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

You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) together with our financial statements and the related notes thereto appearing elsewhere in this prospectus and related registration statement.

Some of the information contained in this MD&A or set forth elsewhere in this prospectus, and registration statement, 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 prospectus and registration statement for 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 proven 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 innovative 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.delivered in a robust cloud-based GIS (geographic information system) platform. Our strategymission is to combine innovative pipeline data acquisitionprovide our clients with professional data management and technically superior pipeline field services to build strong client relationships inan unparalleled 3D understanding of the pipeline service industry. We believe that our multi-disciplined team, consisting of construction professionals, engineers and Geographic Information System (“GIS”) and IT specialists, project managers, estimators and field technicians can be mobilized 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.world’s underground infrastructure.

Liquidity and Capital Resources

At March 31, 2010,June 30, 2014, we had current assets of $5,022,664,$1,011,484, and current liabilities of $4,682,687.$5,902,250.

Our business depends largely on patent pending SmartProbe^™ technology that we license from Reduct, the developer of the technology. Currently, we are the exclusive licensee of the SmartProbe^™ technology in North America, South America, and Australia pursuant to the Amended Reduct License Agreement that we entered into on December 15, 2009, which became effective on April 30, 2010.

The Amended Reduct License Agreement became effective upon the Company’s second installment payment of $2,450,000 for the purchase of SmartProbe^™ equipment on April 30, 2010 which, together with the Company’s first installment payment of $2,500,000 in March, 2010, fulfils the Company’s obligation to make the $4,950,000 Advance Payment previously due by April 30, 2010.

In addition, now that the Amended Reduct License Agreement has become effective, we are 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 15, 2010. In addition, the Company must make minimum purchases totaling $6,000,000, $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. At December 31, 2009June 30, 2014, current liabilities exceeded current assets by $3,862,583.$4,890,766, and total liabilities exceeded total assets by $4,831,206. 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 2012, we raised approximately $632,000 in cash through private sales of our Series B Convertible Preferred Stock (“Series B Stock”), and converted approximately $215,000 in liabilities to Series B Stock. In 2013, we raised approximately $3,246,000 through private sales of our Series B Stock and common stock, and converted approximately $4,926,000 of liabilities to Series B Stock and common stock. During the six months ended June 30, 2014, we raised approximately $2,061.000 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 addition, we have negotiated settlements or long-term extensions on approximately $1,726,000 of liabilities from 2012 through June 30, 2014. We entered into an agreement with Reduct NV, licensor of our former exclusive technology, on May 10, 2013 that eliminates all prior liabilities to Reduct in consideration for the issuance of 9,000,000 shares of our common stock, warrants to purchase 3,500,000 shares of our common stock, and purchases of $300,000 of equipment from Reduct. The agreement allows us to purchase their products on a non-exclusive basis without the minimum purchase requirements to maintain the exclusive license.

On September 17, 2014, we entered into an Asset Purchase Agreement to acquire substantially all the assets of Select Analytics LLC, a company that operates the Shale Navigator website, and is engaged in the business of aggregating, managing, and selling infrastructure data. Pursuant to the Asset Purchase Agreement, we will be required to pay $160,000 in cash and issue 550,000 shares of the Company’s common stock to the seller during 2014.

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 stock and common stock in the aggregate amount of $6.2 million in 2009, including conversion of $2.0 million of indebtedness to our chief executive officer into common stock, and conversionto negotiate settlements or extensions of approximately $105,000 of other debt into common stock, and common stock issued for services totaling approximately $215,000. In March and April, 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 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 a new, marketing and sales channels. The Company hascloud-based mapping software to be marketed under our existing name GeoUndergound that replaces our previous version of GeoUnderground. In 2014, we entered into an agreement to acquire the utility locating market, has enteredShale Navigator website, which we intend to incorporate into a joint marketing agreement with a strategic partner, and is exploring relationships with additional strategic partnersGeoUnderground. 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 moving forward. 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.June 30, 2015.

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 ThreeSix Months Ended March 31, 2010June 30, 2014 and 2013

Sales were $917,966$195,751 for the threesix months ended March 31, 2010,June 30, 2014, compared to $70,193$279,188 for the threesix months ended March 31, 2009.June 30, 2013. Cost of sales was $719,837$95,817 for the threesix months ended March 31, 2010,June 30, 2014, compared to $107,057$131,466 for the threesix months ended March 31, 2009.June 30, 2013. Our sales have fluctuated throughout 2014 and cost of sales increased in 2010 due2013 as our ability to improved economic conditionsmarket and the commencement ofperform jobs was hampered by our utility locating business.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 $1,547,123$1,243,686 for the threesix months ended March 31, 2010,June 30, 2014, compared to $914,512$738,548 for the threesix months ended March 31, 2009.June 30, 2013. The increase in SG&A costs for the threesix months ended March 31, 2010June 30, 2014 compared to the threesix months ended March 31, 2009June 30, 2013 was due to increased expenses resulting from the expansion of our sales and administrativetechnical staff and facilities in 2010, and increased professional fees due to increased legal, financial advisory, government relations, and investor relations fees. In addition, we incurred a fee of $100,000 associated with an extension of payments due under the Amended Reduct License Agreement. These increases in SG&A expenses were partially offset by a reduction in marketing costs associated with an advertising campaign in 2009.2014.

Other income and expenses include interest income, interest expense, and non-business income and expenses. Other income and expense for the threesix months ended March 31, 2010June 30, 2014 was a net expenseincome of $42,422,$156,566, which included interest income of $7,950, and interest expense of $50,372.$78,908, and gains on extinguishment of debt of $235,474. Other income and expense for the threesix months ended MarchJune 30, 2013 was a net income of $528,754, which included interest expense of $334,891, and gains on extinguishment of debt of $863,645. The decrease in interest expense in 2014 is due to a reduction in loan balances due to conversions of debt to equity. The gains on extinguishment of debt resulted from settlement agreements on prior liabilities. 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.

Results of Operations for the Years Ended December 31, 20092013 and 2012

Sales were $556,088 for the year ended December 31, 2013, compared to $336,672 for the year ended December 31, 2012. Cost of sales was $193,321 for the year ended December 31, 2013, compared to $145,916 for the year ended December 31, 2012. Our sales fluctuated throughout 2013 and 2012 as our ability to market and perform jobs was hampered by our financial condition. We expect sales and cost of sales to continue to fluctuate as our business continues to mature.

SG&A expenses were $2,134,111 for the year ended December 31, 2013, compared to $1,256,128 for the year ended December 31, 2012. The increase in SG&A costs for the year ended December 31, 2013 compared to the year ended December 31, 2012 was due to the expansion of our technical staff in 2013.

Other income and expense for the year ended December 31, 2013 was a net expense of $37,715,$1,040,946, which included interest expense of $422,802, gains on extinguishment of debt of $909,682, and expense related to registration payment arrangements of $1,527,826. Other income and expense for the year ended December 31, 2012 was a net expense of $7,448,

$326,129, which included interest expense of $46,446,$335,900, a gain on extinguishment of debt of $1,733, and other income of $1,283.$8,038. The increase in interest expense in 2010 is2013 was due to interest on capital leases,a short-term loan. The gains on extinguishment of debt resulted from settlement agreements on prior liabilities.

Expense related to registration payment arrangements results from a series of Stock Subscription Agreements we entered into in 2009 and 2010 (the “Stock Subscription Agreements”). We are required to register 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 2013, we recorded expense related to registration payment arrangements of $1,527,826, which resulted from increases in the estimated value of our stock due to an increase in stock price, and an increase in the estimated number of Penalty Shares to be granted due to a change in our estimate of the timing of the registration of the shares of common stock under the Securities Act. This expense was partially offset by a reductiongains on registration payment arrangements resulting from decreases in interest on notes payablein the estimated number of Penalty Shares to stockholders,be issued due to the conversionanticipated settlement of notes payablea lawsuit with certain stockholders. We entered into a Settlement Agreement (the “Brooks Settlement Agreement”) with a group of stockholders who had sued the Company and its officers. We owed these stockholders Penalty Shares. Our obligation to stockholdersissue Penalty Shares was terminated by the Brooks Settlement Agreement, resulting in a gain. We are still obligated to common stock.issue Penalty Shares to other shareholders. We expect that income or expense related to registration payment arrangements will fluctuate as the price of our stock and the estimate of the number of Penalty Shares to be 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.

Results of Operations for the Year Ended December 31, 2009

Sales were $825,669 for the year ended December 31, 2009, compared to $1,567,575 for the year ended December 31, 2008. Cost of sales was $929,722 for the year ended December 31, 2009, compared to $673,397 for the year ended December 31, 2008. Our sales declined due to economic conditions in 2009. Cost of sales increased in 2009 as our fixed costs of sales increased due to expansion of our operations. We expect sales and cost of sales to fluctuate as our business reaches maturity.

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 for the year ended December 31, 2009, compared to $5,338,285 for the year ended December 31, 2008. The increase was primarily due to expenses of $3.1 million incurred in connection with the adoption of the Amended Reduct License Agreement 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. In addition, we incurred expense in 2008 related to Amendment No. 3 to the original Reduct License Agreement. SG&A expenses were $1,214,087 and $3,175,895 for the three and nine months ended September 30, 2009, respectively, compared to $1,009,713 and $3,235,349 for the three and nine months ended September 30, 2008, respectively. The increase in SG&A costs for the three months ended September 30, 2009 compared to the nine months ended September 30, 2008 were primarily due to legal, accounting and other expenses incurred in 2008 related to the acquisition of Kayenta and the subsequent filing of a Registration Statement under the Securities Act of 1933, as amended, for a portion of our shares. This decrease in expense was partially offset by increased expenses resulting from the expansion of our sales and administrative staff and facilities in 2009, and marketing costs associated with an advertising campaign in 2009.

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, compared to a net expense of $74,895 for the year ended December 31, 2008. Included in other income and expense during the year ended December 31, 2009 was interest income of $30,374, interest expense of $214,680, and other income of $1,333. During the year ended December 31, 2008, other income and expense included interest income of $21,244, interest expense of $59,788, other income of $171, and a loss on foreign currency exchange of $36,522. The increase in interest expense in 2009 is due to the increase in notes payable to stockholders and capital lease liabilities. The decrease in losses on foreign currency exchange from 2008 to 2009 is because the Company had no liabilities to be settled in foreign currency in 2009.

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 March 31, 2010.

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 licensed the technologyour common stock under the Exclusive License and Distribution Agreement dated August 3, 2006 (the “Original Reduct License Agreement”). On December 15, 2009, we entered intoSecurities Act. We have recorded a liability for the Amended Reduct License Agreement, which restructured the payment obligations and other termsestimated number of the Original Reduct License Agreement. The Amended Reduct License Agreement became effective on April 30, 2010. The Amended Reduct License Agreement provides us with exclusive control rights to the DuctRunner Smart Probe^™ technology throughout the continents of North America, South America, and Australia. We recorded an intangible asset of $1,367,000 upon use of the license under the Original Reduct License Agreement. In addition to the license fees, we are required to make minimum purchases of Smart Probes^™. If we are unable 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 are amortizing 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 projectionquarterly basis our estimate of the number of shares to be issued and the fair value of the stock to be issued.

Realization of Deferred Income Tax Assets. We provide a net deferred tax asset or liability equal to the expected future cash flows, whichtax benefit or expense of temporary reporting differences between financial reporting and tax accounting methods and any available operating loss or tax credit carryovers. At June 30, 2014, 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 updated annually based on management’s projections.completely offset by a valuation allowance due to the uncertainty of realization. We evaluate the necessity of the 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 March 31, 2010,June 30, 2014, 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 March 31, 2010, 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.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Under the Original Reduct License Agreement, most of our transactions with Reduct were denominated in Euros. Under the Amended Reduct License Agreement, most future transactions with Reduct will be denominated in United States dollars. At March 31, 2010, other than the existing obligations under the Original Reduct License Agreement, which were superseded by the Amended Reduct License Agreement upon its effectiveness on April 30, 2010, 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.

OUR BUSINESS

Merger

On March 25, 2008, Parent, a Nevada corporation, Kayenta Subsidiary Corp., a Delaware corporation (the “Merger Subsidiary”), Thomas Kimble, an individual stockholder of Parent and a selling security holder (the “Parent Stockholder”) and GMSI, a Delaware corporation entered into an Agreement and Plan of Merger (the “Merger Agreement”) which provided, upon the satisfaction of certain conditions set forth in the Merger Agreement, that the Merger Subsidiary would merge with and into GMSI and GMSI would become the surviving corporation of the Merger. Those conditions were satisfied and the Merger occurred on April 25, 2008.

Material Terms and Conditions of the Merger Agreement

Pursuant to the terms of the Merger Agreement, Parent agreed to effect a 2.8 to 1 forward stock split of its common stock, resulting in 3,685,618 outstanding Parent Shares. The Forward Split was effected on April 25, 2008. Pursuant to the terms of the Merger Agreement and at the effective time of the Merger, the issued and outstanding shares of GMSI were converted into an aggregate of 20,074,188 shares of the Company’s Common Stock via each GMSI Share issued and outstanding immediately prior to the Effective Time (other than GMSI Shares held in its treasury) on the basis of one Parent Share for each GMSI Share without any action on the part of the holders thereof, and Parent now owns 100% of the outstanding shares of GMSI.

All outstanding options to purchase GMSI Shares, warrants or similar outstanding GMSI securities were likewise converted to like securities of Parent. In addition, each GMSI Share converted into the Merger Consideration was no longer outstanding and was automatically canceled and retired and ceased to exist. Such shares were surrendered and became owned of record and beneficially by Parent. In connection with the Merger, Parent changed its name from Kayenta Kreations, Inc. to Geospatial Holdings, Inc. As of April 28, 2008, the Company has changed its listing symbol on the OTC BB from “KKRI” to “GSPH”.

Pursuant to the terms of the Merger Agreement, the GMSI shareholders owned 84.49 percent of the 23,759,806 issued and outstanding shares of the Company’s Common Stock following the Merger. In addition, the Merger Agreement contains a covenant that the Company will not effectuate any reverse stock split of the Company’s Common Stock for a period of two years from the Effective Time without the consent of the Parent Stockholder. The Merger Agreement also provides that the Company will file this prospectus and registration statement with the Commission covering the resale of all shares of the selling security holders.

Changes Resulting from the Merger

As a result of the Merger, GMSI became the Company’s wholly-owned subsidiary and the Company ceased being a shell company as that term is defined in Rule 12b-2 of the Exchange Act. The Company intends to carry on GMSI’s business.

Accounting Treatment

The Merger is being accounted for as a “reverse merger,” because as a result of the Merger the shareholders of GMSI now own a majority of the outstanding shares of the Company’s Common Stock. GMSI is deemed to be the acquiror in the Merger for accounting purposes. As a result of the Merger, there was a change in control of the Registrant. However, Registrant will continue to be a “smaller reporting company” as defined in Item 10(f) of Regulation S-K promulgated under the Exchange Act (“Regulation S-K”).

Election to Board of Directors; Appointment of Officers

In connection with the Merger, Mark A. Smith was appointed to serve as Chairman of the Board of Directors and Chief Executive Officer of the Company and Linda M. Ward was appointed to serve as the Company’s Executive Vice President of Business Development. Subsequently the Company also added David

Vosbein as President and a Director and Thomas R. Oxenreiter as Chief Financial Officer, Secretary and a Director. On March 2, 2010, Thomas J. Ridge and Timothy F. Sutherland were appointed as Directors. On April 16, 2010, Mr. Vosbein resigned as President and Director. Additionally, Brenda White, the sole member of the Board of Directors of Parent, resigned. Pursuant to the Merger Agreement, the Company’s stockholders have approved an employee benefit stock option plan.

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,General Description of the Business

We provide 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 createdto the forefront of the cloud-based infrastructure mapping industry. Geospatial Pipeline Services, LLC, a wholly-owned subsidiary that operatesCorporation is steadfastly committed to our mission – “To provide our clients with an unparalleled 3D understanding of the world’s underground infrastructure”.

We carefully listen to each client’s precise needs and provide unique and innovative technological 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 to our clients. Data acquisition entails utilizing various technologies to accurately locate the exact position and depth of underground pipelines and conduits along with information 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.

Beginning in October 2014, we will enter the business of pipeline field services. On October 16, 2009, we acquired Utility Servicesaggregating, managing, and Consulting Corporation, a newly-formed company that operates in the business of locating underground utility conduits.

General Development of the Business

We 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 and mapping technology with professional data management and technically superior pipeline field services to build strong client relationships in the pipeline service industry. We believe that by building a multi-disciplined team, consisting of construction professionals, engineers and Geographic Information System (“GIS”) 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.

We believe that owners and operators 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 are 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 pipelineselling 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 licenseacquire the patent pending Smart Probe™Shale Navigator website (www.shalenavigator.com), and intend to incorporate Shale Navigator into GeoUnderground.

Product Development and Introduction

The GIS technology from Reduct NV, a Belgian company (“Reduct”)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 developeraccuracy of the technology (as amendedcollected data managed by their software. To keep pace with these changes we maintain a vigorous program of new product development to address demands in the marketplace for our products. Just as the transition from timemainframes to time,personal computers transformed the “Original Reduct License Agreement”). The Original Reduct License Agreement grantedindustry thirty years ago, we believe our industry is undergoing a similar transition from the Company exclusive control overpersonal computer to cloud, social and mobile information management and sharing.

We dedicate considerable technical and financial 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 our product development activities.

We spent $240,908 and $67,527 on research and development during the rights to the Smart Probe™ technology throughout North America, South America and Australia.

Onyears ended 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, supersedes and replaces the Original Reduct License Agreement.

The Amended Reduct License Agreement became effective upon the Company’s second installment payment of $2,450,000 for the purchase of SmartProbe^™ equipment on April 30, 2010 which, together with the Company’s first installment payment of $2,500,000 in March, 2010, fulfils the Company’s obligation to make the $4,950,000 Advance Payment previously due by April 30, 2010. 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 exist under the Original Reduct License Agreement. Under the Amended Reduct License Agreement, the Company must make a license payment of $3,000,000 by December 15, 2010. In addition, the Company must make minimum quarterly payments totaling $6,000,000, $11,750,000, and $6,612,500 in 2010, 2011,31, 2013 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.

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.

Sales and Marketing Efforts

We have established a strong reputation as a technological leader in data acquisition and mapping of all types of underground, underwater, and above-ground infrastructure. Along with GeoUnderground, we now provide a best-of-class 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 three 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

From January 1, 2012 through June 30, 2014, we raised approximately $6,211,000 in cash through the private sale of our common stock and Series B Stock, and exercises of warrants to purchase common stock and Series B Stock. In an effortaddition, during that period, we converted approximately $5,141,000 of our liabilities to raise capital, the Company has retained Convertible Capital as its financial advisor. Subsequent to December 31, 2009, the Company sold sharescommon stock and Series B Stock, and issued approximately $140,000 of itsour common stock for an aggregate sale price of approximately $9.7 million, including the conversion of $1,000,000 of indebtednessservices. We intend to continue to sell our chief executive officer. The proceeds of these fundraising efforts will be usedcommon 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 the Company’s 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 50150 projects for a varied group of clients including contractors, municipalities, government agencies, utilities, telecoms, and engineering companies.

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-positionedwell 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,September 30, 2014, we had 60have eleven 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 2014, 2013 and 2012.

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 engineering/operations staff. Monthly rentThis property is rented under thisa month-to-month lease isat $6,500 per month. The lease expired on April 30, 2009, and continues 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’s existing facilities are adequate to meet its business needs for the foreseeable future.

Legal Proceedings

The Company is notsubject to various claims and legal proceedings covering a party to any material pending legal proceedings. No such action is contemplated bywide range of matters that arise in the Company nor, to the bestordinary course of its knowledge, hasbusiness activities. We believe that any action been threatened againstliability 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.

MANAGEMENT

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

Mark A. Smith has served as our Chairman of the Board and Chief Executive Officer since our inception in 2006 and as of April 15, Mr. Smith was appointed as the Company’s President.2008. Prior to that, Mr. Smith was a founder of, and served as President and Chief Executive Officer from 1998 to 2005 and Chairman through 2006 of Underground Solutions, Inc. (“Underground Solutions”) (OTC BB: “UGSI”), an infrastructure technology company that developed pipeline technologies. Prior to his experiencesserving with Underground Solutions, Mr. Smith was involved as a principal or investor in several construction, real estate and technology companies. Mr. Smith’s expertise in the Company’s industry led us to conclude that he would be a valuable member of the Board of Directors. As our founder, he brings historical knowledge and strategic insight to the Board.

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

Thomas R. Oxenreiter, CPA has served as our Chief Financial Officer, since February, 2008 and was appointed Secretary, and Director after the Merger. Prior to that, Mr. Oxenreiter was a self-employed Certified Public Accountant and consultant from 2005 tosince 2008. Mr. Oxenreiter served in several capacities, including Controller, for UBICS, Inc. from 2002 to 2005. Prior to 2002, Mr. Oxenreiter worked for several years in public accounting and private industry, whichindustry. Mr. Oxenreiter is a graduate of Villanova University. Mr. Oxenreiter’s financial expertise led us to believeconclude that he would be a valuable member of our Board of Directors. As our current Chief Financial Officer, he is well suited to inform the Board of the current operations of the Company. As a Certified Public Accountant, he brings significant financial expertise.

David Vosbein has served as our President and as a Director since December 15, 2008. Prior to that, Mr. Vosbein was our Executive Vice President since November 3, 2008. On April 16, 2010, Mr. Vosbein resigned as our President and as a Director. There were no known disagreements between the Company and Mr. Vosbein on any matters relating to the Company’s operations, policies or practices. Prior to joining the Company, Mr. Vosbein founded the Offshore Group, an independent oil and gas exploration and production company where he served as CEO since 2003. During that time, Mr. Vosbein also established a joint venture flexible pipe production plant in Changchun, China (Changchun Pipe Co.) and also founded Simulis, LLC, a licensor of patented technology and software tools providing Simulation-Based Assessment and Training Products for energy, healthcare and aviation industries. David Vosbein is Richard Nieman’s brother-in-law. Mr. Vosbein’s experience led us to conclude he would be a valuable member of our Board of Directors. On April 16, 2010, Mr. Vosbein resigned as President and Director. Mark Smith was subsequently appointed President. Mr. Vosbein’s seat on the Board has yet to be filled.

Todd R. Porter has served as our Vice President of Worldwide Energy Operations, since September, 2008. Prior to joining the Company, Mr. Porter was Director of Pipeline Integrity Management for Tuboscope Pipeline Services, a division of National Oilwell Varco Co. from 2001 to 2008. Mr. Porter holds Bachelor of Arts and Master of Engineering degrees from the University of Calgary, and a Master of Business Administration degree from Texas A&M University. On September 15, 2008, the Company entered into an employment agreement with Mr. Porter. Pursuant to the employment agreement, Mr. Porter will be employed until April 21 ^st , 2011, unless terminated earlier, with or without cause. Mr. Porter’s Employment Agreement provides for a base salary of $220,000 per year. In addition, as partial compensation for Mr. Porter’s employment, Mr. Porter was granted a

ten year stock option award with respect to 500,000 shares of common stock of the Company at an exercise price of $0.80. This option award is (a) non-qualified option granted under the 2007 Stock Option Plan of the Company dated December 1, 2007, (b) 1/3 of the options will vest and be exercisable 365 days from the date of grant, and 1/3 shall vest on each successive 365 day period thereafter, and (c) shall be further documented by an option agreement in the form customarily used by the Company for non-qualified option awards under that plan, but with all terms consistent with the Employment Agreement.

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

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

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

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

Timothy Sutherland has served as a Director since March 2, 2010. Mr. Sutherland is the founder of Pace Global Energy Services, LLC (“Pace Global”), formed in 1976 and is its majority stock holder. He has guided the development of Pace Global into an internationally recognized financial and energy advising and asset management firm. Mr. Sutherland has received his Masters in Business Administration from The Stern School at New York University. He serves on the Board of Advisors for the University of Notre Dame’s Mendoza Graduate School of Business and serves on the University’s Trustee Cabinet Committee on Capital Development. He serves as Executive Director of Board of the Hill School and served as its Chairman for the period 1989-1994. Mr. Sutherland is Chairman of the Board for Pace Global. He serves on the Board of Advisors for C2 Facility Solutions, LLC and serves on the Board for Standard Solar, Inc. As CEO of Pace Global, Mr. Sutherland brings executive experience in the energy industry to the Board. Through his associations with C2 Facility Solutions, LLC and Standard Solar, Inc., Mr. Sutherland brings experience serving on corporate boards of directors.

EXECUTIVE COMPENSATION

The following table sets forth a summary for the fiscal years ended December 31, 20092013 and 20082012 of the cash and non-cash compensation awarded, paid or accrued by the Company to our NamedChief Executive Officers.Officer and our two most highly compensated officers other than our Chief Executive Officer who served in such capacities in 2013 (collectively, the “Named Executive Officers”). All currency amounts are expressed in U.S. dollars.

Summary Compensation Table

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information with respect to the Named Executive Officers concerning equity awards granted by the Company as of December 31, 2009. Prior to April 25, 2008 the Named Executive Officers were not employees of the Registrant.2013.

Director Compensation

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

Employment Agreements and Change in Control Arrangements

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

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

On

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

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

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

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

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transactions with Related Persons

The Company leases its headquarters building from Mark A. Smith, the Company’s Chairman and Chief Executive Officer. The building has approximately 3,200 square feet of office space, and is used by the Company’s corporate, technical, and engineering/operations staff. The Company incurred $78,000 of lease expense for this building duringin each of the years ended December 31, 20092013 and 2008.2012. The lease is cancellable by either party upon 30 days’ notice.

At December 31, 2011, the Company owed Mr. Smith $26,000$162,354 on a note payable (the “Smith Note”). Interest on the Smith Note at 8% amounted to $8,336 and $32,500$13,514 for unpaid rentthe years ended December 31, 2013 and 2012, respectively. The balance due on the Smith Note was $175,867 at December 31, 2009 and 2008, respectively.

During the year ended December 31, 2008, Mr.2012. The Smith loaned the Company $2,867,000 for working capital purposes. Interest on the loan at 8% per annum, compounded monthly, amountedNote was converted to $52,242 during the year ended December 31, 2008. During 2008, $903,469 of the loan and accrued interest was settled by the issuance of 1,129,336 shares of the Company’s common stock, at a conversion price of $0.80 per share. At December 31, 2008, the balance due on the note, including accrued interest, was $2,015,772.

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

On October 30, 2009, Mr. Smith and the Company entered into a Note Conversion Agreement, in which Mr. Smith converted the outstanding loan balance of $3,128,263 into: i) 2,000,000 shares ofpurchase the Company’s common stock at a conversion price of $1.00 per share; ii) a $1,000,000 8% Unsecured Convertible Promissory Note (the “Smith Convertible Note”); and iii) a $128,263 8% Unsecured Promissory Note (the “Smith Demand Note”).on August 20, 2013, as described below.

The Smith Convertible Note bears interest at 8% per annum, compounded monthly. The Smith Convertible Note is payable on the earlier of the Company’s closing of a round of convertible preferred or common stock financing of at least $10,000,000 or December 31, 2011. At any time prior to December 31, 2011, the Company owed Mr. Smith may convert the outstanding principal balance of the Smith$35,818 on a convertible note payable (the “Convertible Note”). The Convertible Note was convertible to the Company’s common stock at a conversion price of $1.00 per share. Interest on the Smith Convertible Note was $13,637at 8% amounted to $1,839 and $2,981 for the yearyears ended December 31, 2009.2013 and 2012, respectively. The balance due on the Smith Convertible Note including accrued interest, was $1,013,637$38,799 at December 31, 2009. As2012. The Convertible Note was converted to shares of March 19, 2010, the Company’s common stock, and warrants to purchase the Company’s common stock on August 20, 2013, as described below.

At December 31, 2011, the Company owed Mr. Smith $152,489 on a demand note payable (the “Demand Note”). Interest on the Demand Note at 8% amounted to $7,830 and $12,692 for the years ended December 31, 2013 and 2012, respectively. The balance due on the Smith ConvertibleDemand Note was $1,031,063. $165,182 at December 31, 2012. The Demand Note was converted to shares of the Company’s common stock, and warrants to purchase the Company’s common stock on August 20, 2013, as described below.

On March 19, 2010,November 9, 2012, the Company cancelled $1,000,000and Mr. Smith entered into a Lease Agreement, pursuant to which the Company leases equipment from Mr. Smith. The lease is for 60 months, and is for substantially the same terms for which Mr. Smith leases the equipment from the manufacturer. Interest on the lease amounted to $439 and $41 for the years ended December 31, 2013 and 2012, respectively.

On August 20, 2013, the Company and Mr. Smith entered into a Conversion Agreement (the “Smith Conversion Agreement”), pursuant to which liabilities of the principal balanceCompany to Mr. Smith totaling $1,253,644 were converted to 17,909,203 shares of the Smith Convertible NoteCompany’s common stock and in exchange Smith acquired 600,000warrants to purchase 1,790,920 shares of the Company’s common stock at $1.00an exercise price of $0.25 per shareshare. The liabilities to Mr. Smith included $573,635 of accrued salary, $282,156 of unreimbursed business expenses and unpaid rent for the Company’s offices, $184,204 for unpaid principal and accrued interest on behalfthe Smith Note, $40,638 for unpaid principal and accrued interest on the Convertible Note, and $184,204 for unpaid principal and accrued interest on the Demand Note. As required by the Smith Conversion Agreement, the Company paid taxes owed by Mr. Smith as a result of hethe conversion in the amount of $57,887. In addition to the liabilities to Mr. Smith converted pursuant to the Smith Conversion Agreement, the Company agreed to use reasonable commercial efforts to pay additional accrued and his wife; 200,000unpaid salary of $97,500, and additional unreimbursed business expenses and unpaid rent of $21,366.

On August 20, 2013, the Company and Thomas R. Oxenreiter, the Company’s Chief Financial Officer, entered into a Conversion Agreement (the “Oxenreiter Conversion Agreement”), pursuant to which accrued and unpaid salary of $223,959 and unreimbursed business expenses of $12,062 owed to Mr. Oxenreiter were converted to 3,371,719 shares of the Company’s common stock and warrants to purchase 337,172 shares of the Company’s common stock at $1.00an exercise price of $0.25 per share on behalfshare. As required by the Oxenreiter Conversion Agreement, the Company paid taxes owed by Mr. Oxenreiter as a result of 2000 Irrevocable Trust for Ian Smith;the conversion in the amount of $18,925. In addition to the liabilities to Mr. Oxenreiter converted pursuant to the Conversion Agreement, the Company agreed to use reasonable commercial efforts to pay additional accrued salary of $31,250, and 200,000additional unreimbursed business expenses of $1,759.

In 2010, the Company entered into a Strategic Advisory Agreement (the “Strategic Advisory Agreement”) with Pace Global Energy Services, LLC (“Pace”) and Ridge Global, LLC (“Ridge”) to provide the Company with certain strategic advisory and other support services. Pursuant to the Strategic Advisory Agreement, the Company issued Pace and Ridge warrants to purchase 1,600,000 and 2,400,000 shares, orrespectively, of the Company’s common stock at $1.00 per sharestock. Such warrants expired on behalfMarch 2, 2012. Further, pursuant to the Strategic Advisory Agreement, the Company agreed to expand the number of 2000 Irrevocable Trust for Benjamin Smith. After March 19, 2010,members of the Smith Convertible Note had a remaining balanceCompany’s Board of $31,063.

Directors from three to five, and to appoint Timothy F. Sutherland, Chairman and Chief Executive Officer of Pace, and Thomas J. Ridge, President and Chief Executive Officer of Ridge, to fill the newly-created vacancies. The Smith Demand Note bears interest at 8% per annum, compounded monthly, and is payable upon demand. Interest onCompany incurred fees pursuant to the Smith Demand Note was $1,749 forStrategic Advisory Agreement of $480,000 during the year ended December 31, 2009. At2011.

On October 19, 2010, the Company, Pace, and Ridge entered into a Fee Deferral Agreement and Promissory Note (the “Promissory Note”), pursuant to which the Company memorialized $238,030 of unpaid accounts payable owing to Pace and Ridge to the Promissory Note bearing interest at 10% per annum. Interest on the Promissory Note totaled $28,349 and $25,575 for the years ended December 31, 2009, the2012 and 2011, respectively. The balance due on the Smith DemandPromissory Note was $130,012.$296,781 and $268,432 at December 31, 2012 and 2011, respectively.

Mr. Sutherland resigned his position on the Company’s Board of Directors on February 6, 2012, and Mr. Ridge resigned his position on the Company’s Board of Directors on May 31, 2012.

On December 4, 2009, Mr. Smith advancedFebruary 28, 2013, the Company, $10,000. Interest on the note at 8% per annum, compounded monthly, for the year ended December 31, 2009 was $59. At December 31, 2009, the balance due on the note was $10,059.

On March 6, 2009, the CompanyPace, Ridge, Mr. Sutherland, and Mr. Ridge entered into an Employmenta Mutual Termination and Release Agreement, with David Vosbein,which terminated all prior agreements and released all parties from all obligations related to all prior agreements, including the Company’s president (the “Vosbein Employment Agreement”). Pursuant toPromissory Note. As a result of the Vosbein EmploymentMutual Termination and Release Agreement, the Company granted warrants to purchase 2,000,000 sharesrecorded a gain on extinguishment of the Company’s common stock at $1.23 for ten years to Mr. Vosbein. Warrants to purchase 1,000,000 sharesdebt of the Company’s common stock