UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED: DECEMBER 31, 20092015

OR

COMMISSION FILE NUMBER: 333-04066

GEOSPATIAL HOLDINGS, INC.CORPORATION

(Exact name of registrant as specified in its charter)

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):

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

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

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

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 Probe^TM. 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.

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.

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.

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: 

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,

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.

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.

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.

Reserved.

Not applicable.

PART II

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.

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

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.

Not applicable.

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.

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

Notes to Financial Statements

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

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Balance Sheets

As of December 31,

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

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Statements of Operations

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

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

Geospatial Holdings, Inc.Corporation and Subsidiaries

Consolidated Statements of Cash Flows

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:

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: