced spending by the U.S. government may create competitive pressure within our industry which could result in lower revenues and margins in the future.

Unpredictable economic cycles or uncertain demand for our pipeline data management capabilities and related services could cause our revenues to fluctuate or contribute to delays or the inability of customers to pay our fees.

Demand for our pipeline data management and other services are affected by the general level of economic activity in the markets in which we operate, both in the U.S. and internationally. Our customers, particularly our private sector customers, and the markets in which we compete to provide services, are likely to experience periods of economic decline from time to time. Adverse economic conditions may decrease our customers’ willingness to make capital expenditures or otherwise reduce their spending to purchase services, which could result in diminished revenues and margins for our business. In addition, adverse economic conditions could alter the overall mix of services that our customers seek to purchase, and increased competition during a period of economic decline could result in us accepting contractual terms that are less favorable to us than we might be able to negotiate under other circumstances. Changes in our mix of services or a less favorable contracting environment may cause our revenues and margins to decline. Moreover, our customers may experience difficult business climates from time to time and could delay or fail to pay our fees as a result.

Our ability to recruit, train and retain professional personnel of the highest quality is a competitive necessity. Our future inability to do so would adversely affect our competitiveness.

Our contract obligations in our pipeline data management markets are performed by our staff of well qualified engineers, technical professionals and management personnel. A shortage of qualified technical professionals currently exists in the engineering industry in the U.S. Our future growth potential requires the effective recruiting, training and retention of these employees. Our inability to retain these well qualified personnel and recruit additional well qualified personnel would adversely affect our business performance and limit our ability to perform new contracts.

If we are unable to accurately estimate and control our contract costs, then we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.

It is important for us to control our contract costs so that we can maintain positive operating margins. Under our fixed price contracts, we receive a fixed price regardless of what our actual costs will be. Consequently, we realize a profit on fixed price contracts only if we control our costs and prevent cost overruns on those contracts. Under our time-and-materials contracts, we are paid for labor and equipment at negotiated hourly billing rates and for other expenses. Profitability on our contracts is driven by billable headcount and our ability to estimate and manage costs. Under each type of contract, if we are unable to control costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.

Due to the nature of the work we perform to complete pipeline data management contracts, we are subject to potential liability claims and contract disputes.disputes, and our inability to resolve such claims and disputes may result in profit reductions and reduced cash flows.

Our pipeline data management contracts often involve projects where design, construction, system failures or accidents could result in substantially large or punitive damages for which we could have liability. Our operations can involve professional judgments regarding the planning, design, development, construction, operations and management of facilities and public infrastructure projects. Although we are adopting a range of insurance, risk management safety and risk avoidance programs designed to reduce potential liabilities, there can be no assurance that such programs will protect us fully from all risks and liabilities.

We may also experience a delay or withholding of payments for services due to performance disputes. If we are unable to resolve these disputes and collect these payments, we would incur profit reductions and reduced cash flows.

If we miss a required performance standard, fail to timely complete, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability.

We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet the required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If thea project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling thethat project. In addition, performance of projectsa project can be affected by a number of factors beyond our control, including unavoidable delays from weather conditions, changes in the project scope of services requested by the clientsclient or labor or other disruptions. In some cases, should we fail to meet required performance standards, we may also be subject to agreed uponagreed-upon financial damages, which are determined by the contract.damages. To the extent that these events occur, the total costs of the project could exceed our estimates or, in some cases, we could incur a loss on athe project, which may reduce or eliminate our overall profitability.

We aremay be subject to procurement laws and regulations associated with our government contracts. If we do not comply with these laws and regulations, we may be prohibited from completing our existing government contracts or suspended from government contracting and subcontracting for some period of time.

Our compliance with the laws and regulations relating to the procurement, administration and performance of our government contracts is dependent upon our ability to ensure that we properly design and execute compliant procedures. Our termination from any larger government contracts or suspension from future government contracts for any reason would result in material declines in our expected revenue. Because U.S. federal laws permit government agencies to terminate a contract for convenience, the U.S. federal government may terminate or decide not to renew our contracts with little or no prior notice.

We are subject to routine U.S. federal, state and local government audits related to our government contracts. If audit findings are unfavorable, we could experience a reduction in our profitability.

Our government contracts are subject to audit. These audits may result in the determination that certain costs claimed as reimbursable are not allowable or have not been properly allocated to government contracts according to federal government regulations. We are subject to audits for several years after payments for services have been received. Based on these audits, government entities may adjust or seek reimbursement for previously-paid amounts.

Our potential involvement in partnerships and joint ventures and theour use of subcontractors may expose us to additional legal and market reputation damages.

Our methods of delivery may include the use of partnerships, subcontractors, joint ventures and other ventures. If our partners or subcontractors fail to satisfactorily perform their obligations as a result of financial or other difficulties, we may be unable to adequately perform or deliver our contracted services. Under these circumstances, we may be required to make additional investments and provide additional services to ensure the adequate performance and delivery of the contracted services. Additionally, we may be exposed to claims for damages that are a result of a partner’s or subcontractor’s performance. We could also suffer contract termination and damage to our reputation as a result of a partner’s or subcontractor’s performance.

We are engagedmay be subject to litigation that will be costly to defend or pursue and uncertain in highly competitive markets that pose challenges to continued revenue growth.its outcome.

Our business is characterizedmay bring us into conflict with customers, vendors, investors, or others with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours. If we are unable to resolve these conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by competition for contracts withinor against us. This litigation could be expensive and may require a significant amount of management’s time and attention, at the government and private sectors in which service contracts are often awarded through competitive bidding processes. We compete with a large numberexpense of other service providers who offer the principal servicesaspects of our business. The outcome of litigation is always uncertain, and in some cases could include judgments against us that we offer. In this competitive environment, we must provide technical proficiency, quality of service and experiencerequire us to ensure future contract awards and revenue and profit growth.

pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business.

We use the percentage-of-completion method of accounting for many of our projects. This method may result in volatility in stated revenues and profits.

Our revenues and profits for many of our contracts are recognized ratably as those contracts are performed. This rate is based primarily on the proportion of labor costs incurred to date to total labor costs projected to be incurred for the entire project. This method of accounting requires us to calculate revenues and profit to be recognized in each reporting period for each project based on our predictions of future outcomes, including our estimates of the total cost to complete the project, project schedule and completion date, the percentage of the project that is completed and the amounts of any probable unapproved change orders. Our failure to accurately estimate these often subjective factors could result in reduced profits or losses for certain contracts.

Some of our services may be subject to government regulation, which could lead to higher expenses and reduced profitability.

State laws vary on data collection. Some states require that data collectors must have a surveyor’s license. These regulations may impair our ability to operate in some jurisdictions, or may require us to obtain surveyor licenses, which will result in higher expenses and reduced profitability.

We have a limited accounting and administrative staff, and anticipate the need to hire additional staff. Our failure to do so could lead to internal control deficiencies.

Due to our financial condition, we have been limited in our ability to fully staff our accounting and administrative departments. We intend to expand our accounting and administrative staff. Our success will depend on the effective recruitment, training, and retention of qualified, competent accounting and administrative professionals. Failure to adequately supplement our accounting and administrative staff could lead to internal control deficiencies.

We have not filed all our required tax returns and therefore may be liable for taxes, penalties and interest which could impair our financial condition and results of operations.

Due to the Company’s financial condition, we have been unable to prepare and file our federal and state tax returns for the 2009 tax year through the current tax year. Although we do not owe income taxes, we may be liable for franchise taxes, penalties, and interest. We intend to comply fully with our current and prior federal and state tax reporting obligations in 2016. We have accrued a liability for the taxes, penalties, and interest for which we are liable, which we estimate to be approximately $45,000, and for the cost to prepare and file the returns, which we estimate to be approximately $50,000.

RISK FACTORS RELATED TO OUR COMMON STOCK

An additional number of the Company’s Shares ofBecause our common stock are likely to become freely tradable.

Approximately 400,000 shares of the Company’s commonis considered a “penny stock, are currently freely tradable on the over the counter bulletin board where the Company’s common stock trades. Approximately 3,072,698 shares of the Company’s common stock are registered under a registration statement which was filed under the Securities Act on Form S-1 (the “S-1 Registration Statement”). The S-1 Registration Statement is not currently effective under the Securities Act. However the Company intends to file a post-effective amendment to the registration statement to cause it to be effective. Approximately 11,502,271 shares of the Company’s common stock, which includes 1,500,000 shares of the Company’s Series A Convertible Preferred Stock on an as converted basis, are held by investors who have a contractual right to have such shares registered under the Securities Act, with which obligations the Company intends to comply.

Additional shares of the Company’s common stock may be eligible to be sold pursuant to Section 144 of the Securities Act depending on (i) certain conditions relating to the Company or the shares themselves, including whether, among other things, (A) the Company is subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (i) the Company has filed all required Exchange Act reports and material during the preceding twelve (12) months, and (ii) at least one year has elapsed from the time the Company filed with the US Securities and Exchange Commission (the “Commission”) “Form 10 information” reflecting that it is not a shell company and (B) certain conditions relating to themore difficult for investors who hold such shares, including, among other things, (i) the period for which such investors held such shares and (ii) such investor’s relationship with the Company.

We cannot predict the effect, if any, that the ability to sell additional shares of the Company’s common stock to the public will have on the prevailing market price of the Company’s common stock from time to time. Nevertheless, if a significant number of shares of the Company’s common stock are sold in the public market, or if people believe that such sales may occur, the prevailing market price of our common stock, could decline and could impair our future ability to raise capital through the sale of our equity securities.

The Company’s Shares of common stock are generally not registered and are illiquid.

Aside from the approximately 400,000 shares of the Company’s common stock which are freely tradable under the Securities Act, and aside from certain contractual rights between the Company and select investors, the Company has no obligation to register the Company’s common stock or to comply with any exemption from such registration. Accordingly, there can be no assurance that the Company’s investors will have the opportunity to liquidate their common stock at any time in the near future.

In addition, the Company’s common stock may not be sold pursuant to Section 144 of the Securities Act unless certain conditions are satisfied, including, among other things, (i) the Company is subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (ii) the Company has filed all required Exchange Act reports and material during the preceding twelve (12) months, and (iii) at least one year has elapsed from the time the Company filed with the US Securities and Exchange Commission (the “Commission”) “Form 10 information” reflecting that it is not a shell company.

There is the possibility of future dilution.

There is the possibility that the Company may still require further capital investment. The Company’s Board of Directors will evaluate the need for and oversee the sourcing of future capital for the Company. There is the possibility that such additional sources of financing may result in dilution in the value of the Company’s common stock.

The directors and officers of the Company may have certain personal interests that may affect the Company.

A small group of directors, executive officers, principal shareholders and affiliated entities will beneficially own, in the aggregate, approximately 45% of the Company’s outstanding voting securities. As a result, if some or all of them acted together, they would have the ability to exert substantial influence over and/or control the election of the Board of Directors and the outcome of

issues requiring approval by the Company’s shareholders. This concentration of ownership may have the effect of delaying or preventing a change in control of the Company that may be favored by other shareholders. This could prevent transactions in which shareholders might otherwise recover a premium for their shares over current market prices.

The market price of the Company’s shares of common stock may fluctuate significantly.

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:be adversely affected.

 

Our common stock is considered to be a “penny stock” under the announcementdefinitions in Rules 15g-2 through 15g-6 promulgated by the Securities and Exchange Commission (“SEC”) under Section 15(g) of new productsthe Exchange Act. Under the rules, for purposes relevant to us, stock is considered “penny stock” if: (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Stock Market, or product enhancementseven if quoted, has a price less than $5.00 per share; and (iv) is issued by usa company with net tangible assets less than $2.0 million, if in business more than a continuous three years, or with average revenues at less than $6.0 million for the past three years. The principal result or effect of being designated a “penny stock” is that securities broker-dealers cannot recommend our competitors;stock but must trade it on an unsolicited basis.

 

developments concerning intellectual property rightsSection 15(g) of the Exchange Act and regulatory approvals;

variationsRule 15g-2 promulgated thereunder by the SEC require broker-dealers in ourpenny stocks to provide potential investors with a document disclosing the risks of penny stocks and our competitors’ resultsto obtain a manually signed and dated written receipt of operations;

changesthe document before effecting any transaction in earnings estimates or recommendations by securities analysts, ifa penny stock for the investor’s account. Potential investors in our common stock is covered by analysts;are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stocks.” Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to:

  

(i)obtain from the investor information concerning his or her financial situation, investment experience and investment objectives;

developments

(ii)reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions;

(iii)provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and

(iv)receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the pipeline management services industry;

the results of product liability or intellectual property lawsuits;

future issuances of common stock or other securities;

the addition or departure of key personnel;

announcements by us or our competitors of acquisitions, investments or strategic alliances; and

general market conditions and other factors, including factors unrelated to our operating performance.

Further, the stock market in general has recently experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock which could cause a declinemay be adversely affected. Also, many brokers choose not to participate in the value of our common stock. Price volatilitypenny stock transactions. Accordingly, investors may not always be able to resell their shares of our common stock mightpublicly at times and prices that they believe are appropriate.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be worse if the trading volume ofsuitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, is low. Wewhich may limit an investor’s ability to buy and sell our stock and have not paid, and do not expect to pay, any cash dividendsan adverse effect on the market for our common stock as any earnings generated from future operations will be used to finance our operations and as a result, investors will not realize any income from an investment in our common stock until and unless their shares are sold at a profit.shares.

Trading of our common stock is limited which may negatively impact the price of our common stock and trading restrictions imposed on us by regulatory authorities may further reduce our trading, makingmake it difficult for our shareholdersstockholders to sell their shares.

Trading of our common stock is currently conducted on the OTC BB.Venture Market. The liquidity of our common stock is limited by, among other things, the number of shares that can be bought and sold at a given price and the lack of coverage by security analysts and the media, and may also be adversely affected by delays in the timing of transactions and the reduction of coverage by security analysts and the media, if at all.transactions. Currently, there are approximately 200240 holders of record of our common stock. These factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and askasked prices for our common stock. In addition, without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.

BecauseAn additional number of the Company’s Shares of common stock are likely to become freely tradable which could cause our stock price to decease.

As of April 4, 2016, we had 143,336,073 shares of common stock outstanding. Approximately 41,998,611 of such shares are currently unrestricted and freely tradable on the OTC Venture Market where our common stock may be a “penny stock,” it may be more difficult for investors to selltrades. In addition, 78,476,039 shares of our common stock have been registered for sale pursuant to our Registration Statement that was declared effective on July 10, 2015. Of our remaining outstanding shares, some or all of such shares may become eligible for resale in the future under Rule 144 under the Securities Act.

We cannot predict the effect, if any, that the ability to sell additional shares of our common stock to the public will have on the prevailing market price of our common stock from time to time. Nevertheless, if a significant number of shares of our common stock are sold in the public market, or if people believe that such sales may occur, the prevailing market price of our common stock could decline and could impair our future ability to raise capital through the sale of our equity securities.

We may offer and sell additional shares of common stock in the future which may dilute the value of the common stock held by our stockholders.

In order to meet our capital requirements, we may elect to offer and sell additional shares of our common or preferred stock. There is the possibility that such sales may result in dilution in the value of our common stock.

We are contractually obligated to issue additional shares of common stock to certain investors, which may result in significant dilution in the value of our common stock and may adversely impact our results of operations.

We are contractually obligated to issue additional shares of our common stock to certain investors because we did not timely register their shares of our common stock under the Securities Act. We estimate that we will need to issue approximately 5.5 million shares of common stock. The issuance of such shares may result in significant dilution in the value of our common stock. We have recorded a liability on our books for the estimated value of the shares that we will be required to issue. An increase in the estimated value of the shares, or an increase in the estimated number of shares to be issued, will negatively impact our results of operations.

We have an outstanding convertible note with a fluctuating conversion rate that is set at a discount to market prices of our common stock during the period immediately preceding conversion, which may result in material dilution to our stockholders.

On April 2, 2015, we issued a Secured Promissory Note to David M. Truitt (as amended, the “Truitt Note”) in the principal amount of $1,000,000. On January 27, 2016, the Truitt Note was amended to include an additional $250,000 loan. The Truitt Note is convertible into shares of our common stock at a price per share equal to 75% of the average closing bid prices of our common stock for the ten days preceding the conversion date. This could result in material dilution to existing stockholders of the Company, particularly in the event that the average closing bid prices of our common stock declines below the offering price of shares in this offering. By way of illustration, the following table sets forth the dilutive impact of a conversion of the Truitt Note at maturity, assuming that the average closing bid price of our common stock for the ten days preceding the conversion is equal to $0.01, $0.03, $0.05, and $0.07: 

Average Closing Bid Price  Conversion Price  Shares Issuable 
$0.01  $0.0075   184,666,667 
$0.04  $0.0300   46,166,667 
$0.07  $0.0525   26,380,952 
$0.10  $0.0750   18,466,667 

Our obligations under the Truitt Note are secured by all of our assets and therefore if we default thereunder, the holder could foreclose its security interest and liquidate our assets, which would cause us to cease operations.

Our obligations under the Truitt Note are secured by a lien on all of our assets. As a result, if we default under the terms of the Truitt Note, Mr. Truitt could foreclose his security interest and liquidate all of our assets. This would cause us to cease operations.

The directors and officers of the Company may have certain personal interests that may affect the Company.

A small group of directors, executive officers, principal stockholders and affiliated entities will beneficially own, in the aggregate, more than 50% of the Company’s outstanding voting securities. As a result, if some or all of them acted together, they would have the ability to exert substantial influence over and/or control the election of the Board of Directors and the outcome of issues requiring approval by the Company’s stockholders. This concentration of ownership may have the effect of delaying or preventing a change in control of the Company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices.

Trading in our securities could be subject to extreme price fluctuations that could cause the value of your investment to decrease.

Our stock price has fluctuated significantly in the past and could continue to do so in the future. Our stock is thinly-traded, which means investors will have limited opportunities to sell their shares of common stock in the open market. Limited trading of our common stock also contributes to more volatile price fluctuations. The market price of our common stock may be adversely affected.fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

Our common stock may be a “penny stock” if, among other things,

·the announcement of new services or service enhancements by us or our competitors;

·developments concerning intellectual property rights and regulatory approvals;

·variations in our and our competitors’ results of operations;

·changes in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts;

·developments in the pipeline management services industry;

·the results of product liability or intellectual property lawsuits;

·future issuances of common stock or other securities;

·the addition or departure of key personnel;

·announcements by us or our competitors of acquisitions, investments or strategic alliances; and

·general market conditions and other factors, including factors unrelated to our operating performance.

Further, the stock price is below $5.00 per share, it is not listed on a national securities exchange or approved for quotation on the American Stock Exchange, the Nasdaq Stock Market or any other national stock exchange or itmarket in general has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the Commission. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to purchase the penny stock. Broker-dealers must also provide customers who hold penny stock in their accounts with such broker-dealer a monthly statement containingrecently experienced extreme price and volume fluctuations. Continued market information relating tofluctuations could result in extreme volatility in the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.

If applicable, the penny stock rules may make it difficult for investors to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock, may be adversely affected. Also, many brokers choose not to participatewhich could cause a decline in penny stock transactions. Accordingly, investors may not always be able to resell their sharesthe value of our common stock. Given these fluctuations, an investment in our stock publiclycould lose value. A significant drop in our stock price could expose us to the risk of securities class action lawsuits. Defending against such lawsuits could result in substantial costs and divert management’s attention and resources, thereby causing an investment in our stock to lose additional value.

We have never paid dividends and do not anticipate paying any dividends on our common stock in the future, so any return on an investment in our common stock will depend on the market price of the stock.

We have not paid, and do not expect to pay, any cash dividends on our common stock, as any earnings generated from future operations will be used to finance our operations. As a result, investors will not realize any income from an investment in our common stock until and unless their shares are sold at times and prices that they feel are appropriate.a profit.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results. In addition, current and potential shareholders could lose confidence in our financial reporting, which could have a material adverse effect on the price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports. A failure to provide effective internal controls may present opportunities for fraud and erroneous reporting of financial reports and operating results. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. Beginning with our annual report for the fiscal year ended December 31, 2010, our independent registered public accounting firm must perform an audit of our internal control over financial reporting. During the course of our testing, we may identify deficiencies and weaknesses which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal control structure, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Disclosing significant deficiencies or material weaknesses in our internal controls, failing to remediate these deficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the price of our common stock.

Compliance with changing regulations concerning corporate governanceThe requirements of being a public company may strain our resources and divert management’s attention.

As a public disclosure may result in additional expenses.

There have been changing laws, regulations and standards relatingcompany, we will be subject to corporate governance and public disclosure, includingthe reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, new regulations promulgatedthe Dodd-Frank Act, and other applicable securities rules and regulations. Despite recent reforms made possible by the CommissionJOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. These laws, rules promulgated by the American Stock Exchange, the other national securities exchanges and the

NASDAQ. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Our board members, Chief Executive Officer and Chief Financial Officer could face an increased risk of personal liability in connection with the performance of their duties.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.

Our shares of common stock will not be registered under the Exchange Act and as a result we will have difficulty attractinglimited reporting obligations, and retaining qualified board members and executive officers,those reporting obligations may be suspended automatically if we have fewer than 300 stockholders of record on the first day of our fiscal year, which could harmmake our business. Ifcommon stock less attractive to investors.

Our common stock is not registered under the Exchange Act, and we do not intend to register our effortscommon stock under the Exchange Act for the foreseeable future. As a result, although we are required to comply with new or changed laws, regulationsfile annual, quarterly, and standards differ fromcurrent reports pursuant to Section 15(d) of the activities intended by regulatory or governing bodies,Exchange Act, as long as our shares of common stock are not registered under the Exchange Act, we couldwill not be subject to liabilitythe federal proxy rules and our directors, executive officers and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, our reporting obligations under applicable laws or our reputationSection 15(d) of the Exchange Act may be harmed.

suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.

Item 2.Item 2.Properties.Properties.

Our headquarters office is located in Sarver, Pennsylvania. This building, which we lease from the Company’s Chairman/CEO, has approximately 3,200 square feet of office space and is used by our corporate and engineering/operations staff. Monthly rent under this lease is $6,500 per month. The lease expired on April 30, 2009,month, and continuesis on a month-to-month basis.

We lease a building of approximately 2,800 square feet in Albuquerque, New Mexico for the sales and operations staff of our Utility Services and Consulting Corporation subsidiary. Monthly rent under this lease is $1,870 per month through October 31, 2010, and $1,980 per month thereafter. The lease expires on October 31, 2011.

We believe that the Company’sour existing facilities are adequate to meet itsour business needs for the foreseeable future.

  

Item 3.Legal Proceedings.

The Company is not a party to any material pending legal proceedings. No such action is contemplated by the Company nor, to the best of its knowledge, has any action been threatened against the Company.

  

Item 4.Item 4.Mine Safety Disclosures.

Reserved.

Not applicable.

PART II

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for our Common Stock

SharesOur common stock is not listed on any national securities exchange or any national market system. Trading of our common stock had previously been quotedis currently conducted on the OTC BBOTCQB Venture Market under the listing symbol “KKRI” and had only been traded on a very limited and sporadic basis. As of April 28, 2008, our listing symbol has been changed to “GSPH” in conjunction with our name change. The last reported sales price per share of the Company’s common stock as reported on the OTC BB on March 31, 2010 was $4.65..

The following sets forth high and low bid price quotations for each calendar quarter during the last two fiscal years that trading occurred or quotations were available. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

         
Quarter Ended High  Low 
March 31, 2014 $0.91  $0.64 
June 30, 2014 $0.88  $0.36 
September 30, 2014 $0.68  $0.30 
December 31, 2014 $0.61  $0.22 
March 31, 2015 $0.35  $0.17 
June 30, 2015 $0.28  $0.14 
September 30, 2015 $0.38  $0.13 
December 31, 2015 $0.20  $0.04 

 

Quarter Ended

  High  Low

December 31, 2009

  $1.70  $0.50

September 30, 2009

  $1.15  $0.35

June 30, 2009

  $1.80  $0.30

March 31, 2009

  $2.05  $2.05

December 31, 2008

  $2.50  $1.75

September 30, 2008

  $3.85  $2.00

June 30, 2008

  $10.20  $2.00

March 31, 2008

  $3.87  $3.69

December 31, 2007

  $1.14  $1.14

Number of Shareholders

As of March 31, 2010,April 4, 2016, there were approximately 200225 holders of record of the Company’s common stock.

Dividends

The Company has not paid any cash dividends on its common equity in the last two fiscal years, and does not plan to do so as any earnings generated from future operations will be used to finance our operations. The only restrictions that limit the ability to pay dividends on common equity are those restrictions imposed by law. Under Nevada corporate law, no dividends or other distributions may be made which would render the Company insolvent or reduce assets to less than the sum of its liabilities plus the amount needed to satisfy any outstanding liquidation preferences.

Securities Authorized for Issuance Under Equity Compensation Plans

             
  (a)  (b)  (c) 
          
Plan category 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)) 
             
Equity compensation plans approved by security holders  27,408,500  $0.23   6,641,500 
             
Equity compensation plans not approved by security holders         
             
Total  27,408,500  $0.23   6,641,500 

Sales of Unregistered Securities

On October 9, 2009,December 8, 2015, the Company entered into a series of subscription agreements (collectively, the “October 2009 Subscription Agreement”) with various investors in connection with the sale of 2,000,000 shares of its common stock (the “October 2009 Shares”). Each of the October 2009 Shares was sold at a price of $0.50 for an aggregate purchase price of $1,000,000. Pursuant to section 7.1 of the October 2009 Subscription Agreement, the Company agreed to register the October 2009 Shares under the Securities Act and effect such registration statement by March 1, 2010. In the event that the Company fails to so register the October 2009 Shares, each investor would be entitled to receive an additional allocation of 2% of its portion of the October 2009 Shares for each 30 day period that elapsed after March 1, 2010. As of April 1, 2010, the Company had not so registered the October 2009 Shares and, pursuant to the October 2009 Subscription Agreement, allocated an additional 40,0001,200,000 shares of its common stock to the investors under the October 2009 Subscription Agreement.an investor at a price of $0.10 per share, for $120,000. The Company also issued 100,000 shares of common stock and paid $45,000 in cash to Convertible Capital as a financing fee on the sale. The sales and issuancessale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation D. The purchasers are accredited investors, and the Company conducted the private placement without any general solicitation or advertisement and with a restriction on resale.

On October 30, 2009, the Company converted $2,000,000 of outstanding debt to Mark A. Smith, the Company’s Chief Executive Officer and Chairman of the Board of Directors, at $1.00 per share into 2,000,000 shares of common stock. The conversion took place in a private placement transaction pursuant to the exemption from the registration requirementsSection 4(2) of the Securities Act provided byand/or Regulation D. Mr. SmithThe purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On October 30, 2009, the Company issued warrants to David Vosbein, the Company’s President and a Director, to purchase 1,590,000 shares of the Company’s common stock at an exercise price of $1.00 per share. In connection with this transaction, the Company cancelled the warrants previously issued to Mr. Vosbein on March 6, 2009. The transaction took place in a private placement pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation D. The recipient is an accredited investor, and the Company conducted the private placement without any general solicitation and with a restriction on resale.

On December 14, 2009,22, 2015, the Company entered into a series of subscription agreements (collectively, the “December 2009 Subscription Agreement”) with various investors in connection with the sale of 1,500,000 shares of Series A Convertible Preferred Stock, which are convertible into shares of the Company’s common stock (such shares of the Company’s common stock into which the Series A Convertible Preferred Stock convert, the “December 2009 Shares”) at a price of $1.00 per share for an aggregate purchase price of $1,500,000. Pursuant to section 7.1 of the December 2009 Subscription Agreement, the Company agreed to register the December 2009 Shares under the Securities Act and effect such registration statement by March 1, 2010. In the event that the Company fails to so register the December 2009 Shares, each investor would be entitled to receive an additional allocation of 2% of its portion of the December 2009 Shares (on an as converted basis) for each 30 day period that elapsed after March 1, 2010. As of April 1, 2010, the Company had not so registered the December 2009 Shares, and, pursuant to the December 2009 Subscription Agreement, allocated an additional 37,500sold 312,500 shares of its common stock to the investors under the December 2009 Subscription Agreement.an investor at a price of $0.08 per share, for $25,000. The Company also issued 75,000 shares of Series A Convertible Preferred Stock and paid $67,500 in cash to Convertible Capital, as a financing fee on the sale. The sales and issuancessale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchasers arepurchaser is an accredited investors,investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

The Series A Convertible Preferred Stock may be converted at the option of the holder at any time or from time to time prior to the close of business on the business day before any date fixed for conversion of such share, as provided in the Certificate of the Designations. In addition, the Series A Convertible Preferred Stock is automatically converted upon the earliest to occur of: (i) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, in which shares of Common Stock are approved for listing on a national securities market, covering the offer and sale of Common Stock for the account of the Company in which the aggregate public offering price (before deduction of underwriters’ discounts and commissions) equals or exceeds $35,000,000 and the public offering price per share of which equals or exceeds $3, before deduction of underwriters’ discounts and commissions (ii) the Company’s receipt of the written consent of the holders of not less than 66 2/3% of the then outstanding shares of Series A Preferred Stock to the conversion of all then outstanding Series A Preferred Stock; and (iii) June 7, 2010. The holders of Series A Convertible Preferred Stock are also entitled to a liquidation preference which entitles such holder to an amount per share upon liquidation equal to the original issue price of $1.00 and to antidilution protection.

On December 15, 2009, pursuant22, 2015, the Company converted a note payable of $36,585 due to the Amended Reduct License Agreement, we issued warrantsan investor to Delta to purchase (i) 3,000,000457,309 shares of the Company’sits common stock at an exercisea price of $0.50$0.08 per share which expire on December 31,2012 and (ii) warrants to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.425 per share which expire on December 31, 2013 .share. The warrants were issuedsale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient of the warrantspurchaser is an accredited investor, and wethe Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale. The warrants expire on October 31, 2012.

On January 7, 2010, we26, 2016, the Company issued to a lender a Secured Promissory Note in the principal amount of $250,000, which is convertible into shares of common stock at the option of the holder, and warrants to purchase 250,00025,000,000 shares of the Company’sits common stock at $1.38 to an investor in a private placementexercise price of $0.015 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The warrants were issued to settle contractual obligations. The recipient of the warrants is an accredited investor, and wethe Company issued the Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

On March 16, 2016, the Company sold 1,250,000 shares of its Series C Convertible Preferred Stock to an investor at a price of $0.20 per share, for consideration of $250,000. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale. The warrants expire on January 7, 2020.

On January 1, 2010, we issued warrants to purchase 150,000 shares of our common stock at $1.00 to two investors in a private placement pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation D. The warrants were issued to settle contractual obligations.

The recipients of the warrants are accredited investors,securities in each of these transaction described above represented their intentions to acquire the securities for investment only and we conducted the private placement without any general solicitation or advertisement andnot with a restriction on resale. The warrants expire on January 1, 2020.

On March 2, 2010, we issued warrantsview to purchase 2,400,000 and 1,600,000 shares of our common stock at $1.00 to Ridge Global, LLC and Pace Global Energy Services, LLC, respectively, in a private placement pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation D. The warrants were issuedor for sale in connection with any distribution thereof and appropriate legends were placed upon the execution of the Strategic Advisory Agreement we entered intostock certificates issued in these transactions. All recipients had adequate access, through their relationships with Pace and Ridge. The recipients of the warrants are accredited investors, and we conducted the private placement without any general solicitation or advertisement and with a restriction on resale. The warrants expire on March 2, 2012.

On March 19, 2010, the Company entered into a series of subscription agreements (collectively, the “March 2010 Subscription Agreement”) with various investors in connection with the sale of 8,589,771 shares of our common stock at $1.00 per share for an aggregate offering price of $8,589,771. Pursuantus, to section 7.1 of the March 2010 Subscription Agreement, the Company agreed to register the March 2009 Shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register the

March 2010 Shares each investor would be entitled to receive an additional allocation of 2% of its portion of the March 2010 Shares for each 30 day period that elapsed after September 1, 2010. Also on March 19, 2010, Mark A. Smith, the Company’s Chief Executive Officer and the Chairman of the Board of Directors, acquired 1,000,000 shares of the Company’s common stock in exchange for the cancellation of $1,000,000 of indebtedness owed to Mr. Smith by the Company. The Company also issued 513,233 shares of its common stock to Convertible Capital as a financing fee on the sale. The sales and issuances took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Regulation D. The purchasers are accredited investors, and the Company conducted the private placements without any general solicitation or advertisement and with a restriction on resale.

On April 6, 2010, the Company entered into a series of subscription agreements (collectively, the “April 2010 Subscription Agreement”) with various investors in connection with the sale of 112,000 shares of our common stock at $1.00 per share for an aggregate offering price of $112,000. Pursuant to section 7.1 of the April 2010 Subscription Agreement, the Company agreed to register the April 2009 Shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register the April 2010 Shares each investor would be entitled to receive an additional allocation of 2% of its portion of the April 2010 Shares for each 30 day period that elapsed after September 1, 2010. The sales and issuances took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Regulation D. The purchasers are accredited investors, and the Company conducted the private placements without any general solicitation or advertisement and with a restriction on resale.information about us.

 

Item 6.Selected Financial Data.

Not applicable.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with our financial statements and the related notes thereto filed withappearing elsewhere in this Annual Report on Form 10-K.report.

Some of the information contained in this MD&A or set forth elsewhere in this Annual Report on Form 10-K,prospectus, including information with respect to our plans and strategy for our business and related financing, includes Forward-Looking Statements that involve risks and uncertainties. See “FORWARD“SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS” above. In addition, you should read the “Risk Factors” section of this Annual Report on Form 10-K forreport provides a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the Forward-Looking Statements contained in the following discussion and analysis.

Overview

We provide cloud-based geospatial solutions to accurately locate and digitally map underground pipelines and other infrastructure in three dimensions. Our professional staff offers the expertise, ability, and technologies required to design and execute solutions that are an emerging pipeline management service company that is focused on developing and producing innovative technologies and services which offer technically advanced solutions for managing pipeline infrastructure assets. Our strategy is to combine innovative pipeline data acquisition with professional data management and technically superior pipeline field services to build strong client relationshipsdelivered in the pipeline service industry. a cloud-based GIS (geographic information system) platform.

We believe that the market for aggregating and maintaining positional data for underground assets is maturing, and that business and governmental entities are beginning to understand the value of such data. We believe that this developing market presents us with an opportunity to deliver long-term value to our multi-disciplined team, consisting of construction professionals, engineersshareholders. In order to realize that value, our primary challenge is to raise working capital sufficient to operate our business, and Geographic Information System (“GIS”)investment capital to hire employees, acquire assets, and IT specialists, project managers, estimatorsexpand our business. Management is currently focused on raising capital, and field technicians can be mobilized quicklyplanning to position our business to capitalize on the maturing market for positional data once such capital is in place, including identifying new technologies for aggregating positional data, developing our GeoUnderground software, and efficientlyplanning the strategies and processes for any project. Our field service professionals are availableour upcoming marketing campaigns. We use financial and non-financial performance indicators to provide economic data collectionassess our business, including liquidity measures, revenues, gross margins, operating revenue, and mapping solutions to municipalities, utilities, engineering companies, contractors, pipeline operators, government agencies, industrial concerns and military facilities worldwide.backlog.

Liquidity and Capital Resources

At December 31, 2009,2015, we had current assets of $1,575,958,$172,989, and current liabilities of $5,438,541.$4,758,626.

Our business depends largely on patent pending Smart Probe™ technology that we license from Reduct, the developer of the technology. Currently, we are the exclusive licensee of the Smart Probe™ technology in North America, South America, and Australia pursuant to the Original Reduct License Agreement which remains in effect until the Amended Reduct License Agreement that we entered into on December 15, 2009 becomes effective. We have failed to satisfy certain payment and other obligations under the Original Reduct License Agreement. Reduct has agreed to forbear from enforcing any rights or remedies it may have upon a default by the Company under the Original License Agreement until the earlier of April 30, 2010 or the receipt by Reduct of the remaining Advance Payment pursuant to the Amended Reduct License Agreement.

The Amended Reduct License Agreement will become effective upon the Company making the Advance Payment for the purchase of Smart Probe™ equipment totaling $4,950,000. The Company paid

$2,500,000 toward the Advance Payment in March, 2010. The balance of the Advance Payment is due by April 30, 2010. If we fail to make the remaining Advance Payment of $2,450,000 by April 30, 2010, the Amended Reduct License Agreement may not become effective and we could lose our exclusive license to the Smart Probe™ technology.

In addition, even if we are able to make the remaining Advance Payment by April 30, 2010, causing the effectiveness of the Amended Reduct License Agreement, we will then be obligated to make various payments and minimum purchases under the Amended Reduct License Agreement in order to satisfy our obligations thereunder. Under the Amended Reduct License Agreement, the Company must make a license payment of $3,000,000 by December 31, 2010. In addition, the Company must make minimum quarterly payments totaling $10,950,000, $11,750,000, and $6,612,500 in 2010, 2011, and 2012, respectively. If the Amended Reduct License Agreement is renewed, this minimum purchase requirement will increase by 15% annually over the prior year beginning in 2013. If we fail to make any of these payments or if Reduct believes that we have failed to meet any of our other obligations under the Amended Reduct License Agreement, Reduct could seek to limit or terminate our license rights, which could lead to costly and time-consuming litigation and potentially, a loss of our exclusive license rights. During the period of any such litigation, our ability to carry out the development of client relationships and provide pipeline management services could be significantly and adversely affected.

Our Company has incurred net losses since inception. Our operations and capital requirements have been funded by sales of our common and preferred stock, and advances from our chief executive officer.officer, and notes payable. At December 31, 20092015, current liabilities exceeded current assets by $3,862,583.$4,115,908, and total liabilities exceeded total assets by $3,982,030. Those factors as well as our commitments under the Amended Reduct License Agreement raise doubts about our ability to continue as a going concern.

In 2014, we raised approximately $2.4 million through private sales of our common stock, and approximately $272,000 through the exercise of outstanding warrants to purchase Series B Stock and common stock. In 2015, we raised approximately $476,000 through private sales of our common stock. In 2014, we issued common stock for services valued at $82,500, and settled $50,000 of liabilities for shares of our common stock. In 2015, we converted our outstanding Senior Secured Redeemable Note with a balance due of approximately $1.6 million to shares of our common stock.

On January 16, 2015, we issued a Senior Secured Promissory Note to Horberg Enterprises LLC (the “Horberg Note”) in the principal amount of $500,000. The Horberg Note was due on April 8, 2015, and accrued no interest through the due date. The Horberg note was secured by liens on all of our assets. We also issued the lender warrants to purchase 1.5 million shares of our common stock in consideration for it purchasing the Horberg Note. Proceeds from the issuance of the Horberg Note were used for working capital purposes. We repaid the Horberg Note on April 3, 2015.

On April 2, 2015, we issued a Secured Promissory Note to David M. Truitt (the “Truitt Note”) in the principal amount of $1.0 million. The Truitt Note was due on October 2, 2015, and bears interest at 10% per annum. The Truitt Note is secured by liens on all our assets, and is convertible into shares of our common stock at the option of the holder. We also issued Mr. Truitt warrants to purchase 2.0 million shares of our common stock in consideration for him purchasing the Truitt Note. Proceeds from the issuance of the Truitt Note were used to repay the Horberg Note and for working capital purposes.

On January 27, 2016, we entered into an Agreement and Amendment with Mr. Truitt (the “Amended Truitt Note”), pursuant to which Mr. Truitt loaned us an additional $250,000 and extended the due date of the Truitt Note to July 31, 2016. We also issued Mr. Truitt warrants to purchase 25.0 million shares of our common stock in connection with the Amended Truitt Note.

On March 16, 2016, we designated 10.0 million shares of preferred stock as Series C Convertible Preferred Stock (“Series C Stock”). Series C Stock is convertible to common stock at a conversion ratio of 20 shares of common stock for each share of Series C Stock, subject to adjustment for stock dividends, splits, and similar events. Series C Stock has a liquidation preference equal to its original issue price, and has voting rights equal to five times the number of shares of common stock into which the Series C Stock is convertible.

On March 16, 2016, we sold 1,250,000 shares of Series C Stock to Mr. Truitt for consideration of $250,000.

Management is continuing efforts to secure fundsfunding sufficient for the Company’s operating and capital requirements through financing and operations. The Company retained Convertible Capital as its financial advisor, and in March 2010, entered into a Strategic Advisory Agreement with Ridge Global, LLC (“Ridge”) and Pace Global Energy Services, LLC, (“Pace”) pursuant to which Pace and Ridge agreed to provide strategic advisory services to the Company, including assisting the Company and Convertible Capital in raising capital and assisting the Company in its business development efforts. The Company closed financing throughprivate sales of convertible preferred stockSeries C Stock and common stock, in the aggregate amountand to negotiate settlements or extensions of $6.2 million in 2009, including conversion of $2.0 million of indebtedness to our Chief Executive Officer into common stock, and conversion of approximately $105,000 of other debt into common stock, and common stock issued for services totaling approximately $215,000. In March, 2010, the Company completed a sale of common stock with an aggregate sale price of approximately $9.7 million, including the conversion of $1.0 million of indebtedness to our Chief Executive Officer into common stock.existing liabilities. The proceeds of thesuch sales of stock, offeringif any, will be used to repay the Amended Truitt Note and to fund general working capital needs.

Furthermore,

Beginning in 2012, we changed the Company is expanding intofocus of our company to position us to generate revenue from data acquisition and data management. We expanded our service offerings to provide data acquisition services utilizing twelve different technologies. We developed new, marketing and sales channels. The Company has entered intocloud-based mapping software to be marketed under our existing name GeoUndergound that replaces our previous version of GeoUnderground. We currently utilize GeoUnderground to deliver data to customers. We intend to offer GeoUnderground as a subscription-based stand-alone product beginning in the utility locating market, has entered into a joint marketing agreement with a strategic partner, and is exploring relationships with additional strategic partners2016. We believe that our changes to increase capitalour operating focus will enable us to begin to generate significant revenue from operations. The Company has begun to market probes to third-parties to meet our minimum purchase requirements under the Amended Reduct License Agreement. The Company is also investigating diversifying operations by identifying potential acquisitions of technology to supplement the Reduct Smart Probe™ technology.

We believe that our actions and planned actions will enable us to finance our operations beyond December 31, 2010.the next twelve months.

We do not believe that inflation and changing prices will have a material impact on our net sales and revenues, or on income from continuing operations.

Results of Operations for the Years Ended December 31, 2015 and 2014

Sales were $825,669$89,700 for the year ended December 31, 2009,2015, compared to $1,567,575$286,951 for the year ended December 31, 2008.2014. Cost of sales was $929,722$155,633 for the year ended December 31, 2009,2015, compared to $673,397$193,250 for the year ended December 31, 2008.2014. Our sales declined due to economic conditions in 2009. Cost of sales increased in 2009fluctuated throughout 2015 and 2014 as our fixed costs of sales increased dueability to expansion ofmarket and perform jobs was hampered by our operations.financial condition. We expect sales and cost of sales to continue to fluctuate as our business reaches maturity.continues to mature.

Selling, general and administrative (“SG&A”) expenses include all costs that are not directly associated with our revenue-generating activities. SG&A expenses include payroll costs for sales, administrative, and technical personnel, sales and marketing costs, corporate costs, and facilities costs.

SG&A expenses were $7,510,950$2,431,156 for the year ended December 31, 2009,2015, compared to $5,338,285$3,080,446 for the year ended December 31, 2008.2014. The increase was primarily due to expenses incurreddecrease in connection with the adoption of the Amended Reduct License Agreement of $3.1 million in 2009. In 2008, the Company incurred expenses of $1.2 million related to amendments to the Original Reduct License Agreement. SG&A expenses also increased in 2009 due to the expansion of our sales and administrative staff and marketing costs associated with a marketing campaign in 2009. These increases in expenses were partially offset by decreases in legal, accounting, and other expenses due to expenses incurred in 2008 related to the acquisition of Kayenta Kreations, Inc., legal, accounting and other expenses related to other potential acquisitions, and legal expenses related to the filing of a Registration Statement under the Securities Act of 1933, as amended, for a portion of our shares.

Other income and expenses include interest income, interest expense, non-business income and expenses, and gains or losses on foreign currency exchange. Other income and expense was net expense of $182,973 for the year ended December 31, 2009,2015 compared to a netthe year ended December 31, 2014 was due to reductions in professional fees and sales and marketing expenses due to our financial condition.

Other income and expense of $74,895 for the year ended December 31, 2008. Included in other2015 was a net income of $1,700,811, which included interest expense of $456,174, gains on extinguishment of debt of $299,225, and income related to registration payment arrangements of $1,857,760. Other income and expense duringfor the year ended December 31, 20092014 was interesta net income of $30,374,$222,938, which included interest expense of $214,680,$160,246, and other incomegains on extinguishment of $1,333. During the year ended December 31, 2007, other income and expense included interest incomedebt of $21,244, interest expense of $59,788, other income of $171, and a loss on foreign currency exchange of $36,522.$383,184. The increase in interest expense in 2009 is2015 was due to higher loan balances and a charge of $250,000 for amortization of discount on a Secured Promissory Note due to our recognition of beneficial conversion features. The gains on extinguishment of debt resulted from settlement agreements on prior liabilities and reduction of prior accounts payable that have extended beyond the increasestatute of limitations.

Gains and losses related to registration payment arrangements results from a series of Stock Subscription Agreements we entered into in notes payable2009 and 2010 (the “Stock Subscription Agreements”). We were required to stockholders and capital lease liabilities. Theregister the shares of common stock sold pursuant to the Stock Subscription Agreements under the Securities Act. Our failure to register the shares of common stock under the Securities Act resulted in our obligation to issue additional shares (“Penalty Shares”) to investors who purchased shares pursuant to the Stock Subscription Agreements. We recorded a liability on our books for the value of the estimated number of shares to be issued. We incur losses on our registration payment arrangements when the estimated number of Penalty Shares to be issued increases, or when the value of our stock increases. We record gains on our registration payment arrangements when the estimated number of Penalty Shares to be issued decreases, or when the value of our stock decreases. In 2015, we recorded gains related to registration payment arrangements of $1,857,760, which resulted from decreases in the estimated value of our stock due to a decrease in stock price. We expect that gains or losses on foreign currency exchange from 2008related to 2009 is becauseregistration payment arrangements will fluctuate as the Company had to liabilitiesprice of our stock and the estimate of the number of Penalty Shares to be settled in foreign currency in 2009.granted fluctuate.

We had no net benefit from income taxes, as our deferred tax benefit was completely offset by a valuation allowance due to the uncertainty of realization of the benefit.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of December 31, 2009.2015.

Application of Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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. Estimates and assumptions which, in our opinion, are significant to the underlying amounts included in the financial statements and for which it would be reasonably possible that future events or information could change those estimates include:

Impairment AssessmentRegistration Payment Arrangements. We are contractually obligated to issue shares of Intangible Assets. Intangible assets consistour common stock to certain investors for failure to register their shares of exclusive license rights to the patent pending DuctRunner Smart Probe™ technology. We currently license the technology from Reductour common stock under the Original Reduct License Agreement, which provides us with exclusive control rights toSecurities Act. We have recorded a liability for the DuctRunner Smart Probe™ technology throughout the continentsestimated number of North America, South America, and Australia. Upon the effectiveness of the Amended Reduct License Agreement, we will continue as the exclusive licensee of the technology through restructured minimum purchase quantities and payment terms. We recorded an intangible asset of $1,367,000 upon use of the license. In addition to the license fees, we are required to make minimum purchases of Smart Probes™. If we are unable to satisfy the remainder of the Advance Payment due April 30, 2010 or unable subsequently to satisfy minimum purchase requirements required pursuant to the Amended Reduct License Agreement, Reduct may terminate the license agreement, and our investment in the license rights would be impaired.

Under the Original Reduct License Agreement, the license rights had an indefinite useful life. Accordingly, the license rights were not amortized under accounting principles generally accepted in the United States of America. Upon the execution of the Amended Reduct License Agreement on December 15, 2009, we determined that the license rights have a finite life. We estimate the useful life of the license rights under the Amended Reduct License Agreementshares to be twelve years. Accordingly, we will amortize the investment in the license rights over a twelve-year period beginning January 1, 2010. We test the carrying value of the license rights annually for impairment, and review their useful life. Should the license

rights be determined to be impaired, the value of the asset will be written down, and a loss recognized in the period in which the asset’s recorded value exceeds its fair value. In our test for impairment, we determineissued at the fair value of the license rights basedstock to be issued. We review on a five-year projection of future cash flows, which is updated annually based on management’s projections.

Inquarterly basis our reviewestimate of the license rights fornumber of shares to be issued and the year ended December 31, 2009, we determined that the estimated fair value of those assets substantially exceededthe stock to be issued.

Realization of Deferred Income Tax Assets. We provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between financial reporting and tax accounting methods and any available operating loss or tax credit carryovers. At December 31, 2015, we had a deferred tax asset resulting principally from our $1,367,000 investmentnet operating loss deduction carryforward available for tax purposes in our intangible assets and therefore,future years. This deferred tax asset is completely offset by a valuation allowance due to the valueuncertainty of realization. We evaluate the necessity of the license rights was not impaired. If our current estimate of future cash flows from our license fees had been 10% lower, those cash flows would not have been less than the reported amount of intangible assets. If we had been required to recognize an impairment loss on our intangible assets, our liquidity and capital resources would not have been affected.valuation allowance quarterly.

Estimated Costs to Complete Fixed-Price Contracts. We record revenues for fixed-price contracts under the percentage-of-completion method of accounting, whereby revenues are recognized ratably as those contracts are completed. This rate is based primarily on the proportion of contract costs incurred to date to total contract costs projected to be incurred for the entire project, or the proportion of measurable output completed to date to total output anticipated for the entire project. We review our estimates of costs to complete each contract quarterly, and make adjustments if necessary. At December 31, 2009,2015, we do not believe that material changes to contract cost estimates at completion for any of our open contracts are reasonably likely to occur.

Realization of Deferred Income Tax Assets. We provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between financial reporting and tax accounting methods and any available operating loss or tax credit carryovers. At December 31, 2009, we had a deferred tax asset resulting principally from our net operating loss deduction carryforward available for tax purposes in future years. This deferred tax asset is completely offset by a valuation allowance due to the uncertainty of realization. We evaluate the necessity of the valuation allowance quarterly.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk—Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. We do not have significant short-term investments. Accordingly, we believe that we do not have a material interest rate exposure.

Foreign Currency Risk—Our functional currency is the United States dollar. Some of our business transactions areWe do not currently have any assets or liabilities denominated in foreign currencies. At the date aConsequently, we have no direct exposure to foreign currency transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and recorded in United States dollars using the exchange rate in effect at that time. At each balance sheet date, balances that will be settled in foreign currencies are adjusted to reflect the current exchange rate. Any gain or loss resulting from changes in foreign currency exchange rates is included in net income in the period in which the exchange rate changes.risk.

Under the Original Reduct License Agreement, most of our transactions with Reduct were denominated in Euros. Under the Amended Reduct License Agreement, most future transactions with Reduct will be denominated in United States dollars. At December 31, 2009, other than the existing obligations under the Original Reduct License Agreement, which will be superseded by the Amended Reduct License Agreement upon its effectiveness, we had no liabilities denominated in Euros.

Commodity Price Risk—Based on the nature of our business, we have no direct exposure to commodity price risk.

Item 8.Item 8.Financial Statements and Supplemental Data.

GEOSPATIAL HOLDINGS, INC.CORPORATION

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

 2524

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009 and 2008

2015 AND 2014
 

Consolidated Balance Sheets

25
Consolidated Statements of Operations 26

Consolidated Statements of Operations

27

Consolidated Statements of Changes in Stockholders’ Deficit

Equity
27
Consolidated Statements of Cash Flows 28

ConsolidatedNotes to Financial Statements of Cash Flows

 29

Notes to Financial Statements

30

INDEPENDENT AUDITORS’ REPORT

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Geospatial Holdings, Inc.Corporation

We have audited the accompanying consolidated balance sheets of Geospatial Holdings, Inc.Corporation (a Nevada corporation) as of December 31, 20092015 and 2008,2014, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’sentity’s management. Our responsibility is to express an opinion on these consolidated 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 the audits 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 consolidated financial statements,statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit providesaudits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Geospatial Holdings, Inc.Corporation as of December 31, 20092015 and 2008,2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 141 to the consolidated financial statements, the Company has incurred net losses since inception. Operationsinception, operations and capital requirements since inception have been funded by sales of stock, short and long term loans and advances from its chief executive officer and current liabilities exceed current assets by $3,862,583.$4,585,637. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Goff Backa Alfera and Company, LLC

Pittsburgh, Pennsylvania

April 14, 2010

13, 2016

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Balance Sheets

As of December 31,

         
  December 31,
2015
  December 31,
2014
 
         
ASSETS 
         
Current assets:        
 Cash and cash equivalents $16,962  $17,723 
 Accounts receivable  44,100   32,800 
 Prepaid expenses and other current assets  111,927   180,689 
         
 Total current assets  172,989   231,212 
         
Property and equipment:        
 Field equipment  339,079   339,079 
 Field vehicles  43,285   43,285 
         
 Total property and equipment  382,364   382,364 
 Less: accumulated depreciation  (245,208)  (126,864)
         
 Net property and equipment  137,156   255,500 
         
Total assets $310,145  $486,712 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT 
         
Current liabilities:        
 Accounts payable $533,578  $740,151 
 Accrued expenses  2,028,220   1,353,532 
 Due to related parties  157,286   137,910 
 Notes payable to related parties     29,047 
 Current portion of capital lease liability to related party  3,479   3,379 
 Senior convertible redeemable notes, net of deferred debt issue costs     1,525,025 
 Notes payable  1,488,748   232,892 
 Accrued registration payment arrangement  547,315   2,525,075 
         
 Total current liabilities  4,758,626   6,547,011 
         
Non-current liabilities:        
 Notes payable     39,741 
 Capital lease liability to related party  3,278   6,757 
         
 Total non-current liabilities  3,278   46,498 
         
Total liabilities  4,761,904   6,593,509 
         
Stockholders’ deficit:        
Preferred stock:        
Undesignated, $0.001 par value; 20,000,000 shares authorized at December 31, 2015 and 2014; no shares issued and outstanding at December 31, 2015 and 2014      
Series B Convertible Preferred Stock, $0.001 par value; 5,000,000 shares authorized at December 31, 2015 and 2014; no shares issued and outstanding at December 31, 2015; 530,049 shares issued and outstanding at December 31, 2014     530 
Common stock, $.001 par value; 350,000,000 shares authorized at December 31, 2015 and 2014; 143,336,073 and 126,235,177 shares issued and outstanding at December 31, 2015 and 2014, respectively  143,336   126,235 
Additional paid-in capital  36,031,156   33,596,411 
Accumulated deficit  (40,626,251)  (39,829,973)
         
 Total stockholders’ deficit  (4,451,759)  (6,106,797)
         
Total liabilities and stockholders’ deficit $310,145  $486,712 

 

   2009  2008 
ASSETS 

Current assets:

   

Cash and cash equivalents

  $481,536   $42,793  

Accounts receivable, net of allowance for doubtful accounts of $10,000 at

   

December 31, 2009 and 2008

   263,653    51,271  

Costs and estimated earnings in excess of billings on uncompleted contracts

   61,624    11,479  

Notes receivable

   397,373    361,612  

Prepaid expenses

   371,772    188,358  
         

Total current assets

   1,575,958    655,513  
         

Property and equipment:

   

Field equipment

   1,090,205    905,635  

Office equipment

   106,832    99,616  

Vehicles

   920,853    17,530  
         

Total property and equipment

   2,117,890    1,022,781  

Less: accumulated depreciation

   (514,105  (330,209
         

Net property and equipment

   1,603,785    692,572  
         

Other assets:

   

License fees

   1,367,000    1,367,000  

Deposits on equipment

   500,000    —    
         

Total other assets

   1,867,000    1,367,000  
         

Total assets

  $5,046,743   $2,715,085  
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT   

Current liabilities:

   

Accounts payable

  $1,391,488   $710,493  

Accrued expenses

   3,670,337    105,168  

Billings in excess of costs and estimated earnings on uncompleted contracts

   —      25,159  

Current portion of capital lease liabilities

   210,645    —    

Due to stockholder

   26,000    32,500  

Notes payable to stockholders

   140,071    2,118,808  
         

Total current liabilities

   5,438,541    2,992,128  
         

Non-current liabilities:

   

Capital lease liabilities

   458,167    —    

Convertible note payable to stockholder

   1,013,637    —    
         

Total non-current liabilities

   1,471,804    —    
         

Total liabilities

   6,910,345    2,992,128  
         

Commitments and contingencies (Note 9)

   —      —    
         

Stockholders’ deficit:

   

Preferred stock, $.001 par value; 5,000,000 shares authorized at December 31, 2009 and 2008; 1,575,000 and 0 shares issued and outstanding at December 31, 2009 and 2008, respectively

   1,575    —    

Common stock, $.001 par value; 100,000,000 shares authorized at December 31, 2009 and 2008; 31,124,369 and 23,759,806 shares issued and outstanding at December 31, 2009 and 2008, respectively

   31,124    23,760  

Additional paid-in capital

   13,473,089    7,270,611  

Accumulated deficit

   (15,369,390  (7,571,414
         

Total stockholders’ deficit

   (1,863,602  (277,043
         

Total liabilities and stockholders’ deficit

  $5,046,743   $2,715,085  
         

The accompanying notes are an integral part of these consolidated financial statements.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Statements of Operations

     
 For the Years Ended
December 31,
 
 2015  2014 
  Year Ended
December 31,
2009
 Year Ended
December 31,
2008
      

Sales

  $825,669   $1,567,575   $89,700  $286,951 

Cost of sales

   929,722    673,397    155,633   193,250 
               

Gross profit

   (104,053  894,178  
Gross profit (loss)  (65,933)  93,701 
        

Selling, general and administrative expenses

   7,510,950    5,338,285    2,431,156   3,080,446 
               

Net loss from operations

   (7,615,003  (4,444,107  (2,497,089)  (2,986,745)
               

Other income (expense):

           

Interest income

   30,374    21,244  

Interest expense

   (214,680  (59,788  (456,174)  (160,246)

Other income

   1,333    171  

Loss on foreign currency exchange

   —      (36,522
Gain on extinguishment of debt  299,225   383,184 
Registration payment arrangements  1,857,760    
               

Total other income and expenses

   (182,973  (74,895
Total other income (expense)  1,700,811   222,938 
               

Net loss before income taxes

   (7,797,976  (4,519,002  (796,278)  (2,763,807)

Provision for (benefit from) income taxes

   —      —    
        
Provision for income taxes      
               

Net loss

  $(7,797,976 $(4,519,002 $(796,278) $(2,763,807)
               

Basic and fully-diluted net loss per share of common stock

  $(0.30 $(0.20 $(0.01) $(0.03)
       

The accompanying notes are an integral part of these consolidated financial statements.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

For the Years Ended December 31, 20092015 and 20082014

  Geospatial Mapping Systems, Inc.  Geospatial Holdings, Inc. Additional
Paid-In
Capital
 Accumulated
Deficit
  Total 
  Preferred Stock Common Stock  Preferred Stock Common Stock   
  Shares Amount Shares  Amount  Shares Amount Shares Amount   

Balance, December 31, 2007

 —   $—   17,352,352   $17,352   —   $—   —   $—   $4,792,324 $(3,052,412 $1,757,264  

Issuance of common stock for cash at $0.80 per share

 —    —   1,562,500    1,563   —    —   —    —    1,248,437  —      1,250,000  

Issuance of common stock in settlement of note at $0.80 per share

 —    —   1,129,336    1,129   —    —   —    —    902,340  —      903,469  

Issuance of common stock for cash in settlement of warrant at $0.50 per share

 —    —   30,000    30   —    —   —    —    14,970  —      15,000  

Issuance of shares of Geospatial Holdings, Inc. common stock to stockholders of Kayenta Kreations, Inc. pursuant to merger

 —    —   —      —     —    —   3,685,618  3,686  312,540  —      316,226  

Exchange of shares of Geospatial Mapping Systems, Inc. common stock for shares of Geospatial Holdings, Inc. common stock

 —    —   (20,074,188  (20,074 —    —   20,074,188  20,074  —    —      —    

Net loss for the year ended December 31, 2008

 —    —   —      —     —    —   —    —    —    (4,519,002  (4,519,002
                                 

Balance, December 31, 2008

 —    —   —      —     —    —   23,759,806  23,760  7,270,611  (7,571,414  (277,043

Issuance of common stock for cash at $1.00 per share

 —    —   —      —     —    —   250,000  250  249,750  —      250,000  

Issuance of common stock for cash at $0.50 per share, less offering costs

 —    —   —      —     —    —   4,894,900  4,895  2,346,318  —      2,351,213  

Issuance of common stock in settlement of notes payable at $1.00 per share

 —    —   —      —     —    —   2,104,638  2,104  2,102,534  —      2,104,638  

Issuance of common stock for services at $1.00 per share

 —    —   —      —     —    —   115,025  115  114,910  —      115,025  

Issuance of Series A Preferred Stock at $1.00 per share, less offering costs

 —    —   —      —     1,575,000  1,575 —    —    1,388,966  —      1,390,541  

Net loss for the year ended December 31, 2009

 —    —   —      —     —    —   —    —    —    (7,797,976  (7,797,976
                                 

Balance, December 31, 2009

 —   $—   —     $—     1,575,000 $1,575 31,124,369 $31,124 $13,473,089 $(15,369,390 $(1,863,602
                                 
                       
              Additional
Paid-In
Capital
       
  Preferred Stock Common Stock  Accumulated
Deficit
    
  Shares Amount Shares Amount   Total 
                       
Balance, December 31, 2013  3,804,358 $3,804  89,514,092 $89,514 $31,910,317 $(37,066,166)$(5,062,531)
                       
Sale of common stock, net of issuance costs      6,945,322  6,945  2,422,881    2,429,826 
                       
Exercise of warrants to purchase common stock, net of issuance costs      21,428  21  5,311    5,332 
                       
Exercise of warrants to purchase Series B Convertible Preferred Stock, net of issuance costs  106,745  107      266,464    266,571 
                       
Conversion of Series B Convertible Preferred Stock to common stock  (3,381,054) (3,381) 33,810,540  33,811  (30,430)    
                       
Repurchase of shares of common stock for cancellation      (4,321,205) (4,321) (1,110,367)   (1,114,688)
                       
Issuance of common stock for services      165,000  165  82,335    82,500 
                       
Issuance of common stock in settlement of liabilities      100,000  100  49,900    50,000 
                       
Net loss for the year ended December 31, 2014            (2,763,807) (2,763,807)
                       
Balance, December 31, 2014  530,049  530  126,235,177  126,235  33,596,411  (39,829,973) (6,106,797)
                       
Sale of common stock, net of issuance costs      3,992,500  3,993  471,710    475,703 
                       
Conversion of Series B Convertible Preferred Stock to common stock  (530,049) (530) 5,300,500  5,300  (4,770)    
                       
Issuance of common stock in settlement of liabilities      6,607,896  6,608  1,599,005    1,605,613 
                       
Issuance of common stock for registration penalty      1,200,000  1,200  118,800    120,000 
                       
Issuance of convertible securities with beneficial conversion features          250,000    250,000 
                       
Net loss for the year ended December 31, 2015            (796,278) (796,278)
                       
Balance, December 31, 2015   $  143,336,073 $143,336 $36,031,156 $(40,626,251)$(4,451,759)

The accompanying notes are an integral part of these consolidated financial statements.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Statements of Cash Flows

  Year Ended Year Ended       
  December 31, December 31,  For the Years Ended
December 31,
 
  2009 2008  2015  2014 

Cash flows from operating activities:

           

Net loss

  $(7,797,976 $(4,519,002 $(796,278) $(2,763,807)

Adjustments to reconcile net loss to net cash used in operating activities:

           

Depreciation

   183,896    150,926    118,344   101,447 

Accrued interest receivable

   (30,315  (24,026
Amortization of deferred debt issue costs  53,250    
Amortization of discount on Secured Promissory Note  250,000    
Gain on extinguishment of debt  (299,225)  (383,184)
Accrued registration payment arrangement  (1,857,760)   
Issuance of common stock for services     82,500 

Accrued interest payable

   195,539    55,277    142,616   146,869 

Issuance of common stock for reverse acquisition

   —      316,226  

Issuance of common stock for services

   215,025    —    

Rent expensed through increase in due to stockholder

   45,500    32,500  

Changes in operating assets and liablities:

   
Changes in operating assets and liabilities:        

Accounts receivable

   (212,382  (43,741  (11,300)  231,950 

Costs and estimated earnings in excess of billings on uncompleted contracts

   (50,145  (11,479

Prepaid expenses

   (183,414  (106,373
Prepaid expenses and other current assets  68,762   (61,263)

Accounts payable

   680,995    628,252    263,988   205,676 

Accrued expenses

   3,565,169    1,060,921    489,884   350,653 

Billings in excess of costs and estimated earnings on uncompleted contracts

   (25,159  25,159  
Due to related parties  19,376   72,124 
Other long-term liabilities     (19,887)
               

Net cash used in operating activities

   (3,413,267  (2,435,360  (1,558,343)  (2,036,922)
               

Cash flows from investing activities:

           

Purchase of property, plant and equipment

   (393,733  (37,169     (197,188)

Expenditures for license fees

   —      (937,330

Deposit on equipment

   (500,000  (732,796

Notes receivable issued

   (5,446  (230,000
               

Net cash used in investing activities

   (899,179  (1,937,295     (197,188)
               

Cash flows from financing activities:

           
Proceeds from issuance of notes payable  1,780,000   29,000 
Proceeds from issuance of notes payable to related parties  18,891    
Principal payments on notes payable  (641,491)  (139,522)
Principal payments on notes from related parties  (18,892)   
Principal payments on capital lease liabilities  (3,379)  (3,283)
Debt issuance costs paid  (53,250)   

Proceeds from sale of common stock, net of offering costs

   2,501,213    1,265,000    475,703   2,429,826 

Proceeds from sale of Series A Preferred Stock, net of offering costs

   1,390,541    —    

Net borrowings from stockholders

   892,000    2,967,000  

Principal payments on capital lease liabilities

   (32,565  —    
Proceeds from exercise of warrants to purchase common stock, net of offering costs     5,332 
Proceeds from exercise of warrants to purchase Series B Convertible Preferred Stock, net of offering costs     266,571 
Repurchase of shares of common stock for cancellation     (1,114,688)
               

Net cash provided by financing activities

   4,751,189    4,232,000    1,557,582   1,473,236 
               

Net change in cash and cash equivalents

   438,743    (140,655  (761)  (760,874)
        

Cash and cash equivalents at beginning of period

   42,793    183,448    17,723   778,597 
               

Cash and cash equivalents at end of period

  $481,536   $42,793   $16,962  $17,723 
               

Supplemental disclosures:

           

Cash paid during period for interest

  $19,141   $4,510   $10,307  $13,377 

Cash paid during period for income taxes

   —      —          

Non-cash transactions:

           
Issuance of common stock for services     82,500 

Issuance of common stock in settlement of liabilities

   2,104,639    903,469    1,605,614   50,000 

Issuance of common stock for services

   215,025    —    

Capital lease liabilities incurred

   701,377    —    

Reclassification of due to stockholder to note payable to stockholder

   52,000    —    

Accrued license fees

   —      592,934  

Accrued deposit on equipment

   —      497,520  
Issuance of common stock for registration penalty  120,000    

The accompanying notes are an integral part of these consolidated financial statements.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1 – Summary of Significant Accounting Policies

This summary of significant accounting policies of Geospatial Corporation, a Nevada corporation, formerly known as Geospatial Holdings, Inc., a Nevada corporationand subsidiaries (the “Company”) is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.

Nature of Operations

The Company utilizes innovative proprietary technologies to acquire and manage data related to underground assets. The Company’s services include pipeline data acquisition utility locating,and professional data management, and pipeline field services.management. The Company is located in Sarver, Pennsylvania, and provides services throughout the United States. The Company also provides services on a limited basis in Canada.

Consolidation

The Company’s financial statements include its wholly-owned subsidiaries Geospatial Mapping Systems, Inc. (“GMSI”), and Utility Services and Consulting Corporation, and Geospatial Pipeline Services, LLC.which ceased operations in 2011. All material intercompany accounts and transactions have been eliminated in consolidation.

On April 25, 2008, Kayenta Kreations, Inc. (“Kayenta”) acquired all the outstanding common stock of GMSI pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated March 25, 2008. Upon consummation of the Merger Agreement, GMSI became a fully-owned subsidiary of Kayenta, which was subsequent renamed “Geospatial Holdings, Inc.” Because GMSI’s stockholders owned a majority of the company upon consummation of the Merger Agreement, GMSI was deemed to be the acquiring entity. Accordingly, all historical financial information prior to the consummation of the Merger Agreement contained in these financial statements is that of GMSI.

Use of Estimates

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 disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Use of Estimates (continued)

Estimates and assumptions which, in the opinion of management, are significant to the underlying amounts included in the financial statements and for which it would be reasonably possible that future events or information could change those estimates include:

 

·Estimated useful lives of property and equipment;

Impairment assessment of intangible assets;

·Estimated costs to complete fixed-price contracts;

·Realization of deferred income tax assets;

·Estimated number and value of shares to be issued pursuant to registration payment arrangements;

 

Estimated useful lives of property and equipment;

Estimated costs to complete fixed-price contracts;

Realization of deferred income tax assets.

These estimates are discussed further throughout these Notes to Financial Statements.

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Going Concern

Since its inception, the Company has incurred net losses. In addition, the Company’s operations and capital requirements have been funded since its inception by sales of its common and preferred stock and advances from its chief executive officer. At December 31, 2015, the Company’s current liabilities exceeded its current assets by $4,885,637, and total liabilities exceeded total assets by $4,451,759. Those factors create an uncertainty about the Company’s ability to continue as a going concern. The Company’s management has implemented plans to secure financing sufficient for the Company’s operating and capital requirements, and to negotiate settlements or extensions of existing liabilities. There can be no assurance that such efforts will be successful. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Accounting Method

The Company’s financial statements are prepared on the accrual method of accounting.

Reclassifications

Certain amounts from the Company’s financial statements as of and for the year ended December 31, 2008 have been reclassified to conform to current year presentation.

Foreign Currency

The Company’s functional currency is the United States dollar. The Company transacts business in foreign currencies. At the date a foreign currency transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and recorded in United States dollars using the exchange rate in effect at that time. At each balance sheet date, balances that will be settled in foreign currencies are adjusted to reflect the current exchange rate. Any gain or loss resulting from changes in foreign currency exchange rates is included in net income in the period in which the exchange rate changes.

Cash and Cash Equivalents

The Company considers all highly liquid debt investments with a maturity of three months or less when purchased to be cash equivalents.

Accounts Receivable

Accounts receivable are presented in the statement of financial positionbalance sheet net of estimated uncollectible amounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company had no allowance for doubtful accounts was $10,000 at December 31, 20092015 and 2008.2014.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1 – Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are carried at cost. Depreciation of property and equipment is provided using the straight-line method for financial reporting purposes, and accelerated methods for tax purposes, based on estimated useful lives ranging from three to ten years. Depreciation expense was $183,896$118,344 and $150,926$101,447 for the years ended December 31, 20092015 and 2008,2014, respectively.

Expenditures for major renewals and betterments that materially extend the useful lives of assets are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

The Company leases vehicles, field equipment, and office equipment under leases with terms of two to three years. Each lease is analyzed using the criteria in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 840,Leases, to determine whether the lease is a capital or operating lease. Capital leases are recorded at the inception of the lease as property and equipment, and a capital lease liability of the same amount, at the lesser of the fair value of the leased asset or the present value of the minimum lease payments. Assets recorded under capital lease agreements are depreciated over their estimated useful lives. Depreciation of assets recorded under capital leases is included with depreciation expense related to owned assets. At December 31, 2009,2015, assets under capital leases and the related accumulated depreciation amounted to $930,946$16,870 and $23,734,$10,544, respectively. The company had noAt December 31, 2014, assets under capital lease at December 31, 2008.leases and the related accumulated depreciation amounted to $16,870 and $7,170, respectively.

Intangible Assets

Intangible assets consist of exclusive license rights to the patent pending DuctRunner Smart Probe™ technology. The Company licenses the technology from Reduct NV (“Reduct”), a Belgian company, the developer of the technology, under an Exclusive License and Distribution Agreement dated August 3, 2006 (as amended, the “Original Reduct License Agreement”). The Original Reduct License Agreement provides the Company with exclusive control rights to the DuctRunner Smart Probe™ technology throughout the continents of North America, South America, and Australia. The Company recorded total license fees of $1,367,000 upon use of the license. During 2009 and 2008, the Company incurred expense of approximately $3,100,000 and $1,206,000, respectively, in connection with maintenance of the license.

On December 15, 2009, the Company, Reduct, and Delta Networks Ltd., SA, (“Delta”) a Luxembourg company, the owner of substantially all of the capital stock of Reduct, entered into an Amended and Restated License and Distribution Agreement (the “Amended Reduct License Agreement”). The Amended License Agreement becomes effective upon an advance payment for purchase of Smart Probe™ equipment totaling $4,950,000 due January 31, 2010, and supersedes the Original Reduct License Agreement. The Amended Reduct License Agreement has an initial term of three years, and is renewable at the discretion of the Company for successive three-year terms. The Amended Reduct License Agreement restructures the payment and minimum purchase requirements that existed under the Original Reduct License Agreement.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1 – Summary of Significant Accounting Policies (continued)

Intangible Assets (continued)

In addition to the license fees, the Company is obligated to make minimum purchases of Smart Probes™. The minimum purchase requirements of the Amended Reduct License Agreement are set forth in Note 9.

Under the Original Reduct License Agreement, the license rights had an indefinite useful life. Accordingly, the rights were not amortized under FASB ASC 350,Intangible Assets – Goodwill and Other. Upon the execution of the Amended Reduct License Agreement, the Company determined that the license rights have an estimated useful life of twelve years. Accordingly, the license rights will be amortized over a twelve-year period beginning January 1, 2010. The useful life of the license rights is reviewed annually and the carrying value of the license rights is tested annually for impairment. Should the license rights be determined to be impaired, the value of the asset will be written down and a loss recognized in the period in which the asset’s recorded value exceeds its fair value.

Fair Value Measurements

FASB ASC 820-10,Fair Value Measurements and Disclosures—Overall, establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

In accordance with FASB ASC 820, the Company is required to adjust the carrying value or provide valuation allowance for its license fee intangible assets using fair value measurements on a nonrecurring basis. These assets are not measured at fair value on an ongoing basis. However, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that impairment may exist.

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Fair Value Measurements (continued)

The following table summarizes the assets measured at fair value on a nonrecurring basis as of the measurement date, December 31, 2009, by level within the fair value hierarchy:

      Fair Value Measurements at December 31, 2009
   

Total
Carrying

Value at

  

Quoted
prices

in active

  Significant other  Significant
   December 31,
2009
  markets
(Level 1)
  observable inputs
(Level 2)
  unobservable inputs
(Level 3)

Intangible asset – license fees

  $1,367,000  $—    $—    $1,367,000

The license fee intangible asset is subject to impairment testing on an annual basis, or sooner if circumstances indicate that impairment may exist. The valuation uses assumptions such as interest and discount rates, growth projections, and other assumptions of future business conditions. These valuation methods require a significant degree of management judgment concerning the use of internal and external data. In the event that these methods indicate that fair value is less than carrying value, the asset would be recorded at fair value as determined by the valuation models. As such, the Company classifies license fee intangible assets subject to nonrecurring fair value adjustments in the hierarchy of disclosure inputs as Level 3.

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Revenue Recognition

The Company records revenue when all of the following criteria are met:

·Persuasive evidence of an arrangement exists;

·Delivery has occurred or services have been rendered;

·The price to the buyer is fixed or determinable; and

·Collectability is reasonably assured.

 

Persuasive evidence of an arrangement exists;

Delivery has occurred or services have been rendered;

The price to the buyer is fixed or determinable; and

Collectibility is reasonably assured.

Substantially all of the Company’s contracts for services are rendered under the following types of contracts:

Fixed-price contracts are contracts in which the Company’s clients are billed at defined milestones for an agreed amount negotiated in advance for a specified scope of work. Revenues for fixed-price contracts are recognized under the percentage-of-completion method of accounting, whereby revenues are recognized ratably as those contracts are performed. This rate is based primarily on the proportion of contract costs incurred to date to total contract costs projected to be incurred for the entire project, or the proportion of measurable output completed to date to total output anticipated for the entire project.

Units of delivery contracts contracts are contracts in which the Company’s clients are billed an agreed amount for each unit of service, as defined in the contract, that is delivered to the client. Revenues for units of delivery contracts are recognized as each unit of service is completed.

Time-and-materials contracts are contracts in which the Company and the client negotiate billing rates, typically hourly, and bill based on the actual time expended, plus other direct costs incurred in connection with the contract. Revenues for time-and-materials contracts are recognized as the services are rendered.

Advance customer payments are recorded as deferred revenue until such time as theythe related services are recognized as revenue.rendered or performed.

Revenues are recorded net of sales taxes collected.

AdvertisingDeferred Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the related debt. The deferred debt issuance costs were fully amortized at December 31, 2015 and 2014.

Convertible Securities with Beneficial Conversion Features

During 2015, the Company issued a Secured Promissory Note of $1,000,000. The Secured Promissory Note is convertible at the lender’s option to the Company’s common stock at a price per share of 75% of the average bid price of the Company’s common stock for the ten trading days preceding the conversion. The Company expenses advertising costsrecorded the Secured Promissory Note in accordance with FASB ASC 470-20,Debt with Conversion and Other Options. The Company determined that the discount to market price on the conversion feature was a beneficial conversion feature, and that the intrinsic value of the feature was $250,000. This amount was recognized as they are incurred. Advertising expense foradditional paid-in capital, and as a discount on the years ended December 31, 2009 and 2008Secured Promissory Note that was $160,554 and $4,623, respectively.

completely amortized in 2015.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1 – Summary of Significant Accounting Policies (continued)

Deferred Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740,Income Taxes,which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryovers.

Deferred income taxes arise from the Company’s use of different accounting methods for financial reporting and income tax reporting purposes. The tax basis of certain start-up costs exceeds their basis for financial reporting purposes. The excess will be deductible for tax purposes as the start-up costs are amortized over 180 months. The basis for financial reporting purposes of certain license rights exceeds the tax basis of those license rights by the cumulative amortization for tax purposes. The excess will reverse if and when the license rights are written down due to impairment. The Company uses different methods of depreciation for tax and financial reporting purposes, resulting in different tax bases. This difference will reverse over the estimated useful lives of the Company’s property, plant and equipment. The tax basis of accounts receivable exceeds its basis for financial reporting purposes by the allowance for doubtful accounts. Amounts in the allowance for doubtful accounts will be deductible for tax purposes when specific accounts are deemed to be uncollectible. The tax basis of certain accruals exceeds its basis for financial reporting purposes. The excess will be deductible when the accrued amounts are paid. The tax basis of certain accrued expenses denominated in foreign currency exceeds its basis for financial reporting purposes by the amount of unrealized foreign currency losses. These losses will be deductible for tax purposes as the losses are realized when the accrued amounts are paid. The Company uses the completed contracts method of accounting for fixed-price contracts for tax purposes, and the percentage-of-completion method of accounting for fixed-price contracts for financial reporting purposes. The amount of revenue recorded for financial reporting purposes on contracts uncompleted at year end will be taxable, and the costs associated with those contracts will be deductible, when the contracts are completed. The Company has a net operating loss carryover from prior periods that is available to offset future taxable income.

The Company currently has a deferred tax asset resulting from the above differences in accounting methods for financial reporting and income tax reporting purposes. This deferred tax asset is completely offset by a valuation allowance due to the uncertainty of realization.

The Company is subject to taxation in various jurisdictions. The Company continues to remain subject to examination by U.S. federal authorities and various state authorities for the years 2009 through 2015. Due to financial constraints, the Company has not filed its federal and state tax returns for 2009 through 2015.

Gains on Extinguishment of Debt

Due to significant cash flow problems, the Company has negotiated concessions on the amounts of certain liabilities and extensions of payment terms. The Company accounts for such concessions in accordance with FASB ASC 470-60, Troubled Debt Restructurings by Debtors, and FASB ASC 405-20, Extinguishment of Liabilities and recognizes gains the extent that the carrying value of the liability exceeds the fair value of the restructured payment plan. Such gains are included as “Gains on extinguishment of debt” in “other income and expenses” on the Company’s Consolidated Statement of Operations. In addition, the Company has accounts payable that has aged or is expected to age beyond the statute of limitations. The Company is amortizing those liabilities over the remaining term of the statute of limitations. Such amortization amounted to $292,724 and $296,380 during the years ended December 31, 2015 and 2014, respectively.

Stock-Based Payments

The Company accounts for its stock-based compensation in accordance with FASB ASC 718,Stock Compensation. The Company records compensation expense for employee stock options at the fair value of the stock options at the grant date, amortized over the vesting period. The Company records expense for stock options, warrants, and similar grants issued to non-employees at their fair value at the grant date, or the fair value of the consideration received, whichever is more readily available.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1 – Summary of Significant Accounting Policies (continued)

Registration Payment Arrangements

The Company is contractually obligated to issue shares of its common stock to certain investors for failure to register shares of its common stock under the Securities Act of 1933, as amended (the “Securities Act”). The Company records such obligations in accordance with FASB ASC 825-20, Registration Payment Arrangements. The Company has recorded a liability for the estimated number of shares to be issued at the fair value of the stock to be issued. The Company measures fair value by the price of its common stock at its most recent sale. The Company reviews its estimate of the number of shares to be issued and the fair value of the stock to be issued quarterly. The liability is included on the Consolidated Balance Sheet under the heading “accrued registration payment arrangement,” and amounted to $547,315 and $2,525,075 at December 31, 2015 and 2014, respectively. Gains or losses resulting from changes in the carrying amount of the liability are included in the Consolidated Statement of Operations in other income and expense under the heading “registration payment arrangements” which amounted to a gain of $1,857,760 during the year ended December 31, 2015. There was no such gain or loss during the year ended December 31, 2014.

Segment Reporting

The Company operates as one segment. Accordingly, no segment reporting is presented.

Recent Accounting Pronouncements

The Company adopted FASB ASC 740-10-25, Income Taxes—Overall—Recognition,has reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. The Company believes that the following impending standards may have an impact on January 1, 2008. FASB ASC 740-10-25 provides guidance for how uncertain tax positions shouldits future filings. The applicability of any standard will be recognized, measured, presented and disclosed in the consolidated financial statements. FASB ASC 740-10-25 requires the evaluation of tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions have met a “more-likely-than-not” threshold of being sustainedevaluated by the applicable tax authority. Tax benefits relatedCompany and is still subject to tax positions not deemed to meet the “more-likely-than-not” threshold are not permitted to be recognized in the consolidated financial statements. The adoption of FASB ASC 10-25 had a minimal impact on the Company’s consolidated financial statements.

On January 1, 2009, the Company adopted the provisions of FASB ASC 805,Business Combinations, which significantly changes the accounting for business combinations. Under FASB ASC 805, an acquiring entity is required to recognize, with limited exceptions, all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value. FASB ASC 805 changes the accounting treatment for certain specific acquisition related items including, among other items: expensing acquisition related costs as incurred; valuing noncontrolling interests at fair value at the acquisition date; and expensing restructuring costs associated with an acquired business. FASB ASC 805 also includes a substantial number of new disclosure requirements. As the provisions of FASB ASC 805 are applied prospectively to business combinations for which the acquisition occurs after January 1, 2009, the full impact to the Company, while expected to be material, will be dependent upon any individual transactions consummated.

On September 30, 2009, the Company adopted FASB ASC 105,Generally Accepted Accounting Principles, which establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognizedreview by the Financial Accounting Standards Board to be applied by nongovernmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”). Rules and interpretive releases of the United States Securities and Exchange Commission (“SEC”) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements of Financial Accounting Standards, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which accounting guidance is referenced, the adoption of these changes had no impact on the Consolidated Financial Statements.Company.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1 – Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

In July, 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-11, Liabilities (Topic 405): Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  ASU 2013-11 provides guidance on the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The Company adopted ASU 2013-11 effective January 1, 2014. The Company’s adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers (Topic 606), a new revenue recognition standard that supersedes the existing standard and eliminates all industry-specific standards. The largely principles-based standard provides a comprehensive framework that can be applied to all contracts with customers, regardless of industry-specific or transaction-specific fact patterns. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities should apply the five-step model outlined in the standard to achieve that core principal. The standard will be effective for the Company on January 1, 2017, and may be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company does not expect that the adoption of ASU 2014-09 will have a material impact on the Company’s consolidated financial statements.

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

In June 2014, FASB issued ASU 2014-12, Compensation – Stock Compensation (Topic 718), an update regarding accounting for share-based payments for which the terms of an award provide that a performance target could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is achieved. The updated standard clarifies that such awards should be treated as a performance condition that affects vesting. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The standard will be effective for the Company on January 1, 2016, and may be applied either prospectively or retrospectively.The Company does not expect that the implementation of ASU 2014-12 will have a material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15,Presentation of Financial Statements – Going Concern (Subtopic 205-40), which provides authoritative guidance regarding management’s evaluation of conditions or events that raise substantial doubts about an entity’s ability to continue as a going concern, management’s plans to mitigate the effect of the conditions or events that raise such doubts, and disclosure requirements for entities in which there exists a substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 will be effective for the Company on January 1, 2017. Early application is permitted. The Company is currently assessing the financial statement impact of adopting this new standard.

In January 2015, the FASB issued ASU 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates the concept of an extraordinary item from GAAP. As a result, an entity is no longer required to separately classify, present, or disclose extraordinary events and transactions; however, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained. ASU 2015-01 will be effective for the Company beginning in fiscal 2017 and interim reporting periods within that year. The Company does not expect that the implementation of ASU 2015-01 will have a material effect on the Company’s financial position or results of operations.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented as a direct deduction from the associated debt liability on the balance sheet. ASU 2015-03 will be effective for the Company in fiscal 2017 and interim reporting periods within that year, using the retrospective method. The Company does not expect that the implementation of ASU 2015-03 will have a material effect on the Company’s consolidated financial statements.

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 2 – Capital Stock

The Company has authorized 100,000,000350,000,000 shares of common stock with a par value of $0.001 per share. Each outstanding share of common stock entitles the holder to one vote on all matters. Stockholders do not have preemptive rights to purchase shares in any future issuance of common stock. Upon the Company’s liquidation, common stockholders are entitled to a pro-rata share of assets, if any, after payment of creditors and preferred stockholders.

The Company has authorized 5,000,00025,000,000 shares of preferred stock with a par value of $0.001 per share. All powers and rights of the shares of preferred stock are determined by the Company’s Board of Directors at issuance.

On December 11, 2009,August 20, 2013, the Company filed a Certificate of Designations, Powers, Preferences and Rights of the Series A Preferred Stock of Geospatial Holdings, Inc. (the “Certificate of Designations”) with the State of Nevada. The Certificate of Designations designated 1,575,000Designation to designate 5,000,000 shares of Series AB Convertible Preferred Stock (“Series B Stock”) for issuance by the Company. Each share of Series A Convertible PreferredB Stock is convertible to ten shares of common stock in accordance withat the termsoption of the Certificateholder, or automatically upon the occurrence of Designations. Each holdercertain events. The holders of Series A Convertible PreferredB Stock is entitled tohave the number of votes equalsame voting rights and dividend participation rights as common stockholders in proportion to the number of shares of common stock into which the holders of Series A Convertible PreferredB Stock may be converted.would hold if those shares were converted to common stock. The holders of Series A Convertible Preferred StockB stock are entitled to a liquidation preference equal toof 150% of the original issue price, and a dividend preference overafter payment of which they participate in liquidation with the holders of common stock.

Note 3 – Merger

On April 25, 2008, Kayenta acquired allThe Company entered into a series of Subscription and Purchase Agreements with certain investors dated October 9, 2009 (the “October 2009 Subscription Agreement”) in connection with the outstandingsale of 2,000,000 shares of the Company’s common stock of GMSI(the “October 2009 shares”). Pursuant to the October 2009 Subscription Agreement, the Company agreed to register the October 2009 shares under the Securities Act by March 1, 2010. The Company failed to register the October 2009 shares by March 1, 2010, and consequently each investor that invested pursuant to the Merger Agreement.

PriorOctober 2009 Subscription Agreement is entitled to the closingreceive an additional allocation of 2% of its portion of the Merger Agreement, Kayenta shareholders approvedOctober 2009 Shares for each 30-day period that elapses after March 1, 2010, subject to certain restrictions.

The Company entered into a 2.8 for 1 forward stock split, resultingseries of Subscription and Purchase Agreements with certain investors dated December 14, 2009 (the “December 2009 Subscription Agreement”) in 3,685,618connection with the sale of 1,500,000 shares of Kayenta common stock outstanding at the closingCompany’s Series A Stock (the “December 2009 shares”). Each share of Series A Stock subsequently converted to 1.25 shares of the Merger Agreement.Company’s common stock. Pursuant to the MergerDecember 2009 Subscription Agreement, Kayenta issued one sharethe Company agreed to register the December 2009 shares under the Securities Act by March 1, 2010. The Company failed to register the December 2009 shares by March 1, 2010, and consequently each investor that invested pursuant to the December 2009 Subscription Agreement is entitled to receive an additional allocation of Kayenta’s common stock in exchange2% of its portion of the December 2009 Shares for each outstanding share of GMSI’s common stock, resulting in 20,074,188 shares of Kayenta common stock, for a total aggregate number of shares of Kayenta common stock of 23,759,806 outstanding upon consummation of the merger. Upon completion of the merger, GMSI became a fully-owned subsidiary of Kayenta, which was subsequently renamed “Geospatial Holdings, Inc.,” and GMSI’s shareholders obtained majority ownership of the shares of common stock of Geospatial Holdings, Inc. After the merger, GMSI’s former stockholders owned approximately 84.5% of the common stock of the Company, and Kayenta’s stockholders owned approximately 15.5% of the common stock of the Company.30-day period that elapses after March 1, 2010, subject to certain restrictions.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 32MergerCapital Stock (continued)

In accordance

The Company entered into a series of Subscription and Purchase Agreements withAccounting and Financial Reporting Interpretations and Guidance issued by certain investors dated March 19, 2010 (the “March 2010 Subscription Agreement”) in connection with the staffsale of 8,589,771 shares of the United StatesCompany’s common stock (the “March 2010 shares”). Pursuant to the March 2010 Subscription Agreement, the Company agreed to register the March 2010 shares under the Securities Act by September 1, 2010. The Company failed to register the March 2010 shares by September 1, 2010, and Exchange Commission, the merger was accounted for as a recapitalization. Accordingly, all consideration paid and costs incurredconsequently each investor that invested pursuant to the merger were chargedMarch 2010 Subscription Agreement is entitled to expense,receive an additional allocation of 2% of its portion of the March 2010 Shares for each 30-day period that elapses after September 1, 2010, subject to certain restrictions.

The Company entered into a series of Subscription and no goodwill or other intangible asset was recorded. All historical financial information priorPurchase Agreements with certain investors dated April 6, 2010 (the “April 2010 Subscription Agreement”) in connection with the sale of 112,000 shares of the Company’s common stock (the “April 2010 shares”). Pursuant to the consummationApril 2010 Subscription Agreement, the Company agreed to register the April 2010 shares under the Securities Act by September 1, 2010. The Company failed to register the April 2010 shares by September 1, 2010, and consequently each investor that invested pursuant to the April 2010 Subscription Agreement is entitled to receive an additional allocation of 2% of its portion of the Merger Agreement isApril 2010 Shares for each 30-day period that of GMSI. Kayenta’s results of operations have been included in the Company’s Consolidated Statements of Operations since the completion of the merger on April 25, 2008.elapses after September 1, 2010, subject to certain restrictions.

Prior

The Company has recorded a liability for its obligation to issue shares for failure to register shares pursuant to the merger, KayentaOctober 2009 Subscription Agreement, the December 2009 Subscription Agreement, the March 2010 Subscription Agreement, and the April 2010 Subscription Agreement (collectively, the “Subscription Agreements”). There is no limitation to the maximum potential consideration to be paid for failure to register shares pursuant to the Subscription Agreements. The Company registered the shares as required by the Subscription Agreements during 2015. The liability for accrued registration payment arrangements was a public shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. The acquisition was undertaken to provide the Company a public shell.

Note 4 – Accounts Receivable

Accounts receivable consisted of the following$547,315 and $2,525,075 at December 31, 2009:2015 and 2014, respectively.

 

Billed:

  

Fixed-price contracts:

  

Completed contracts

  $43,046  

Contracts in progress

   2,370  

Units of delivery contracts

   197,522  

Retainage

   2,981  

Unbilled

   27,734  

Less: allowance for doubtful accounts

   (10,000
     
  $263,653  
     

On June 22, 2014, the Company and its officers entered into a Settlement Agreement (the “Brooks Settlement Agreement”) with a group of investors (the “Brooks Investors”), to settle a lawsuit filed by the Brooks Investors against the Company and its officers in the Court of Common Pleas of Butler County, Pennsylvania. Pursuant to the Brooks Settlement Agreement, the Company acquired all shares of the Company’s common stock owned by the Brooks Investors, and the Brooks Investors agreed to forego their rights to receive additional shares for the Company’s failure to register shares pursuant to the October 2009 Subscription Agreement, the December 2009 Subscription Agreement, and the March 2010 Subscription Agreement. The Company acquired 4,321,205 shares of common stock from the Brooks Investors in consideration for $1,114,688, and agreed to cancel the shares.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 53Uncompleted ContractsAccrued Expenses

Costs, estimated earnings,

Accrued expenses consisted of the following:

         
  December 31,
2015
  December 31,
2014
 
         
Payroll and taxes $1,832,937  $1,134,918 
Accounting  50,737   67,280 
Insurance  34,014   33,902 
Contractors and subcontractors  20,227   60,848 
Interest  7,800   642 
Other  82,505   55,942 
         
Accrued expenses $2,028,220  $1,353,532 

Note 4 – Related-Party Transactions

The Company leases its headquarters building from Mark A. Smith, the Company’s chairman and billingschief executive officer. The building has approximately 3,200 square feet of office space, and is used by the Company’s corporate, technical, and operations staff. The Company incurred $78,000 of lease expense in each of the years ended December 31, 2015 and 2014. The lease is cancellable by either party upon 30 days’ notice.

During 2014, Mr. Smith advanced the Company $29,000. Interest on uncompleted contracts are summarized as followsthe note at 8% amounted to $123 and $47 for the years ended December 31, 2015 and 2014, respectively. The balance of the note was $29,047 at December 31, 2009:

Costs incurred on uncompleted contracts

  $104,152  

Estimated earnings

   73,420  
     
   177,572  

Billings to date

   (115,948
     
  $61,624  
     

Included in the accompanying balance sheet under the following captions:

Costs and estimated earnings in excess of billings on uncompleted contracts

  $61,624

Billings in excess of costs and estimated earnings on contracts in progress

   —  
    
  $61,624
    

Note 6 – Backlog

2014. The following schedule summarizes changes in backlog on fixed-price contractsnote was repaid during the year ended December 31, 2009. Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted fixed-price contracts in progress at the end of the year, and from fixed-price contractual agreements on which work has not yet begun. Backlog does not include any amounts from signed units of delivery or time-and-materials contracts.2015.

Backlog balance at December 31, 2008

  $838,627  

New contracts awarded during the year

   812,430  

Contract adjustments

   (758,216
     
   892,841  

Less: contract revenue earned during the period

   (612,191
     

Backlog balance at December 31, 2008

  $280,650  
     

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 74Notes ReceivableRelated-Party Transactions (continued)

During the years ended 2009 and 2008,

On November 9, 2012, the Company advanced cash totaling $5,446 and $230,000, respectively,Mr. Smith entered into a Lease Agreement, pursuant to Mid-Atlantic Pipe Services, Inc. (“MAPS”) in exchangewhich the Company leases a field vehicle from Mr. Smith. The lease is for Promissory Notes60 months, and is for substantially the same terms for which Mr. Smith leases the vehicle from MAPS. The Promissory Notes bear interest at 8% per annum, which totaled $30,315the manufacturer. Interest on the lease amounted to $249 and $24,026$346 for the years ended December 31, 20092015 and 2008,2014, respectively. The lease is recorded as a capital lease. At December 31, 20092015, gross assets recorded under the lease and 2008, MAPS owedassociated accumulated depreciation were $16,870 and $10,544, respectively. Future minimum payments under the capital lease are as follows as of December 31, 2015:

Year ending December 31, 2016 $3,628 
Year ending December 31, 2017  3,326 
Thereafter   
Total minimum payments  6,954 
Less:  minimum interest payments  (198)
Minimum principal payments $6,756 

During 2015, Thomas R. Oxenreiter, the Company’s chief financial officer, advanced the Company $397,373 and $361,612, respectively.$18,891. Interest on the note at 10% amounted to $448 for the year ended December 31, 2015. In addition, Mr. Oxenreiter received warrants to purchase 18,891 shares of the Company’s common stock in connection with the note. The note was repaid during 2015.

Note 85Income TaxesSenior Convertible Redeemable Notes

On October 15, 2010, the Company entered into a series of Senior Notes with certain investors. The initial principal amount of the Senior Notes totaled $1,155,000. Interest accrues on the Senior Notes at 10% per annum, payable quarterly by increasing the principal amounts of the Senior Notes. Upon certain instances of default, the interest rate may increase to 12% per annum. The principal and unpaid interest on the Senior Notes was due after 15 months, and was extendable for three additional six-month periods. The principal and unpaid interest on the Senior Notes is convertible at the option of the holders of the Senior Notes into the Company’s provision for (benefit from) income taxes is summarized below forcommon stock at $0.50 per share.

On June 22, 2014, a Senior Note was extinguished pursuant to a settlement agreement, resulting in a gain on extinguishment of debt of $77,803.

On February 26, 2015, a Senior Note was converted into 6,150,587 shares of the years endedCompany’s common stock.

The balance due on the Senior Notes amounted to $1,525,025 December 31, 2009 and 2008:2014. No Senior Notes were outstanding at December 31, 2015.

 

   Year Ended
December 31,
2009
  Year Ended
December 31,
2008
 

Current:

   

Federal

  $—     $—    

State

   —      —    
         
   —      —    
         

Deferred:

   

Federal

   (2,449,872  (1,319,303

State

   (777,737  (418,826
         
   (3,227,609  (1,738,129
         

Total income taxes

   (3,227,609  (1,738,129

Less: valuation allowance

   3,227,609    1,738,129  
         

Net income taxes

  $—     $—    
         

The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows for the years ended December 31, 2009 and 2008:

   Year Ended
December 31,
2009
  Year Ended
December 31,
2008
 

Federal statutory rate

  35.0 35.0

State income taxes (net of federal benefit)

  6.5   6.5  

Valuation allowance

  (41.5 (41.5
       

Effective rate

  0.0 0.0
       

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 86Income Taxes (continued)Notes Payable

Significant components

Current notes payable consisted of the Company’s deferred tax assets and liabilities are summarized below as of December 31, 2009 and 2008. A valuation allowance has been established as realization of such assets has not met the more-likely-than-not threshold requirement under SFAS 109.following:

         
  December 31,
2015
  December 31,
2014
 
Secured Promissory Note, payable to an individual, bearing interest at 10% per annum, due July 26, 2016, secured by substantially all assets of the Company.  The note is convertible to common stock at 75% of the weighted average trading price, and is secured by substantially all the assets of the Company $1,075,833  $ 
Unsecured Promissory Note, payable to an individual, bearing interest at 10% per annum  67,817    
Unsecured Convertible Promissory Notes, payable to individuals, bearing interest at 10% per annum, convertible to common stock at prices ranging from $0.20 to $0.25 per share  190,453    
         

Current portion of long-term notes payable

  154,645   232,892 
Current notes payable $1,488,748  $232,892 

 

   As of December 31, 
   2009  2008 

Start-up costs

  $96,492   $106,325  

License fees

   (88,247  (50,427

Depreciation

   (108,618  (81,885

Allowance for doubtful accounts

   4,150    4,150  

Accrued expenses

   1,330,179    13,488  

Uncompleted contracts

   (30,469  (13,634

Net operating loss carryforward

   5,024,929    3,022,791  
         

Deferred income taxes

   6,228,416    3,000,808  

Less: valuation allowance

   (6,228,416  (3,000,808
         

Net deferred income taxes

  $—     $—    
         

At December 31, 2009, the Company had federal and state net operating loss carryforwards of approximately $12,108,000. The federal and state net operating loss carryforwards expire beginning in 2021 and 2026, respectively. The amountLong-term notes payable consisted of the state net operating loss carryforward that can be utilized each year to offset taxable income is limited by state law.following:

         
  December 31,
2015
  December 31,
2014
 
Notes payable under settlement agreements with former employees, payable monthly with terms of up to 39 months, with interest rates ranging from 0% to 20% $154,645  $218,892 
         

Notes payable under settlement agreements with vendors, payable monthly with terms of up to 60 months, with interest rates ranging from 0% to 32%

     53,741 
Total long-term notes payable  154,645   272,633 
         

Less: current portion

  (154,645)  (232,892)
Long-term notes payable, less current portion $  $39,741 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 9 – Commitments and Contingencies

Amended Reduct License Agreement

The Company’s Amended Reduct License Agreement provides the Company with exclusive control over the rights to the DuctRunner Smart Probe™ technology throughout the continents of North America, South America, and Australia.

Pursuant to the Amended Reduct License Agreement, the Company must make minimum quarterly purchases as shown below on an annualized basis:

Year Ending

December 31,

  Minimum  Annual
Payments

2010

  $10,950,000

2011

  $11,750,000

2012

  $6,612,500

Bank Deposits

The Company maintains its cash in bank deposit accounts at financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The bank accounts at times exceed FDIC limits. The Company has not experienced any losses on such accounts.

Lease Obligations

The Company leases office space under non-cancelable operating leases with lease terms ranging from less than one year to two years. The Company leases vehicles, field equipment, and office equipment under non-cancelable capital leases with lease terms ranging from two to three years. Rent expense under non-cancelable operating leases was $103,206 and $85,233 for the years ended December 31, 2009 and 2008, respectively. Future annual minimum lease payments under non-cancelable capital and operating leases were as follows as of December 31, 2009:

Year Ending

December 31,

  Capital
Lease
Obligations
  Operating
Lease
Obligations
  Total

2010

  $283,701  $27,100  $310,801

2011

   280,963   19,800   300,763

2012

   222,725  ��—     222,725
            

Total minimum lease payments

   787,389   46,900   834,289

Less: amounts representing interest

   118,577   —     118,577
            

Present value of minimum lease payments

  $668,812  $46,900  $715,712
            

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 10 – Concentrations

Reduct is the developer and sole supplier of the DuctRunner Smart Probe™, which is an essential component of a significant portion of the Company’s services.

The Company derives a significant portion of its revenues from a few customers. Revenues from significant customers as a percentage of total revenues were as follows for the years ended December 31:

   2009  2008 

Customer A

  25.7 *  

Customer B

  19.4 —    

Customer C

  —     44.3

Customer D

  —     35.8

* Less than 10%.

Note 117Related-Party TransactionsCommitments and Contingencies

Bank Deposits

The Company leasesmaintains its headquarters building from Mark A. Smith, the Company’s Chairman and Chief Executive Officer. The building has approximately 3,200 square feet of office space, and is usedcash in bank deposit accounts at financial institutions. Accounts at each institution are insured by the Company’s corporate and engineering/operations staff.Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The bank accounts at times exceed FDIC limits. The Company incurred $78,000has not experienced any losses on such accounts.

Legal Matters

The Company is subject to various claims and legal proceedings covering a wide range of lease expensematters that arise in the ordinary course of its business activities. The Company believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or the results of operations of the Company.

Note 8 – Income Taxes

The Company’s provision for this building during each of(benefit from) income taxes is summarized below for the years ended December 31, 2009 and 2008. The Company owed Mr. Smith $26,000 and $32,500 for unpaid rent at December 31, 2009 and 2008, respectively.31:

During the year ended December 31, 2008, Mr. Smith loaned the Company $2,867,000 for working capital purposes. Interest on the loan at 8% per annum, compounded monthly, amounted to $52,242 during the year ended December 31, 2008. During 2008, $903,469 of the loan and accrued interest was settled by the issuance of 1,129,336 shares of the Company’s common stock at conversion price of $0.80 per share. At December 31, 2008, the balance due on the note, including accrued interest, was $2,015,772.

During the year ended December 31, 2009, Mr. Smith loaned the Company $882,000, net of repayments. In addition, Mr. Smith converted $52,000 of unpaid rent to the note payable. Interest on the loan at 8% per annum, compounded monthly, amounted to $178,491 during the year ended December 31, 2009.

On October 30, 2009, Mr. Smith and the Company entered into a Note Conversion Agreement, in which Mr. Smith converted the outstanding loan balance of $3,128,263 into: i) 2,000,000 shares of the Company’s common stock at a conversion price of $1.00 per share; ii) a $1,000,000 8% Unsecured Convertible Promissory Note (the “Smith Convertible Note”); and iii) a $128,263 8% Unsecured Promissory Note (the “Smith Demand Note”).

  2015  2014 
       
Current:      
Federal $  $ 
State      
       
Deferred:        
    Federal  (755,350)  (867,368)
    State  (239,794)  (275,355)
   (995,144)  (1,142,723)
Total income taxes  (995,144)  (1,142,723)
         
Less:  valuation allowance  995,144   1,142,723 
         
Net income taxes $  $ 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 118Related Party TransactionsIncome Taxes (continued)

The Smith Convertible Note bears interest at 8% per annum, compounded monthly. The Smith Convertible Note is payable on the earlierreconciliation of the Company’s closing of a round of convertible preferred or common stock financing of at least $10,000,000 or December 31, 2011. At any time prior to December 31, 2011, Mr. Smith may convert the outstanding principal balance of the Smith Convertible Notefederal statutory income tax rate to the Company’s common stock at a conversion price of $1.00 per share. Interest on the Smith Convertible Note was $13,637 for the year ended December 31, 2009. The balance due on the Smith Convertible Note, including accrued interest, was $1,013,637 at December 31, 2009. Minimum payments on the Smith Convertible Note wereeffective income tax rate is as follows as of December 31, 2009:

Year ending December 31, 2010

  $—  

Year ending December 31, 2011

   1,013,637
    

Total

  $1,013,637
    

Subsequent to December 31, 2009, on March 19, 2010, the Company cancelled the indebtedness owed pursuant to the Smith Convertible Note and in exchange Smith acquired 1,000,000 shares of the Company’s common stock at $1.00 per share on behalf of he and his wife; 200,000 shares of the Company’s common stock at $1.00 per share on behalf of 2000 Irrevocable Trust for Ian Smith; and 200,000 shares or the Company’s common stock at $1.00 per share on behalf of 2000 Irrevocable Trust for Benjamin Smith.

The Smith Demand Note bears interest at 8% per annum, compounded monthly, and is payable upon demand. Interest on the Smith Demand Note was $1,749 for the year ended December 31, 2009. At December 31, 2009, the balance due on the Smith Demand Note was $130,012.

On December 4, 2009, Mr. Smith advanced the Company $10,000. Interest on the note at 8% per annum, compounded monthly, for the year ended December 31, 2009 was $59. At December 31, 2009, the balance due on the note was $10,059.

During the year ended December 31, 2008, another stockholder loaned the Company $100,000 for working capital purposes. The stockholder owned approximately 14% of the Company’s outstanding common stock at the time of the advance. At December 31, 2008, the balance due on the note, including accrued interest, was $103,036. On March 10, 2009, the balance due on the note of $104,638, including accrued interest, was converted to 104,638 shares of the Company’s common stock and warrants to purchase 20,927 shares of the Company’s common stock at $1.50 per share, exercisable for ten years. Interest on the loan at 8% amounted to $1,603 and $3,036 for the years ended December 31:

  

2015

  

2014

 
Federal statutory rate  35.0%  35.0%
State income taxes (net of federal benefit)  6.5   6.5 
Valuation allowance  (41.5)  (41.5)
         
Effective rate  0.0%  0.0%

Significant components of the Company’s deferred tax assets and liabilities are summarized below. A valuation allowance has been established as realization of such assets has not met the more-likely-than-not threshold requirement under FASB ASC 740.

  

December 31,
2015

  December 31,
2014
 
Start-up costs $37,491  $47,325 
Depreciation  (37,759)  (37,684)
Accrued expenses  687,212   378,020 
Net operating loss carryforward  15,669,422   14,973,562 
         
    Deferred income taxes  16,356,366   15,361,223 
    Less:  valuation allowance  (16,356,366)  (15,361,223)
         
Net deferred income taxes $  $ 

At December 31, 20092015, the Company had federal and 2008,state net operating loss carryforwards of approximately $36,391,000. The federal and state net operating loss carryforwards will expire beginning in 2021 and 2026, respectively. The amount of the state net operating loss carryforward that can be utilized each year to offset taxable income is limited by state law.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 129 – Net Loss Per Share of Common Stock

Basic earningsnet loss per share are computed by dividing earnings available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earningsnet loss per share reflectreflects per share amounts that would have resulted if dilutive potential common stock had been converted to common stock. Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all warrants and options are used to repurchase common stock at market value. The number of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities.

The following reconciles amounts reported in the financial statements:statements for the years ended December 31:

 

   Year Ended
December 31,
2009
  Year Ended
December 31,

2008
 

Net loss

  $(7,797,976 $(4,519,002

Divided by:

   

Weighted average shares outstanding

   26,190,928    22,134,029  
         

Basic and fully-diluted net loss per share

  $(0.30 $(0.20
         
  2015  2014 
Net loss $(796,278) $(2,763,807)
         
Weighted average number of shares of common stock outstanding  137,222,159   110,507,506 
Dilutive potential shares of common stock  137,222,159   110,507,506 
         
Net loss per share of common stock:        
    Basic $(0.01) $(0.03)
    Diluted $(0.01) $(0.03)

During 2009, the Company issued 1,575,000 shares of Series A Preferred Stock. At December 31, 2009, each share of Series A Preferred Stock was convertible into one share of common stock. Upon the occurrence of certain events, the conversion ratio of Series A Preferred Stock to common stock may change.

The shares of Series A Preferred Stockfollowing securities were not included in the computation of diluted earningsnet loss per share, for the year ended December 31, 2009 because theas their effect of their conversion would be antidilutive.

The effect of the potential conversion of the Smith Convertible Note to 1,013,637 shares of common stock was not included in the computation of diluted earnings per share for the year ended December 31, 2009 because the effect of its conversion would be antidilutive.

The effects of options to purchase 12,195,000 and 11,670,000 shares of common stock, and warrants to purchase 5,716,272 and 3,837,545 shares of common stock were not included in the computation of diluted earnings per sharehave been anti-dilutive for the years ended December 31, 2009 and 2008, respectively, because the effect of their conversion would be antidilutive.

31:

  2015  2014 
Series B Convertible Preferred Stock     21,672,035 
Options and warrants to purchase common stock  3,494,749   9,880,828 
Warrants to purchase Series B Convertible Preferred Stock     2,220,976 
Secured Convertible Promissory Note  44,041,770    
Unsecured Convertible Promissory Notes  25,050    
Senior Convertible Redeemable Notes     4,377,612 
         
Total  47,561,569   38,151,451 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1310 – Stock-Based Payments

On December 1,

In 2007, the Company adopted the 2007 Stock Option Plan (the “Plan”“2007 Plan”), underpursuant to which the Compensation Committee of the Board of Directors (the “Committee”) may award grants of options to purchase up to 15,000,000 shares of the Company’s common stock to eligible employees, directors, and consultants, subject to exercise prices and vesting requirements determined by the Committee. On September 23, 2013, the Company reduced the number of shares of the Company’s common stock that may be subject to awards under the 2007 Plan to 9,050,000. The Board of Directors has reserved 15,000,0009,050,000 shares of the Company’s Common Stockcommon stock for issuance under the 2007 Plan. DuringThe Company did not grant any options to purchase shares of the yearCompany’s common stock pursuant to the 2007 Plan during the years ended December 31, 2009,2015 and 2014.

On September 23, 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which up to 25,000,000 shares of the Company’s common stock shall be available for grants of awards, including incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards, or performance compensation awards to eligible employees, consultants, and directors, provided that no more than 15,000,000 shares of common stock may be granted options to purchase 675,000as incentive stock options. The Board of Directors has reserved 25,000,000 shares of the Company’s common stock for issuance under the 2013 Plan. The Company granted stock appreciation rights on 2,362,500 and 96,000 shares of the Company’s common stock to eligible employees at prices ranging from $0.41and consultants pursuant to $1.50 per share. During the year2013 Plan during the years ended December 31, 2008, the Company granted options to purchase 1,870,000 shares of the Company’s common stock to eligible employees at prices ranging from $0.80 to $1.75 per share.2015 and 2014, respectively.

Using the Black-Scholes option pricing model, management has determined that the stock optionsappreciation rights granted in 20092015 and 20082014 had no value. Accordingly, no compensation cost or other expense was recorded for the stock options.appreciation rights. The current value of a share of the Company’s common stock used in the Black-Scholes option pricing model was determined by an independent valuation. The value per share as determined by the valuation was $0.27$0.0074 and $0.16$0.0096 per share as of December 31, 20092015 and 2008,2014, respectively.

The assumptions used and the weighted average calculated value of the stock options are as follows at December 31:

   2009  2008 

Risk-free interest rate

   4.6  2.2

Expected dividend yield

   None    None  

Expected life of options

   5 years    5 years  

Expected volatility rate

   50  25

Weighted average fair value of options granted

  $0.00   $0.00  

        
2015  2014 
Risk-free interest rate 1.73%  1.64%
Expected dividend yield  None   None 
Expected life of options  5 years   5 years 
Expected volatility rate  50%  50%
Weighted average fair value of options granted $0.00  $0.00 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1310 – Stock-Based Payments (continued)

The following is an analysis of the options to purchase the Company’s common stock:

   Total
Options
  Weighted
Average
Exercise
Price
  Aggregate
Fair
Value
  Weighted
Average
Remaining
Contractual
Term
(In Years)

Total options outstanding at January 1, 2008

  9,700,000   $0.50    

Granted

  1,870,000    0.86    

Exercised

  —      —      

Lapsed and forfeited

  —      —      
         

Total options outstanding at December 31, 2008

  11,570,000   $0.56  $—    9.0
         

Options vested and expected to vest at December 31, 2008

  9,649,998   $0.51  $—    8.9
         

Options exercisable at December 31, 2008

  9,649,998   $0.51  $—    8.9
         

Total options outstanding at January 1, 2009

  11,570,000   $0.56    

Granted

  675,000    0.69    

Exercised

  —      —      

Lapsed and forfeited

  (50,000  0.80    
         

Total options outstanding at December 31, 2009

  12,195,000   $0.56  $—    8.1
         

Options vested and expected to vest at December 31, 2009

  10,545,550   $0.53  $—    8.0
         

Options exercisable at December 31, 2009

  10,545,550   $0.53  $—    8.0
         

                 
  

Total

Options

  

Weighted

Average

Exercise

Price

  

Aggregate

Fair

Value

  

Weighted

Average

Remaining

Contractual

Term

(In Years)

 
             
Total options outstanding at January 1, 2014  24,950,000  $0.23         
 Granted  96,000   0.46         
 Exercised              
 Lapsed and forfeited              
Total options outstanding at December 31, 2014  25,046,000  $0.23  $   6.7 
Options vested and expected to vest at December 31, 2014  18,516,666  $0.29  $   6.0 
Options exercisable at December 31, 2014  18,516,666  $0.29  $   6.0 
Total options outstanding at January 1, 2015  25,046,000  $0.23         
 Granted  2,362,500   0.18         
 Exercised              
 Lapsed and forfeited              
Total options outstanding at December 31, 2015  27,408,500  $0.23  $   6.0 
Options vested and expected to vest at December 31, 2015  24,484,602  $0.24  $   5.7 
Options exercisable at December 31, 2015  24,484,602  $0.24  $   5.7 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1310 – Stock-Based Payments (continued)

The following is an analysis of nonvested options:

Nonvested
Options
Weighted
Average
Fair Value

Nonvested options at January 1, 2008

633,334$—  

Granted

1,870,000   —  

Vested

(533,332—  

Forfeited

—  —  
      

Nonvested options at December 31, 2008

 1,970,002Nonvested
Options
Weighted
Average
Fair Value
   —  

Granted

675,000—  

Vested

(945,552—  

Forfeited

(50,000—  
      

Nonvested options at December 31, 2009

January 1, 2014
 1,649,45011,733,334  $ 
    Granted96,000
    Vested(5,300,000)
    Forfeited
      
Nonvested options at December 31, 20146,529,334
    Granted2,362,500
    Vested(4,867,936)
    Forfeited
Nonvested options at December 31, 20154,023,898$

On June 6, 2007, the Company entered into an Agreement (the “2007 Agreement”) with Reduct to extend and amend the Original Reduct License Agreement. Pursuant to the 2007 Agreement, the Company granted Delta warrants purchase 3,000,000 shares of the Company’s common stock at $0.50 per share until October 31, 2009. The warrants expired on October 31, 2009.

On December 4, 2007, the Company granted warrants to purchase 100,000 shares of the Company’s common stock at $0.50 per share to a contractor. On February 6, 2008, the contractor exercised warrants to purchase 30,000 shares of the Company’s common stock, and the remaining warrants to purchase 70,000 shares of the Company’s common stock were cancelled.

On January 24, 2008, the Company granted warrants to purchase 87,545 shares of the Company’s common stock at $0.55 per share to contractors. The warrants expire on January 24, 2018.

On November 7, 2008, the Company granted warrants to purchase 250,000 shares of the Company’s common stock at $2.15 per share to a contractor. The warrants expire on November 7, 2018.

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1310 – Stock-Based Payments (continued)

On December 18, 2008, pursuant to Amendment No. 3 to the Original Reduct License Agreement, the Company granted Delta warrants to purchase 500,000 shares of the Company’s common stock at the lesser of $3.00 per share, or 85% of the price per share of any of the Company’s common stock or preferred stock sold in any subsequent offering. On December 21, 2009, pursuant to the Amended Reduct License Agreement, the exercise price on the warrants was changed to $0.43 per share. The warrants expire on December 31, 2013.

During 2009,2015, the Company granted warrants to purchase 70,9275,458,641 shares of the Company’s common stock to investors and contractors, at $1.50prices ranging from $0.08 to $0.25 per share for five years to certain stockholders in connection with the sale of common stock.share. The warrants expire in 2014.were granted for periods ranging from five to ten years.

During 2009, the Company granted warrants to purchase 217,800 shares of the Company’s common stock at $0.55 per share for ten years to certain contractors in settlement of contractual obligations. The warrants expire in 2019.

On March 6, 2009, the Company entered into an Employment Agreement with David Vosbein, the Company’s president (the “Vosbein Employment Agreement”). Pursuant to the Vosbein Employment Agreement, the Company granted warrants to purchase 2,000,000 shares of the Company’s common stock at $1.23 for ten years to Mr. Vosbein. Warrants to purchase 1,000,000 shares of the Company’s common stock vested immediately upon the grant, and with the balance vesting over twelve months. On October 30, 2009, the Company and Mr. Vosbein entered into an Agreement (the “Vosbein Warrant Agreement”). Pursuant to the Vosbein Warrant Agreement, the Company cancelled the warrants to purchase 2,000,000 shares of the Company’s common stock at $1.23, and issued Mr. Vosbein warrants to purchase 1,590,000 shares of the Company’s common stock at $1.00, with 1,173,333 shares vested immediately at the grant date, and the balance vesting over five months.

Using the Black-Scholes option pricing model, management has determined that the warrants to purchase the Company’s Common Stockcommon stock granted to non-employees in 2009 and 20082015 have no value. Accordingly, no expense was recorded upon the grants of the warrants to purchase the Company’s common stock. The current value of a share of the Company’s common stock used in the Black-Scholes option pricing model was determined by an independent appraisal.

The assumptions used and the weighted average calculated value of the stock purchase rights are as follows for the year ended December 31:31, 2015:

   2009  2008 

Risk-free interest rate

   4.6  2.2

Expected dividend yield

   None    None  

Expected life of warrants

   5 years    2 years  

Expected volatility rate

   50  25

Weighted average fair value of warrants granted

  $0.00   $0.00  

     
Risk-free interest rate  1.73%
Expected dividend yield  None 
Expected life of warrants  5 years 
Expected volatility rate  50%
Weighted average fair value of warrants granted $0.00 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1310 – Stock-Based Payments (continued)

The following is an analysis of the warrants to purchase the Company’s common stock.

   Total
Options
  Weighted
Average
Exercise
Price
  Aggregate
Fair
Value
  Weighted
Average
Remaining
Contractual
Term

(In Years)

Total warrants outstanding at January 1, 2008

  3,100,000   $0.50    

Granted

  837,545    2.49    

Exercised

  (30,000  0.50    

Lapsed and forfeited

  (70,000  0.50    
         

Total warrants outstanding at December 31, 2008

  3,837,545   $0.54  $—    2.1
         

Warrants vested and expected to vest at December 31, 2008

  3,837,545   $0.54  $—    2.1
         

Warrants exercisable at December 31, 2008

  3,837,545   $0.54  $—    2.1
         

Total warrants outstanding at January 1, 2009

  3,837,545   $0.54    

Granted

  6,878,727    0.84    

Exercised

  —      —      

Lapsed and forfeited

  (5,000,000  0.79    
         

Total warrants outstanding at December 31, 2009

  5,716,272   $0.58  $—    5.4
         

Warrants vested and expected to vest at December 31, 2009

  5,466,272   $0.71  $—    5.2
         

Warrants exercisable at December 31, 2009

  5,466,272   $0.71  $—    5.2
         
��

  Total
Options
  Weighted
Average
Exercise
Price
  Aggregate
Fair
Value
  Weighted
Average
Remaining
Contractual
Term
(In Years)
 
                 
Total warrants outstanding at January 1, 2014  10,719,362  $0.43         
Granted              
Exercised  (21,428)  0.25         
Lapsed and forfeited  (70,927)  1.50         
Total warrants outstanding at December 31, 2014  10,627,007  $0.42  $   2.5 
Warrants vested and expected to vest at December 31, 2014  10,627,007  $0.42  $   2.5 
Warrants exercisable at December 31, 2014  10,627,007  $0.42  $   2.5 
                 
Total warrants outstanding at January 1, 2015  10,627,007  $0.42         
Granted  5,458,641   0.13         
Exercised              
Lapsed and forfeited  (3,225,000)  0.48         
Total warrants outstanding at December 31, 2015  12,860,648  $0.29  $   4.7 
Warrants vested and expected to vest at December 31, 2015  12,860,648  $0.29  $   4.7 
Warrants exercisable at December 31, 2015  12,860,648  $0.29  $   4.7 

Geospatial Holdings, Inc.Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 20092015 and 20082014

Note 1310 – Stock-Based Payments (continued)

On August 20, 2013, the Company granted warrants to purchase 451,738 shares of its Series B Stock at $2.50 per share to certain investors in connection with the sale of Series B Stock. The warrants were vested upon issuance, and expire on August 20, 2018.

The following is an analysis of nonvested warrants:the warrants to purchase the Company’s Series B Stock. 

                 
  Total
Options
  Weighted
Average
Exercise
Price
  Aggregate
Fair
Value
  Weighted
Average
Remaining
Contractual
Term
(In Years)
 
                 
Total warrants outstanding at January 1, 2014  451,738  $2.50         
Granted              
Exercised  (106,745)  2.50         
Lapsed and forfeited              
Total warrants outstanding at December 31, 2014  344,992  $2.50  $   3.6 
Warrants vested and expected to vest at December 31, 2014  344,992  $2.50  $   3.6 
Warrants exercisable at December 31, 2014  344,992  $2.50  $   3.6 
                 
Total warrants outstanding at January 1, 2015  344,992  $2.50         
Granted              
Exercised              
Lapsed and forfeited              
Total warrants outstanding at December 31, 2015  344,992  $2.50  $   2.6 
Warrants vested and expected to vest at December 31, 2015  344,992  $2.50  $   2.6 
Warrants exercisable at  December 31, 2015  344,992  $2.50  $   2.6 

  

Nonvested
Warrants
Weighted
Average
Fair Value

Nonvested warrants at January 1, 2008

—  $—  

Granted

837,545—  

Vested

(837,545—  

Forfeited

—  —  

Nonvested warrants at December 31, 2008

—  —  

Granted

6,878,727—  

Vested

(4,628,727—  

Forfeited

(2,000,000—  

Nonvested warrants at December 31, 2009

250,000$—  

During 2009,

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 10 – Stock-Based Payments (continued)

On August 14, 2014, the Company issued 115,025165,000 shares of the Company’s common stock as payment for services. The Company recorded expense of $115,025,$82,500, the fair value of the services received.

Note 14 – Going Concern

Since its inception, the Company has incurred net losses. In addition, the Company’s operations and capital requirements have been funded since its inception by sales of its common stock and advances from its chief executive officer. At December 31, 2009, the Company’s current liabilities exceeded its current assets by $3,862,583. Those factors, as well as the Company’s commitments under the Amended Reduct License Agreement (as discussed in Note 9) create an uncertainty about the Company’s ability to continue as a going concern. The Company’s management is developing a plan to secure financing sufficient for the Company’s operating and capital requirements. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1511 – Subsequent Events

On January 1, 2010, the Company issued warrants to purchase 150,000 shares of common stock to a contractor. The warrants have an exercise price of $1.00 per share,

Secured Promissory Note Agreement and vest over twelve months. The warrants expire on January 1, 2020.Amendment

On January 7, 2010,27, 2016, the Company cancelledentered into an Agreement and Amendment (the “Amendment”) with David Truitt, the holder of a Secured Promissory Note issued by the Company dated April 2, 2015 (the “Existing Note”) in the principal amount of $1 million. Pursuant to the Amendment, Mr. Truitt extended an additional $250,000 loan to be added to the Existing Note under the same terms as the Existing Note, and extended the due date of the Existing Note to July 26, 2016. The Company granted Mr. Truitt a warrant to purchase 250,000 shares of the Company’s common stock exercisable at $2.15 per share due to a contractor, and issued warrants to purchase 250,00025,000,000 shares of the Company’s common stock at an exercisea price of $1.38$0.015 per share. The warrants expire on January 7, 2020.

On January 29, 2010, the Company and Reduct entered into the First Amendment to the Amended and Restated Exclusive License and Distribution Agreement, which extended the date for payment of the Company’s advance payment for Smart Probe™ equipment of $4,950,000 under the Amended Reduct License Agreement from January 31, 2010 to March 31, 2010 in consideration for a payment by the Company of $100,000. On March 12, 2010, the Company and Reduct entered into the Second Amendment to the Amended and Restated Exclusive License and Distribution Agreement, which extended the date for payment of the Company’s advance payment for Smart Probe™ equipment of $4,950,000 under the Amended Reduct License Agreement from March 31, 2010 to $2,500,000 by March 17, 2010, and $2,450,000 by April 30, 2010. The Company paid Reduct $2,500,000 on March 12, 2010. The Amended Reduct License Agreement will become effective upon the payment by the Company of $2,450,000 by April 30, 2010.

Series C Preferred Stock

On March 2, 2010,16, 2016, the Company entered intofiled a Strategic Advisory AgreementCertificate of the Designations, Powers, Preferences and Rights of Series C Convertible Preferred Stock (the “Strategic Advisory Agreement”“Certificate of Designations”) with Pace Global Energy Services, LLC (“Pace”) and Ridge Global, LLC (“Ridge”) to provide the Company with certain strategic advisory and other support services. Pursuant to the Strategic Advisory Agreement, the Company issued Pace Global Energy Services, LLC and Ridge Global, LLC warrants to purchase 1,600,000 and 2,400,000 shares, respectively,Nevada Secretary of the Company’s common stock at an exercise price of $1.00 per share. The warrants expire on March 2, 2012. Further, pursuant to the Strategic Advisory Agreement, the Company agreed to expand the number of members of the Company’s board of directors from three to five, and to appoint Timothy F. Sutherland, Chairman and Chief Executive Officer of Pace, and Thomas J. Ridge, President and Chief Executive Officer of Ridge, as members of the Company’s board of directors to fill the newly-created vacancies.

On March 19, 2010, the Company entered into a series of subscription agreements (collectively, the “March 2010 Subscription Agreement”) with various investors in connection with the sale of 8,589,771 shares of our common stock at $1.00 per share for an aggregate offering price of $8,589,771. Pursuant to section 7.1 of the March 2010 Subscription Agreement, the Company agreed to register the March 2009 Shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register the March 2010 Shares each investor would be entitled to receive an additional allocation of 2% of its portion of the March 2010 Shares for each 30 day period that elapsed after September 1, 2010. Also on March 19, 2010, Mark A. Smith, the Company’s Chief Executive Officer and the Chairman of the Board of Directors, acquired 1,000,000State, designating 10,000,000 shares of the Company’s undesignated preferred stock, par value $0.001 per share, as Series C Preferred Stock (the “Series C Preferred Stock”).

The Series C Preferred Stock shall be convertible at the option of the holder, at any time after an amendment to the Company’s Articles of Incorporation is filed and effective increasing the Company’s authorized shares of Common Stock to at least 680,000,000 shares (the “Filing Date”), into shares of common stock, par value $0.001 per share, of the Company (“Common Stock”) at a conversion ratio of one (1) share of Series C Preferred into twenty (20) shares of Common Stock, subject to adjustments for stock dividends, splits, combinations and similar events as described in exchangethe Certificate of Designations (the “Conversion Ratio”).

After the Filing Date, each share of Series C Convertible Preferred Stock will automatically be converted into shares of Common Stock at the Conversion Ratio, upon the earlier of (i) the closing of a public or private offer and sale of Common Stock for the cancellation of $1,000,000 of indebtedness owed to Mr. Smith by the Company. The Company also issued 513,233 shares of its common stock to Convertible Capital as a financing fee on the sale. The sales and issuances took place in a series of private placement transactions pursuant to the exemption from the registration requirementsaccount of the Securities Act of 1933, as amended, provided by Regulation D. The purchasers are accredited investors, andCompany in which the Company conducted the private placements without any general solicitation or advertisement and with a restriction on resale.

On April 6, 2010, the Company entered into a series of subscription agreements (collectively, the “April 2010 Subscription Agreement”) with various investors in connection with the sale of 112,000 shares of our common stock at $1.00 per share for an aggregate offering price (before deduction of $112,000. Pursuant to section 7.1underwriters’ discounts and commissions, if any) equals or exceeds $5,000,000 and the offering price per share of which equals or exceeds five (5x) times the Original Issue Price of the April 2010 Subscription Agreement,Series C Preferred Stock per share (before deduction of underwriters’ discounts and commissions, if any (such price per share of Common Stock subject to certain adjustments described in the Certificate of Designations); or (ii) the written consent of the holders of not less than a majority of the then outstanding shares of Series C Preferred Stock to the conversion of all then outstanding Series C Preferred Stock.

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 11 – Subsequent Events (continued)

The holders of the Series C Preferred Stock will be entitled, upon liquidation, winding up or dissolution, of the Company, agreed to registerbe paid out of the April 2009 Shares under the Securities Act by September 1, 2010. In the event thatfunds and assets of the Company failsthat may be legally distributed to so register the April 2010 SharesCompany’s shareholders prior and in preference to any payment or distribution to the holders of Common Stock or any shares of any other class or series of preferred stock subsequently created with a liquidation preference senior to the Common Stock, an amount equal to the Original Issue Price of the Series C Preferred Stock per share (as adjusted for stock splits, stock dividends and the like), plus all declared but unpaid dividends.

The Series C Preferred Stock is not entitled to receive any special dividend, but will participatepari passu with the Common Stock and each investor wouldother class or series of preferred stock of the Company in any dividends declared, on an as converted to Common Stock basis.

Except as described in the Certificate of Designations, holders of the Series C Preferred Stock will vote together with holders of the Company Common Stock on all matters and not as a separate class or series (subject to limited exceptions). Each holder of shares of Series C Preferred Stock shall be entitled to receive an additional allocationthe number of 2%votes equal to five times (5x) the number of its portionthose shares of the April 2010 Shares for each 30 day period that elapsed after September 1, 2010. The sales and issuances took place in a seriesCommon Stock into which such shares of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Regulation D. The purchasersSeries C Preferred Stock are accredited investors, andconvertible.

On March 16, 2016, the Company conducted the private placements without any general solicitation or advertisement and with a restriction on resale.

sold 1,250,000 shares of Series C Preferred Stock to Mr. Truitt for consideration of $250,000. 

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles or practices or financial statement disclosure.

Item 9A(T).  Controls and Procedures.

Item 9A.Controls and Procedures.

Evaluation of Controls and Procedures

As of December 31, 2009,2015, based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a -15(e) and 15(d)-15(e) under the Exchange Act), our Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the applicable time periods specified by the Commission’s rules and forms. This includes controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended.Act. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective at December 31, 2009.2015.

We did not become aware of any material weaknesses or significant deficiencies in our internal control over financial reporting. However, during our evaluation, we became aware of matters that relate tosignificant deficiencies in our internal control deficiencies that were of a lesser magnitude than significant deficiencies.control. These matters were: 1) filing system and retention of records; 2) lack of segregation of duties for accounting transactions; 2)3) non-timely preparationfiling of administrative documents; 3) lack of a disaster recovery plan; 4) lack of an audit committee of the board of directors; and 5) lack of a compensation committee of the board of directors.corporate income taxes.

Management believes that these matters are due to the small size of the Company’s administrative and accounting staff. Management is taking action in 20102016 to improve these matters by 1) increasing the size of the Company’s accounting staff; 2) increasing the size of the Company’s administrative staff; 3) implementing a disaster recovery plan; 4) investigating the feasibility of creating an audit committee of the board of directors; and 5) investigating the feasibility of creating a compensation committee of the board of directors.staff.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes to Internal Controls over Financial Reporting

There was no significant change in the Company’s internal controls over financial reporting that occurred during the most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

Item 9B.Other Information.

None.

None. 

PART III

 

Item 10.Directors, Executive Officers and Corporate Governance. [Under W&S Review]

 Directors and Executive Officers

Our directors and executive officers, their ages and positions as of December 31, 2009, are set forth below. All of our directors will hold office until the next annual meeting of shareholdersstockholders and the election and qualification of their successors.successors unless they resign or are terminated earlier. 

 

Name

 Age 

Position(s)

Mark A. Smith 5561 Chairman of the Board of Directors and Chief Executive Officer
Troy G. Taggart50President
Thomas R. Oxenreiter 4350 Chief Financial Officer, Secretary, and Director
David Vosbein68President and Director
Todd R. Porter49Executive Vice President of Worldwide Energy Operations
Richard W. McDonald66Executive Vice President of GIS Operations
Richard B. Nieman73Executive Director of Corporate Development
Linda M. Ward56Executive Vice President of Business Development
Thomas J. Ridge64Director
Timothy Sutherland59Director

Mark A. Smithhas served as our Chairman of the Board and Chief Executive Officer since our inception in 2006.2008. Prior to that, Mr. Smith was a founder of, and served as President and Chief Executive Officer from 1998 to 2005 and Chairman through 2006 of Underground Solutions, Inc. (“Underground Solutions”) (OTC BB: “UGSI”), an infrastructure technology company that developed pipeline technologies. Prior to his experiencesserving with Underground Solutions, Mr. Smith was involved as a principal or investor in several construction, real estate and technology companies. Mr. Smith’s expertise in the Company’s industry led us to conclude that he would be a valuable member of the Board of Directors. As our founder, he brings historical knowledge and strategic insight to the Board.

Troy G. Taggartjoined the Company as an employee in 2012 and has served as our President since 2013. Mr. Taggart held executive and senior-level positions with several financial services firms prior to co-founding McKim and Company (Formerly VentureRound), a boutique investment banking firm, in 2001. Mr. Taggart served as Executive Vice President of Bacterin International (AMEX/NYSE: “BONE”) from 2008 through 2012. 

Thomas R. Oxenreiter, CPAhas served as our Chief Financial Officer, since February, 2008 and was appointed Secretary, and Director after the Merger. Prior to that, Mr. Oxenreiter was a self-employed Certified Public Accountant and consultant from 2005 tosince 2008. Mr. Oxenreiter served in several capacities, including Controller, for UBICS, Inc. from 2002 to 2005. Prior to 2002, Mr. Oxenreiter worked for several years in public accounting and private industry.

David Vosbein has served as our President since December 15, 2008. Prior Mr. Oxenreiter is a graduate of Villanova University. Mr. Oxenreiter’s financial expertise led us to conclude that Mr. Vosbein was our Executive Vice President since November 3, 2008. Prior to joining the Company, Mr. Vosbein founded the Offshore Group, an independent oil and gas exploration and production company where he served as CEO since 2003. During that time, Mr. Vosbein also establishedwould be a joint venture flexible pipe production plant in Changchun, China (Changchun Pipe Co.) and also founded Simulis, LLC, a licensor of patented technology and software tools providing Simulation-Based Assessment and Training Products for energy, healthcare and aviation industries. David Vosbein is Richard Nieman’s brother-in-law.

Todd R. Porterhas served as our Vice President of Worldwide Energy Operations, since September, 2008. Prior to joining the Company, Mr. Porter was Director of Pipeline Integrity Management for Tuboscope Pipeline Services, a division of National Oilwell Varco Co. from 2001 to 2008. Mr. Porter holds Bachelor of Arts and Master of Engineering degrees from the University of Calgary, and a Master of Business Administration degree from Texas A&M University. On September 15, 2008, the Company entered into an employment agreement with Mr. Porter. Pursuant to the employment agreement, Mr. Porter will be employed until April 21st, 2011, unless terminated earlier, with or without cause. Mr. Porter’s Employment Agreement provides for a base salary of $220,000 per year. In addition, as partial compensation for Mr. Porter’s employment, Mr. Porter was granted a ten year stock option award with respect to 500,000 shares of common stock of the Company at an exercise price of $0.80. This option award is (a) non-qualified option granted under the 2007 Stock Option Plan of the Company dated December 1, 2007, (b) 1/3 of the options will vest and be exercisable 365 days from the date of grant, and 1/3 shall vest on each successive 365 day period thereafter, and (c) shall be further documented by an option agreement in the form customarily used by the Company for non-qualified option awards under that plan, but with all terms consistent with the Employment Agreement.

Richard W. McDonaldhas served as our Executive Vice President of GIS Operations since October, 2008. Prior to joining the Company, Mr. McDonald was Assistant Vice President of Michael Baker Jr. Inc.’s Geospatial Information Technologies division. On October 10, 2008, the Company entered into an Agreement Not-To-Compete and an Option Award Agreement with Mr. McDonald. In accordance with the Option Award Agreement, the Company granted Mr. McDonald an option to purchase all or any part of an aggregate of 120,000 of the Company’s Shares at an exercise price of $1.75. The option will expire on October 10, 2018. One third of the options vested on October 10, 2009, and one third shall vest on each subsequent 12 month anniversary of October 10, 2008.

Richard Nieman has served as our Executive Director of Corporate Development since our inception in 2006 and was appointed Director after the Merger. Prior to that, Mr. Nieman was a co-founder of Underground Solutions with Mr. Smith, our Chief Executive Officer, and served as Underground Solutions’ Executive Vice President of Marketing and Sales from 1998 until 2005. On November 3, Mr. Nieman resigned as a Director. Richard Nieman is David Vosbein’s brother-in-law.

Linda M. Ward has served as our Executive Vice President of Business Development since our inception in 2006. Prior to that, from 2002 to 2006, Ms. Ward served as the Director of Business Development for Shaw Environmental & Infrastructure, Inc., which served as the environmental, science, engineering and construction division of The Shaw Group, Inc., a New York Stock Exchange listed company.

Tom Ridge has served as a Director since March 2, 2010. Mr. Ridge is also president and CEO of the international consulting firm Ridge Global LLC, headquartered in Washington, DC. He served as the nation’s first Secretary of the U.S. Department of Homeland Security from January 2003 through January 2005, and as the Assistant to the President for Homeland Security from October 2001 through December 2002. Previously, he was governor of the Commonwealth of Pennsylvania from 1995 through October 2001 and avaluable member of the U.S. House of Representatives from 1983 through 1995. A Vietnam combat veteran, Secretary Ridge works with multiples organizations to assist our nation’s veterans, serves as chairman of the National Organization on Disability and co-chairs the Flight 93 National Memorial. Mr. Ridge serves on the Advisory Board of Ridge Global, LLC. He also serves on public and private boards, including the Institute for Defense Analyses and the Center for the Study of the Presidency and Congress. He holds a B.S. from Harvard University and J.D. from the Dickinson School of Law.

Timothy Sutherland has served as a Director since March 2, 2010. Mr. SutherlandDirectors. As our current Chief Financial Officer, he is the founder of Pace Global Energy Services, LLC (“Pace Global”), formed in 1976 and is its majority stock holder. He has guided the development of Pace Global into an internationally recognized financial and energy advising and asset management firm. Mr. Sutherland has received his Masters in Business Administration from The Stern School at New York University. He serves onwell suited to inform the Board of Advisors for the University of Notre Dame’s Mendoza Graduate School of Business and serves on the University’s Trustee Cabinet Committee on Capital Development. He serves as Executive Director of Boardcurrent operations of the Hill School and served as its Chairman for the period 1989-1994. Mr. Sutherland is ChairmanCompany. As a Certified Public Accountant, he brings significant financial expertise. 

Corporate Governance

 We have not adopted a code of the Board for Pace Global. He serves on the Boardethics. We intend to adopt a code of Advisors for C2 Facility Solutions, LLC and serves on the Board for Standard Solar, Inc.

ethics during 2016. 

Item 11.Executive Compensation. [Under W&S Review]

The following table sets forth a summary for the fiscal years ended December 31, 20092015 and 20082014 of the cash and non-cash compensation awarded, paid or accrued by the Company to our NamedChief Executive Officers.Officer and our two most highly compensated officers other than our Chief Executive Officer who served in such capacities in 2015 (collectively, the “Named Executive Officers”). All currency amounts are expressed in U.S. dollars.

Summary Compensation Table

 

Name and Principal Position
Name and Principal Position Year  Salary
($)
  Bonus
($)
  Stock
Award(s)
($)
  Option
Award(s)
($)(1)
  Non-Equity Incentive Plan Compensation
($)
  Nonqualified Deferred Compensation Earnings
($)
  All Other Compensation
($)(2)
  Total
($)
 
Mark A. Smith, 2015   320,000                  23,618   343,618 
Chairman of Board of Directors and Chief Executive Officer 2014   320,000   96,000               25,155   441,155 
Troy G. Taggart 2015   225,000                  21,816   246,816 
President 2014   225,000   67,500               23,020   315,520 
Thomas R. Oxenreiter, 2015   175,000                  18,021   193,021 
Chief Financial Officer 2014   175,000   52,500               17,873   245,373 

YearSalary
($)
Bonus
($)
Stock
Award(s)

($)
Option
Award(s)

($)(1)
Non-Equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($)
Total
($)

Mark A. Smith,

Chairman of Board of Directors and Chief Executive Officer

2009
2008
327,385
291,029
—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

24,641
10,400
352,026

301,426

Thomas R. Oxenreiter,

Chief Financial Officer

2009
2008
127,884
110,978
—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

18,892
9,900
146,777

120,878

David Vosbein,

President

2009
2008
—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

Todd R. Porter,

Executive Vice President, Worldwide Energy Operations

2009
2008
225,077
59,936
—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

50,948

—  

276,025

59,936

Richard W. McDonald,

Executive Vice President, GIS Operations

2009
2008
188,246
26,067
—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

18,554

—  

206,800

26,067

 

(1)This column sets forth the amounts that the Company recognized as compensation expense in its financial statements for 2009 and 2008. The Company determines expense for grants of options to purchase shares of the Company’s common stock (“Stock Options”) under Financial Accounting Standards Board Accounting Standards Codification 718,Stock Compensation. Using the Black-Scholes option pricing model, management has determined that the Stock Optionsstock appreciation rights granted in 2009 and 2008 had2015 to the Named Executive Officers have no value.
(2)This column includes employee benefit amounts including health dental and life insurance, as well as $26,000 in education reimbursement for Todd R. Porter and $4,150 in reimbursement for tax preparation for Mark A. Smith.insurance.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information with respect to the Named Executive Officers concerning equity awards granted by the Company as of December 31, 2009. Prior to April 25, 2008 the Named Executive Officers were not employees of the Registrant.2015.

                    
  Option Awards Stock Awards 
Name Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
 Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
 Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
 Option
Exercise
Price
Per
Share
($)
 Option
Expiration
Date
 Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
 Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
 Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
 Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
 
Mark A. Smith 8,000,000(1)  .50 12-01-2017     
Mark A. Smith 3,000,000(2)  .07 10-18-2023     
Troy G. Taggart 3,000,000(2)  .07 10-18-2023     
Troy G. Taggart 50,000(3)50,000  .15 10-23-2025     
Thomas R. Oxenreiter 100,000(4)  .80 3-13-2018       
Thomas R. Oxenreiter 3,000,000(2)  .07 10-18-2023     
Thomas R. Oxenreiter 50,000(3)50,000  .15 10-23-2025     

 

  Option Awards Stock Awards

Name

 Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
  Equity
Incentive
Plan
Awards:
Number  of
Securities
Underlying
Unexercised
Unearned
Options
(#)
 Option
Exercise
Price
Per
Share
($)
 Option
Expiration
Date
 Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)
 Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($)
 Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units  or
Other
Rights
That
Have Not
Vested
(#)
 Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)

Mark A. Smith

 8,000,000(1) —     —   .50 12-01-2017 —   —   —   —  

Thomas R. Oxenreiter

 66,666(2) 33,334(2)  —   .80 3-13-2018 —   —   —   —  

David Vosbein

 1,590,000(3) —     —   1.00 3-06-2019 —   —   —   —  

Todd R. Porter

 166,666(4)  333,334(4)  —   .80 4-24-2018 —   —   —   —  

Richard W. McDonald

 40,000(5)  80,000(5)  —   1.75 10-10-2018 —   —   —   —  

(1)Option to purchase 8,000,000 shares of Common Stockcommon stock at $.50 per share granted December 1, 2007, vested on December 1, 2007, and expires on December 1, 2017.

(2)Stock appreciation rights on 3,000,000 shares of common stock at $0.07 per share granted October 18, 2013, vested one-third on October 18, 2013, one-third on October 18, 2014, and one-third on October 18, 2015. The stock appreciation rights expire on October 18, 2023.
(3)Stock appreciation rights on 100,000 shares of common stock at $0.15 per shares granted on October 23, 2015, vested one-half on October 23, 2015, and will vest one-half on October 23, 2016. The stock appreciation rights expire on October 23, 2025.
(4)Option to purchase 100,000 shares of Common Stock at $0.80 per share granted March 13, 2008, vested one-third on March 13, 2009, one-third on March 13, 2010, and vest one-third on March 13, 2011. The option expires on March 13, 2018.

 

(3)Warrant to purchase 1,590,000 shares of Common Stock at $1.00 per share granted October 30, 2009; warrants to purchase 1,173,333 shares vested on October 30, 2009; warrants to purchase 83,333 shares vested on November 6, 2009; warrants to purchase 83,334 shares vested on December 6, 2009; warrants to purchase 83,333 shares vested January 6, 2010; warrants to purchase 83,333 shares vested on February 6, 2010; warrants to purchase 83,334 shares vested on March 6, 2010. The warrants expire on March 6, 2019.

(4)Option to purchase 500,000 shares of Common Stock at $0.80 per share granted April 24, 2008 vested one-third on April 24, 2009, vest one-third on April 24, 2010, and one-third on April 24, 2011. The option expires on April 24, 2018.

(5)Option to purchase 120,000 shares of Common Stock at $1.75 per share granted October 10, 2008 vested one-third on October 10, 2009, vest one-third on October 10, 2010, and one-third on October 10, 2011. The option expires on October 10, 2018.

Director Compensation

Other than compensation of Named Executive Officers disclosed in the Summary Compensation Table, the Company did not pay any compensation to Directors.

Employment Agreements and Change in Control Arrangements

On December 1, 2007, GMSIOctober 18, 2013, the Company entered into an Employment Agreement with Mark A. Smith, the Company’s Chairman and Chief Executive Officer (the “Smith“2013 Smith Employment Agreement”). The 2013 Smith Employment Agreement provides for a base salary of $320,000 per year, plus certain expenses and employee benefits, and an annual bonus dependent upon the attainment of certain performance measures. The 2013 Smith Employment Agreement expires on November 30, 2010, afterhas an initial expiration date of October 18, 2016, which itexpiration date is automatically extended by one day during each day toof the date one year fromterm of the agreement so that day,the unexpired term is always three years, unless either Mr. Smith or the Company terminateterminates the automatic extension provision. Pursuant to the Smith Employment Agreement, Mr. Smith was awarded options to purchase 8,000,000 shares of GMSI’s common stock at an exercise price of $0.50 per share. Pursuant to the Merger Agreement, all options to purchase shares of GMSI’s common stock were converted to options to purchase shares of the Company’s Common Stock. The Smith Employment Agreement is filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on May 1, 2008.

Upon a change in control, as defined in the 2013 Smith Employment Agreement, and for six months thereafter, Mr. Smith may terminate the Smith Employment Agreement. Upon such termination, the Company must pay Mr. Smith a lump sum equal to two times Mr. Smith’s salary and targetannual bonus on the date of termination for the remaining term of the 2013 Smith Employment Agreement. Also upon such termination, all equity awards granted by the Company to Mr. Smith immediately vest and remain exercisable for their original term, and all employee benefits remain in place for one year.

On

Prior to October 18, 2013, the Company and Mr. Smith were parties to an Employment Agreement dated December 1, 2007 GMSI entered into an Employment Agreement with Richard Nieman, the Company’s Director of Corporate Development (the “Nieman“2007 Smith Employment Agreement”). The Nieman Employment Agreement provides, which provided for a base salary of $120,000$320,000 per year, plus certain expenses and employee benefits.benefits, and an annual bonus dependent upon the attainment of certain performance measures. The 2007 Smith Employment Agreement expired on November 30, 2010, after which it was automatically extended each day to the date one year from that day, until it was superseded by the 2013 Smith Employment Agreement. Pursuant to the Nieman2007 Smith Employment Agreement, Mr. NiemanSmith was awarded options to purchase 1,000,0008,000,000 shares of the GMSI’sCompany’s common stock at an exercise price of $0.50 per share. Pursuant to the Merger Agreement, all options to purchase shares of GMSI’s common stock were converted to options to purchase shares of the Company’s Common Stock. The Nieman Employment Agreement is filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on May 1, 2008.

Upon a change in control, as defined in the Nieman2007 Smith Employment Agreement, and for six months thereafter, Mr. Nieman maySmith could terminate the Nieman2007 Smith Employment Agreement. Upon such termination, the Company mustwould pay Mr. NiemanSmith a lump sum equal to Mr. Nieman’sSmith’s salary and target bonus on the date of termination for the remaining term of the Nieman2013 Smith Employment Agreement. Also upon such termination, all equity awards granted by the Company to Mr. NiemanSmith would immediately vest and remain exercisable for their original term, and all employee benefits would remain in place for one year.

On October 18, 2013, the Company entered into an Employment Agreement with Thomas R. Oxenreiter, the Company’s Chief Financial Officer (the “Oxenreiter Employment Agreement”). The Oxenreiter Employment Agreement provides for a base salary of $175,000 per year, plus certain expenses and employee benefits, and an annual bonus dependent upon the attainment of certain performance measures. The Oxenreiter Employment Agreement has an initial expiration date of October 18, 2016, which expiration date is automatically extended by one day during each day of the term of the agreement so that the unexpired term is always three years, unless either Mr. Oxenreiter or the Company terminates the automatic extension provision.

Upon a change in control, as defined in the Oxenreiter Employment Agreement, and for six months thereafter, Mr. Oxenreiter may terminate the Oxenreiter Employment Agreement. Upon such termination, the Company must pay Mr. Oxenreiter a lump sum equal to Mr. Oxenreiter’s salary and annual bonus on the date of termination for the remaining term of the Oxenreiter Employment Agreement. Also upon such termination, all equity awards granted by the Company to Mr. Oxenreiter immediately vest and remain exercisable for their original term, and all employee benefits remain in place for one year.

Item 12.Security Ownership of Certain Beneficial Owners and Management. [Under W&S Review]

Security Ownership of 5% Beneficial Owners, Directors and Management

The following tables settable sets forth information, as of April 14, 2010,4, 2016, regarding beneficial ownership of our Common Stock, and Series A Convertible Preferred Stock (on an as-converted basis)common stock to the extent known to us, by:

(i) each person who is known by us to own beneficially more than 5% of our Common Stockoutstanding shares of common stock or Series A Convertible Preferred Stock;B Stock (each a “5% Stockholder”);

(ii) each Director;

(iii) our Chiefeach Named Executive OfficerOfficer; and our two most highly compensated officers other than our Chief Executive Officer who served in such capacities in 2009 (collectively, the “Named Executive Officers”); and

(iv) all of our Directors and Named Executive Officers collectively.as a group.

We have determined beneficial ownership in accordance with the Rules of the SEC. Unless otherwise noted, we believe that each person named in the table has sole voting and investment power with respect to all shares of our Common Stock or Series A Convertible Preferred Stock (on an as-converted basis)common stock that he or she beneficially owns.

Applicable percentage ownership of common stock is based on 143,336,073 shares of common stock outstanding. For purposes of these tables, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereofApril 4, 2016 upon exercise of options, warrants and convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not those held by any other person) and that are exercisable within 60 days from the date hereof have been exercised. Unless otherwise indicated, the address of each 5% Stockholder, Director and Named Executive Officer is 229 Howes Run Road, Sarver, PA 16055.

 

Title of Class

  

Name and Address or Number in

Group

  Amount and Nature of
Beneficial Ownership
  Percentage of
Class (%)

Common Stock

  

Anthony F. Hovey

1724 Plaza 600 Building

600 Stewart Street

Seattle, WA 98101

  3,450,565(1) 7.9

Common Stock

  

Mark A. Smith

229 Howes Run Road

Sarver, PA 16055

  20,868,695(2) 40.6

Common Stock

  

Todd R. Porter

229 Howes Run Road

Sarver, PA 16055

  343,333(3) *

Common Stock

  

Richard W. McDonald

229 Howes Run Road

Sarver, PA 16055

  45,000(4) *

Common Stock

  

Thomas R. Oxenreiter

229 Howes Run Road

Sarver, PA 16055

  78,437(5) *

Common Stock

  

David Vosbein

229 Howes Run Road

Sarver, PA 16055

  1,590,000(6) 3.5

Common Stock

  

Delta Networks Limited SA

Molenberglei 42

2627 Schelle, Belgium

  3,500,000(7) 7.5

Common Stock

  

Thomas J. Ridge

229 Howes Run Road

Sarver, PA 16055

  2,646,196(8)  5.8

Common Stock

  

Timothy F. Sutherland

229 Howes Run Road

Sarver, PA 16055

  1,600,000(9)  3.6

Common Stock

  

All Executive Officers and

Directors as a group (9 persons)

  24,805,465(10) 49.4

Securities authorized for issuance under equity compensation plans appear in Item 5 of this Report on Form 10-K. 

          
   Shares of Common Stock
Beneficially Owned
   Shares of Series C Preferred
Stock Beneficially Owned
  Percentage
of
Voting
Stock
Beneficially
Owned
 
Name and Beneficial Owner   Shares    %    Shares    %    % 
Named Executive Officers and Directors:                    
Mark A. Smith (1)  36,732,684   23.5%        13.1%
Troy G. Taggart (2)  4,286,375   2.9%        1.6%
Thomas R. Oxenreiter(3)  6,948,499   4.7%        2.6%
All executive officers and directors as a group (3 persons)  47,967,558   29.4%        16.7%
Other 5% Stockholders:                    
David M. Truitt (4)  92,198,338   32.1%  1,250,000   100.0%  57.5%
Lesa Smith (5)  24,518,764   17.1%        9.1%
Delta Networks Limited SA (6)  9,300,000   6.5%        3.5%
John W. Whearty, Trustee of the Anthony F. Hovey Living Trust dated 3-18-2008 (7)  8,929,638   5.9%        3.3%
deLaski Family Foundation (8)  8,350,587   5.8%        3.1%

 

*Less than one percent.

(1)Includes 20,92723,941,764 shares of common stock jointly owned by Mr. Smith and his wife, Lesa A. Smith, and 12,790,920 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants.
(2)Includes 74,330 shares of common stock owned by a revocable trust controlled by Mr. Taggart, and 3,212,045 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants.
(3)Includes 3,392,436 shares of common stock jointly owned by Mr. Oxenreiter and his wife, Emily J. Oxenreiter, and 3,556,063 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants.
(4)The address for Mr. Truitt is 13241 Woodland Park Road, Suite 610, Herndon, VA  20171.  Includes 39,162,638 shares of common stock issuable upon conversion of a Secured Promissory Note and 27,000,000 shares of common stock issuable upon exercise of outstanding warrants.  Shares of common stock beneficially owned include 25,000,000 shares of common stock issuable upon conversion of Series C Preferred Stock.  
(5)Represents 23,941,764 shares of common stock owned jointly by Mrs. Smith and her husband, Mark A. Smith; 177,000 shares of common stock owned by the 2000 Irrevocable Trust FBO Benjamin Smith, of which Mrs. Smith is the trustee; and 200,000 shares of common stock owned by the 2000 Irrevocable Trust FBO Ian Smith, of which Mrs. Smith is the trustee.
(6)The address for Delta Networks Limited SA is Molenberglei 42, 2627 Scheibe, Belgium. Peter Magnus has voting and investment power over these securities.  Includes 300,000 shares of common stock owned by a wholly-owned subsidiary of Delta Networks Limited SA.  
(7)The address for John W. Whearty, Trustee of the Anthony F. Hovey Living Trust dated 3/18/2008 is 9115 SW Oleson Road, Suite 100, Portland, OR  97223.  Includes 500,000 shares of common stock issuable upon exercise of outstanding warrants within 60 daysto purchase shares of April 14, 2010, held by Mr. Hovey.Series B Preferred Stock, and subsequent conversion of such shares of Series B Preferred Stock to common stock.  
(8)The address for the deLaski Family Foundation is 1201 Connecticut Ave. NW, Suite 300, Washington, DC  20036.  

 

(2)Includes 12,868,695 shares of common stock beneficially owned by Mr. Smith, and 8,000,000 shares of Common Stock issuable upon exercise of outstanding options within 60 days of April 14, 2010, held by Mr. Smith.

(3)Includes 333,333 shares of common stock issuable upon exercise of outstanding options within 60 days of April 14, 2010, held by Mr. Porter.

(4)Includes 40,000 shares of common stock issuable upon exercise of outstanding options within 60 days of April 14, 2010, held by Mr. McDonald.

(5)Includes 11,771 shares of common stock owned jointly by Mr. Oxenreiter and his wife, and 66,666 shares of common stock issuable upon exercise of outstanding options within 60 days of April 14, 2010, held by Mr. Oxenreiter.

(6)Includes 1,590,000 shares of common stock issuable upon exercise of outstanding warrants within 60 days of April 14, 2010, held by Mr. Vosbein.

(7)Includes 3,500,000 shares of common stock issuable upon exercise of outstanding warrants within 60 days of April 14, 2010, held by Delta Networks Limited SA.

(8)Includes 2,400,000 shares of common stock issuable upon exercise of outstanding warrants within 60 days of April 14, 2010 held by Ridge Global, LLC, beneficially owned by Mr. Ridge.

(9)Includes 1,600,000 shares of common stock issuable upon exercise of outstanding warrants within 60 days of April 14, 2010 held by Pace Global Energy Services, LLC, beneficially owned by Mr. Sutherland.

(10)Includes 11,379,999 shares of common stock issuable upon exercise of outstanding options and warrants within 60 days of April 14, 2010.

Item 13.Certain Relationships and Related Transactions.

Transactions with Related Persons

The Company leases its headquarters building from Mark A. Smith, the Company’s Chairman and Chief Executive Officer. The building has approximately 3,200 square feet of office space, and is used by the Company’s corporate, technical, and engineering/operations staff. The Company incurred $78,000 of lease expense for this building duringin each of the years ended December 31, 20092015 and 2008.2014. The Company owedlease is cancellable by either party upon 30 days’ notice.

During 2014, Mr. Smith $26,000advanced the Company $29,000. Interest on the note at 8% amounted to $123 and $32,500$47 for unpaid rentthe years ended December 31, 2015 and 2014, respectively. The balance of the note was $29,047 at December 31, 20092014. The note was repaid during 2015.

On November 9, 2012, the Company and 2008,Mr. Smith entered into a Lease Agreement, pursuant to which the Company leases a field vehicle from Mr. Smith. The lease is for 60 months, and is for substantially the same terms for which Mr. Smith leases the vehicle from the manufacturer. Interest on the lease amounted to $249 and $346 for the years ended December 31, 2015 and 2014, respectively. The lease is recorded as a capital lease. At December 31, 2015, gross assets recorded under the lease and associated accumulated depreciation were $16,870 and $10,544, respectively.

During 2015, Thomas R. Oxenreiter, the Company’s chief financial officer, advanced the Company $18,891. Interest on the note at 10% amounted to $448 for the year ended December 31, 2008,2015. In addition, Mr. Smith loaned the Company $2,867,000 for working capital purposes. Interest on the loan at 8% per annum, compounded monthly, amountedOxenreiter received warrants to $52,242 during the year ended December 31, 2008. During 2008, $903,469 of the loan and accrued interest was settled by the issuance of 1,129,336purchase 18,891 shares of the Company’s common stock at a conversion price of $0.80 per share. At December 31, 2008,in connection with the balance due on thenote. The note including accrued interest, was $2,015,772.repaid during 2015.

During the year ended December 31, 2009, Mr. Smith loaned the Company $882,000, net of repayments. In addition, Mr. Smith converted $52,000 of unpaid rent to the note payable. Interest on the loan at 8% per annum, compounded monthly, amounted to $178,491 during the year ended December 31, 2009.

On October 30, 2009, Mr. Smith and the Company entered into a Note Conversion Agreement, in which Mr. Smith converted the outstanding loan balance of $3,128,263 into: i) 2,000,000 sharesDirector Independence

None of the Company’s common stock at a conversion price of $1.00 per share; ii) a $1,000,000 8% Unsecured Convertible Promissory Note (the “Smith Convertible Note”); and iii) a $128,263 8% Unsecured Promissory Note (the “Smith Demand Note”).

The Smith Convertible Note bears interest at 8% per annum, compounded monthly. The Smith Convertible Note is payable ondirectors are independent as defined in the earlierrules of the Company’s closing of a round of convertible preferred or common stock financing of at least $10,000,000 or December 31, 2011. At any time prior to December 31, 2011, Mr. Smith may convert the outstanding principal balance of the Smith Convertible Note to the Company’s common stock at a conversion price of $1.00 per share. Interest on the Smith Convertible Note was $13,637 for the year ended December 31, 2009. The balance due on the Smith Convertible Note, including accrued interest, was $1,013,637 at December 31, 2009. As of March 19, 2010, the balance due on the Smith Convertible Note was $1,031,063. On March 19, 2010, the Company cancelled $1,000,000 of the principal balance of the Smith Convertible Note and in exchange Smith acquired 600,000 shares of the Company's common stock at $1.00 per share on behalf of he and his wife; 200,000 shares of the Company’s common stock at $1.00 per share on behalf of 2000 Irrevocable Trust for Ian Smith; and 200,000 shares or the Company’s common stock at $1.00 per share on behalf of 2000 Irrevocable Trust for Benjamin Smith. After March 19, 2010, the Smith Convertible Note had a remaining balance of $31,063.NASDAQ National Market System.

The Smith Demand Note bears interest at 8% per annum, compounded monthly, and is payable upon demand. Interest on the Smith Demand Note was $1,749 for the year ended December 31, 2009. At December 31, 2009, the balance due on the Smith Demand Note was $130,012.

On December 4, 2009, Mr. Smith advanced the Company $10,000. Interest on the note at 8% per annum, compounded monthly, for the year ended December 31, 2009 was $59. At December 31, 2009, the balance due on the note was $10,059.

On March 6, 2009, the Company entered into an Employment Agreement with David Vosbein, the Company’s president (the “Vosbein Employment Agreement”). Pursuant to the Vosbein Employment Agreement, the Company granted warrants to purchase 2,000,000 shares of the Company’s common stock at $1.23 for ten years to Mr. Vosbein. Warrants to purchase 1,000,000 shares of the Company’s common stock vested immediately upon the grant, and with the balance vesting over twelve months. On October 30, 2009, the Company and Mr. Vosbein entered into an Agreement (the “Vosbein Warrant Agreement”). Pursuant to the Vosbein Warrant Agreement, the Company cancelled the warrants to purchase 2,000,000 shares of the Company’s common stock at $1.23, and issued Mr. Vosbein warrants to purchase 1,590,000 shares of the Company’s common stock at $1.00, with 1,173,333 shares vested immediately at the grant date, and the balance vesting over five months.

On March 19, 2010, Mr. Ridge purchased 50,000 shares of the Company’s common stock for $1.00 per share, pursuant to the Subscription Agreement dated as of March 19, 2010. Pursuant to section 7.1 of the Subscription Agreement, the Company agreed to register Mr. Ridge’s shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register Mr. Ridge’s shares Mr. Ridge would be entitled to receive an additional allocation of 2% of his 50,000 shares for each 30 day period that elapsed after September 1, 2010.

Transactions with Control Persons

None.

 

Item 14. Item 14.Principal Accountant Fees and Services.

The aggregate fees billed to the Company by its principal accountants were as follows for the years ended December 31:

   
  2015  2014 
Audit fees $26,756  $68,873 
Tax fees  8,763    
Total fees billed $35,519  $68,873 

 

   2009  2008

Audit fees

  $78,077  $55,817

Audit-related fees

   1,533   32,504

Tax fees

   3,198   9,520

Other fees

   —     —  
        

Total fees billed

  $82,808  $97,841
        

Audit-related fees were fees incurred for accounting and auditing for Current Reports on Form 8-K, Registration Statements on Form S-1, as amended, and for audits of a potential acquisition candidate.

Item 15.Exhibits and Financial Statement Schedules. [Under W&S Review]

 

Exhibit

 

Document

 2.1 Agreement and Plan of Merger by and among Kayenta Kreations, Inc., a Nevada Corporation, Kayenta Subsidiary Corp., a Delaware Corporation Geospatial Mapping Systems, Inc., a Delaware Corporation and Thomas G. Kimble, an individual dated March 25, 2008 (incorporated by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K filed March 25, 2008)
3.1 Amended Articles of Incorporation of the RegistrantGeospatial Corporation (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly ReportRegistration Statement on Form 10-Q for the quarter endedS-1 dated March 31, 2008)
26, 2014)
 
3.2 Bylaws of the RegistrantGeospatial Corporation (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form SB-2 filed on April 23, 1996)
  3.3Amended Articles of Incorporation of Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 3.33.2 of the Company’s Registration Statement on Form S-1 filed on May 29, 2008)
dated March 26, 2014)
 3.4 Bylaws of Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1 filed on May 29, 2008)
  3.5Limited Liability Company Agreement of Geospatial Pipeline Services, LLC (incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form S-1 filed on May 29, 2008)
  3.64.1 Certificate of Designations Powers, Preferences and Rights of the Series AB Convertible Preferred Stock of Geospatial Holdings, Inc. dated as of December 11, 2009August 20, 2013 (incorporated by reference to Exhibit 3.6 to4.1 of the Company’s Current ReportRegistration Statement on Form 8-K filed December 22, 2009).
S-1 dated March 26, 2014)
 4.1
4.2 Common Stock Specimen Certificate (incorporated by reference to Exhibit 4.4 to4.2 of the Company’s Registration Statement on Form SB-2 filed on April 23, 1996)S-1 dated March 26, 2014)
4.3Series B Convertible Preferred Stock Specimen Certificate (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)
4.4Certificate of Designations, Powers, Preferences and Rights of Series C Convertible Preferred Stock dated March 16, 2016 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated as of March 16, 2016)
10.1 Lease Agreement dated May 1, 2006 between Mark AA. Smith and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.1 toof the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.2 Exclusive License and Distribution Agreement between Reduct NV and Geospatial Mapping Systems,Holdings, Inc., dated as of August 3, 2006 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 toof the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.3 Exclusive License and Distribution Extension Agreement between Reduct NV and Geospatial Mapping Systems, Inc., dated as of June 6, 2007 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.4The Amendment No. 1 to the Reduct Exclusive License and Distribution Agreement between Reduct NV and Geospatial Mapping Systems, Inc., dated December 21, 2007 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.5The Amendment No. 2 to the Reduct Exclusive License and Distribution Agreement between Reduct NV and Geospatial Mapping Systems, Inc., dated March 21, 2008 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.6Letter Agreement Clarifying the Exclusive License and Distribution Agreement dated April 17, 2008 by Reduct NV to Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.7Company2007 Stock Option Plan (incorporated by reference to Exhibit 10.7 to10.3 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.810.4 Employment Agreement dated December 1, 2007 between Mark A. Smith and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.8 to10.4 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)

S-1 dated March 26, 2014)
10.9  10.5 Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Mark A. Smith dated effective December 1, 2007 (incorporated by reference to Exhibit 10.9 to10.5 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.1010.6 Agreement Not to Compete between Mark A. Smith and Geospatial Mapping Systems, Inc. dated effective December 1, 2007 (incorporated by reference to Exhibit 10.10 to10.6 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.1110.7Conversion Agreement dated August 20, 2013 by and among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc. and Mark A. Smith (incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)
10.8 Employment Agreement dated December 1, 2007October 18, 2013 by and between Richard NiemanGeospatial Corporation and Geospatial Mapping Systems, Inc.Mark A. Smith (incorporated by reference to Exhibit 10.11 to10.8 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.12 Nonqualified
10.9Stock OptionAppreciation Rights Agreement dated October 18, 2013 between Geospatial Mapping Systems, Inc.Corporation and Richard Nieman dated effective December 1, 2007Mark A. Smith (incorporated by reference to Exhibit 10.12 to10.9 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.13 
10.10Stock Appreciation Rights Agreement Not to Competedated October 18, 2013 between Richard NiemanGeospatial Corporation and Geospatial Mapping Systems, Inc. dated effective December 1, 2007Troy Taggart (incorporated by reference to Exhibit 10.13 to10.10 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)

10.14Exhibit Employment Agreement dated January 8, 2007 between Linda M. Ward and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed May 1, 2008)Document
10.15 Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Linda M. Ward dated effective December 1, 2007 (incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.16Agreement Not to Compete between Linda M. Ward and Geospatial Mapping Systems, Inc. dated effective December 1, 2007 (incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.1710.11 Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Thomas R. Oxenreiter dated effective March 13, 2008 (incorporated by reference to Exhibit 10.17 to10.11 of the Company’s Current ReportRegistration Statement on Form 8-K filed May 1, 2008)S-1 dated March 26, 2014)
10.1810.12 Agreement Not to Compete between Thomas R. Oxenreiter and Geospatial Mapping Systems, Inc. dated effective March 13, 2008 (incorporated by reference to Exhibit 10.18 to10.12 of the Company’s Current Report on Form 8-K filed May 1, 2008)
10.19Distribution Agreement between Geospatial Mapping Systems, Inc. and HMIM, Inc., a company duly organized under the laws of Louisiana, dated December 19, 2007 (incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.20The Amendment No. 3 to the Reduct Exclusive License and Distribution Agreement between Reduct NV and Geospatial Holdings, Inc., dated December 18, 2008 (incorporated by reference to Exhibit 10.20 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1 filed on February 10, 2008)dated March 26, 2014)
10.21 Employment
10.13Conversion Agreement dated March 6, 2009 between David VosbeinAugust 20, 2013 by and Geospatial Holdings, Inc. (incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed March 12, 2009)
10.22Agreement Not to Compete dated March 6, 2009 between David Vosbein and Geospatial Holdings, Inc. (incorporated by reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K filed March 12, 2009)

10.23Warrant No. 1 Issued on March 6, 2009 to David Vosbein (incorporated by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed March 12, 2009)
10.24Letter of Agreement dated March 10, 2009 among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc., Reduct NV, and Delta Networks Limited SAThomas R. Oxenreiter (incorporated by reference to Exhibit 10.24 to10.13 of the Company’s Annual ReportRegistration Statement on Form 10-K filed April 15, 2009)S-1 dated March 26, 2014)
10.25 Letter of
10.14Employment Agreement dated March 31, 2009 amongOctober 18, 2013 by and between Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc., Reduct NV,Corporation and Delta Networks Limited SAThomas R. Oxenreiter (incorporated by reference to Exhibit 10.25 to10.14 of the Company’s Annual ReportRegistration Statement on Form 10-K filed April 15, 2009)S-1 dated March 26, 2014)
10.26 
10.15Stock Appreciation Rights Agreement dated October 18, 2013 between Geospatial Holdings, Inc. 8% Unsecured Promissory Note Due December 31, 2011 in the amount of $2,866,700.00 in favor of Mark A. SmithCorporation and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.26 to10.15 of the Company’s Current ReportRegistration Statement on Form 8-K filed November 4, 2009)S-1 dated March 26, 2014)
10.27 Note Conversion
10.16Mutual Termination and Release Agreement dated as of October 30, 2009 by and between Geospatial Holdings, Inc. and Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.28Geospatial Holdings, Inc. 8% Unsecured Convertible Promissory Note Due December 31, 2011 in the amount of $1,000,000.00 in favor of Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.29Geospatial Holdings, Inc. 8% Unsecured Promissory Note Due Upon Demand in the amount of $128,262.70 in favor of Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.30Vosbein Warrant Agreement (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.31Warrant No. 16 issued on October 30, 2009 to David Vosbein (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.32Amended and Restated Exclusive License and Distribution Agreement dated as of December 15, 2009 (incorporated by reference to Exhibit 10.32 to the Company’s Current Report on Form 8-K filed December 22, 2009).
10.33Strategic Advisory Agreement effective as of March 2, 2010February 28, 2013 by and among Geospatial Holdings, Inc., Timothy F. Sutherland, Thomas J. Ridge, Pace Global Energy Services, LLC, Pace Financial Services, LLC and Ridge Global, LLC (incorporated by reference to Exhibit 10.3210.16 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)
10.17Mutual Release and Settlement Agreement dated May 10, 2013 by and among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc., Reduct N.V., and Delta Networks, S.A. (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)
10.18Geospatial Holdings, Inc. Promissory Note dated November 21, 2012 in favor of Matthew F. Bensen (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)
10.19Settlement Agreement dated May 25, 2012 among Joseph Timothy Nippes, Daniel A. Bradley, Christina Sherwood, Joseph A. Lane, Ronald Peterson, Timothy Story, Linda Ward, Geospatial Mapping Systems, Inc., Geospatial Holdings, Inc., Mark A. Smith, Thomas R. Oxenreiter, Timothy F. Sutherland and Thomas Ridge (incorporated by reference to Exhibit 10.19 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)
10.20Settlement Agreement dated June 22, 2014 by and among Brad Brooks, et al., Geospatial Corporation, Mark A. Smith, and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.20 of the Company’s Amendment No. 1 to Registration Statement on Form S-1 dated November 14, 2014)
10.21Asset Purchase Agreement dated as of September 17, 2014 among Geospatial Corporation, Select Analytics LLC, and Edward R. Camp, Jr. (incorporated by reference to Exhibit 10.21 of the Company’s Amendment No. 1 to Registration Statement on Form S-1 dated November 14, 2014)
10.22Employment and Noncompetition Agreement dated September 17, 2014 between Geospatial Corporation and Edward R. Camp, Jr. (incorporated by reference to Exhibit 10.22 of the Company’s Amendment No. 1 to Registration Statement on Form S-1 dated November 14, 2014)
10.23Note and Warrant Purchase Agreement dated as of January 16, 2015 by and between Geospatial Corporation and Horberg Enterprises LP.  (incorporated by reference to Exhibit 10.23 of the Company’s Amendment No. 2 to Registration Statement on Form S-1 dated March 9, 2015)

ExhibitDocument
10.24Note and Warrant Purchase Agreement dated as of April 2, 2015 by and between Geospatial Corporation and David Truitt (incorporated by reference to Exhibit 10.24 of the Company’s Amendment No. 3 to Registration Statement on Form S-1 dated May 19, 2014)
10.25Preferred Stock Purchase Agreement dated March 16, 2016 by and between Geospatial Corporation and David Truitt (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 5, 2010).
10.34Warrant No. 20 issued on March 2, 2010 to Ridge Global LLC (incorporated by reference to Exhibit 10.33 to the Company’s Current Report on Form 8-K filed March 5, 2010).
10.35Warrant No. 21 issued on March 2, 2010 to Pace Global Energy Services, LLC (incorporated by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K filed March 5, 2010).
10.36First Amendment to the Amended and Restated Exclusive License and Distribution Agreement dated as of January 29, 2010 (incorporated by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K filed March 19, 2010).
10.37Second Amendment to the Amended and Restated Exclusive License and Distribution Agreement dated as of March 12, 2010 (incorporated by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K filed March 19, 2010).16, 2016)
10.38 Subscription
10.26Agreement and Amendment dated as of March 19, 2010January 27, 2016 by and between Geospatial Holdings, Inc.Corporation and Mark A. and Lisa A. Smith, with respect to 600,000 shares of the Company’s Common Stock*David Truitt *
10.39 Subscription
10.27Settlement Agreement, General Release and Waiver of Claims dated as of March 19, 2010February 24, 2016 by and among Edward R. Camp, Jr., Select Analytics LLC, and Geospatial Corporation *
10.28Stock Appreciation Rights Agreement by and between Geospatial Holdings, Inc.Corporation and 2000 Irrevocable Trust for Ian Smith, with respect to 200,000 shares of the Company’s Common Stock*Troy G. Taggart dated October 23, 2015 *
10.40 Subscription
10.29Stock Appreciation Rights Agreement dated as of March 19, 2010 by and between Geospatial Holdings, Inc.Corporation and 2000 Irrevocable Trust for Benjamin Smith, with respect to 200,000 shares of the Company’s Common Stock*Thomas R. Oxenreiter dated October 23, 2015 *
10.41 Employment
10.30Convertible Note and Warrant Purchase Agreement dated as of September 15, 2008 by and between Geospatial Mapping Systems, Inc.Corporation and Todd Porter.Thomas R. Oxenreiter dated September 30, 2015 *
10.42 Geospatial Mapping Systems, Inc. 2007 Stock Option Plan Nonqualified Stock Option
10.31Convertible Note and Warrant Purchase Agreement dated as of October 10, 2008 by and between Geospatial Mapping Systems, Inc.Corporation and Richard McDonald.Thomas R. Oxenreiter dated October 15, 2015 *
10.43 Agreement Not-To-Compete dated as of October 10, 2008 by and between Geospatial Mapping Systems, Inc. and Richard McDonald.*
21.1 List of Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Company’s Post-Effective Amendment No. 3 to Registration Statement on Form S-1 filed on January 12, 2010)dated March 26, 2014)
31.1 Certification of Mark A. Smith Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2 Certification of Thomas R. Oxenreiter Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

*
101.INSXBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema Document*
101.CALXBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFXBRL Taxonomy Extension Definition Linkbase Document*
101.LABXBRL Taxonomy Extension Label Linkbase Document*
101.PREXBRL Taxonomy Extension Presentation Linkbase Document*
______________________
*  Filed herewith.herewith

SIGNATURES

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

 
 Geospatial Holdings, Inc.Corporation
 (Registrant)
Date: April 15, 201014, 2016By:/s/ Mark A. Smith
 Name:Mark A. Smith
 Title:Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of April 15, 2010:

14, 2016: 

Signature

 

Title

SignatureTitle

/s/ Mark A. Smith

Mark A. Smith

 Chief Executive Officer and Director
(Principal Executive Officer)

/s/ Thomas R. Oxenreiter

Thomas R. Oxenreiter

 

Chief Financial Officer and Director

(Principal Financial Officer and Principal Accounting Officer)

/s/ David C. Vosbein

David C. Vosbein

President and Director

 

65

63