10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2009

OR

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

COMMISSION FILE NUMBER: 333-04066

GEOSPATIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

NEVADA	87-0554463
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

229 Howes Run Road, Sarver, PA 16055

(Address of principal executive offices)

(724) 353-3400

(Registrant’s telephone number, including area code)

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

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

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

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

Yes  ¨    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.

Yes  ¨    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.

Yes  x    No  ¨

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

Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

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

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

Yes  ¨    No  x

Aggregate market value of voting common stock held by non-affiliates of the registrant at June 30, 2009: $4,646,878. 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).

Documents incorporated by reference: None.

GEOSPATIAL HOLDINGS, INC.

TABLE OF CONTENTS

		Page
PART I:
Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Reserved	17
PART II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Item 9A(T).	Controls and Procedures	54
Item 9B.	Other Information	54
PART III:
Item 10.	Directors, Executive Officers, and Corporate Governance	55
Item 11.	Executive Compensation	56
Item 12.	Security Ownership of Certain Beneficial Owners and Management	59
Item 13.	Certain Relationships and Related Transactions	61
Item 14.	Principal Accountant Fees and Services	61
Item 15.	Exhibits and Financial Statement Schedules	62

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

The statements set forth in this Annual Report on From 10-K, and in particular the “Business,” “Management’s Discussion and Analysis of Financial Condition and Result of Operations,” and “Risk Factors” sections and other statements included elsewhere in this Annual Report on 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 Section 21E of the Securities Exchange Act of 1934, as amended, 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.

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“ beginning on page 8.

PART I

Item 1. Business.

Company Overview

The Registrant (formerly known as Kayenta Kreations, Inc.) was incorporated on December 26, 1995 in the state of Nevada. Geospatial Mapping Systems, Inc. (“GMSI”) was incorporated on May 26, 2006 in the State of Delaware. On April 25, 2008, the Registrant merged with GMSI to form Geospatial Holdings, Inc. (“we” or the “Company”). Upon completion of the merger, the Company adopted the business of GMSI, and GMSI became 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 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

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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 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

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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.

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

We intend to establish Regional Technical Sales Managers (“RTSMs”) in various sales regions across the United States, Canada 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 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 group 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™ technology and its associated benefits. We also will demonstrate the use and functionality of the Smart Probe™ at numerous national and regional trade shows sponsored by related industry groups. In addition, the Company expects each RTSM to generate sales leads through electronic mail marketing.

Fundraising

In an effort to raise capital, the Company has retained Convertible Capital as its financial advisor. Subsequent to December 31, 2009, the Company sold shares of its common stock for an aggregate sale price of approximately $9.7 million, including the conversion of $1,000,000 of indebtedness to our Chief Executive Officer. The proceeds of these fundraising efforts will be used to fund 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.

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Ability to Develop and Protect Patents and Other Intellectual Property

Our success, competitive position, and future revenues, if any, depend in part on our ability, and that of the licensors of our major technology, to obtain and successfully leverage intellectual property rights covering our technology, know-how, methods, processes, and to protect our trade secrets, to prevent others from using our intellectual property, and to operate without infringing the intellectual property of third parties. United States 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 maintain our competitive 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 50 projects for a varied group of clients including contractors, municipalities, utilities, telecoms, and engineering companies.

Government Contracts

Some of our contracts are 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

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.

In the energy (oil 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 Williams and Enduro. While a few 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.

The competitive conditions in our business relate to the nature of the contracts being pursued. Public sector contracts, consisting mostly 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.

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, (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

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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. A shortage of qualified technical professionals currently exists in the engineering 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, we had 60 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.

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.

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Item 1A. Risk Factors.

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. If any of the following risks actually occur, they would likely harm our business, financial condition, and results of operations.

RISK FACTORS RELATED TO THE 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 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

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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 advances from our chief executive officer. At December 31, 2009, our current liabilities exceed our current assets by $3,862,583. 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 not be able to protect our proprietary technology from infringement.

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 products could compete aggressively against us in the pricing of certain products and 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.

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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 need 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 adapt to technological advances in the pipeline services industry.

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 adapt to technological changes in the industry. If we are unable to adapt to technological change, timely develop and introduce new products, or enhance existing products in response to changing market conditions or customer requirements or demands, our business and results of operations could be materially and adversely affected. 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 in the future.

We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.

Our business may bring us into conflict with our licensor 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 or against us. This litigation could be expensive and may require 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 us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business.

Loss of key individuals could disrupt our operations and harm 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, the 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 agencies of the U.S. federal government and state and local governments and agencies that 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, and 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.

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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 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.

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.

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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 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 the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projects 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 clients or labor or other disruptions. In some cases, should we fail to meet required performance standards, we may also be subject to agreed upon financial damages, which are determined by the contract. 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 a project, which may reduce or eliminate our overall profitability.

We are 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 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, ventures and the 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 engaged in highly competitive markets that pose challenges to continued revenue growth.

Our business is 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 a large number of other service providers who offer the principal services that we offer. In this competitive environment, we must provide technical proficiency, quality of service and experience to ensure future contract awards and revenue and profit growth.

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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.

RISK FACTORS RELATED TO COMMON STOCK

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

Approximately 400,000 shares of the Company’s common 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 the 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:

• the announcement of new products or product enhancements by us or our competitors;

• developments concerning intellectual property rights and regulatory approvals;

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

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

• developments in the pipeline management services industry;

• the results of product liability or intellectual property lawsuits;

• future issuances of common stock or other securities;

• the addition or departure of key personnel;

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

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

Further, the stock 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 decline in the value of our common stock. Price volatility of our common stock might be worse if the trading volume of our common stock is low. 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 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.

Trading of our common stock is limited and trading restrictions imposed on us by regulatory authorities may further reduce our trading, making it difficult for our shareholders to sell their shares.

Trading of our common stock is currently conducted on the OTC BB. 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 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. Currently, there are approximately 200 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 ask 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.

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Because our common stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.

Our common stock may be a “penny stock” if, among other things, 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 it 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 containing price and market information relating to 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 participate in penny stock transactions. Accordingly, investors may not always be able to resell their shares of our common stock publicly at times and prices that they feel are appropriate.

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 governance and public disclosure may result in additional expenses.

There have been changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act, new regulations promulgated by the Commission and rules promulgated by the American Stock Exchange, the other national securities exchanges and the

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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, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies, we could be subject to liability under applicable laws or our reputation may be harmed.

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Item 2. Properties.

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

Item 3. Legal Proceedings.

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

Item 4.

Reserved.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for our Common Stock

Shares of our common stock had previously been quoted on the OTC BB under the listing symbol “KKRI” and had only been traded on a very limited and sporadic basis. As of April 28, 2008, our listing symbol has been changed to “GSPH” in conjunction with our name change. The last reported sales price per share of the Company’s common stock as reported on the OTC BB on March 31, 2010 was $4.65.

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

Quarter Ended	High		Low
December 31, 2009	$	1.70	$	0.50
September 30, 2009	$	1.15	$	0.35
June 30, 2009	$	1.80	$	0.30
March 31, 2009	$	2.05	$	2.05
December 31, 2008	$	2.50	$	1.75
September 30, 2008	$	3.85	$	2.00
June 30, 2008	$	10.20	$	2.00
March 31, 2008	$	3.87	$	3.69
December 31, 2007	$	1.14	$	1.14

Number of Shareholders

As of March 31, 2010, there were approximately 200 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.

Sales of Unregistered Securities

On October 9, 2009, 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 40,000 shares of its common stock to the investors under the October 2009 Subscription Agreement. 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 issuances 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.

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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 requirements of the Securities Act provided by Regulation D. Mr. Smith 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, 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 37,500 shares of its common stock to the investors under the December 2009 Subscription Agreement. 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 issuances 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.

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, pursuant to the Amended Reduct License Agreement, we issued warrants to Delta to purchase (i) 3,000,000 shares of the Company’s common stock at an exercise price of $0.50 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 . The warrants were issued in a private placement pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation D. The recipient of the warrants is an accredited investor, and we 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, we issued warrants to purchase 250,000 shares of the Company’s common stock at $1.38 to an investor 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 recipient of the warrants is an accredited investor, and we 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, and we conducted the private placement without any general solicitation or advertisement and with a restriction on resale. The warrants expire on January 1, 2020.

On March 2, 2010, we issued warrants 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 issued in connection with the execution of the Strategic Advisory Agreement we entered into 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. Pursuant to section 7.1 of the March 2010 Subscription Agreement, the Company agreed to register the March 2009 Shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register the

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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.

Item 6. Selected Financial Data.

Not applicable.

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

You should read the 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 filed with this Annual Report on Form 10-K.

Some of the information contained in this MD&A or set forth elsewhere in this Annual Report on Form 10-K, 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 LOOKING STATEMENTS” above. In addition, you should read the “Risk Factors” section of this Annual Report on Form 10-K 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 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 relationships in 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.

Liquidity and Capital Resources

At December 31, 2009, we had current assets of $1,575,958, and current liabilities of $5,438,541.

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

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$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 stock and advances from our chief executive officer. At December 31, 2009 current liabilities exceeded current assets by $3,862,583. Those factors as well as our commitments under the Amended Reduct License Agreement raise doubts about our ability to continue as a going concern.

Management is continuing efforts to secure funds 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 through 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 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. The proceeds of the stock offering will be used to fund general working capital needs.

Furthermore, the Company is expanding into new marketing and sales channels. The Company has entered into the utility locating market, has entered into a joint marketing agreement with a strategic partner, and is exploring relationships with additional strategic partners to increase capital 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.

Results of Operations

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.

21

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 incurred 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, 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, 2007, 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 to 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 December 31, 2009.

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 Assessment of Intangible Assets. Intangible assets consist of exclusive license rights to the patent pending DuctRunner Smart Probe™ technology. We currently license the technology from Reduct under the Original Reduct License Agreement, which provides us with exclusive control rights to the DuctRunner Smart Probe™ technology throughout the continents 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 Agreement 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

22

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 determine the fair value of the license rights based on a five-year projection of future cash flows, which is updated annually based on management’s projections.

In our review of the license rights for the year ended December 31, 2009, we determined that the estimated fair value of those assets substantially exceeded our $1,367,000 investment in our intangible assets and therefore, the value 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.

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, we do not believe that material changes to contract cost estimates at completion for any of our open contracts are reasonably likely to occur.

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

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

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

Foreign Currency Risk—Our functional currency is the United States dollar. Some of our business transactions are denominated 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.

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.

23

Item 8. Financial Statements and Supplemental Data.

GEOSPATIAL HOLDINGS, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	25
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009 and 2008
Consolidated Balance Sheets	26
Consolidated Statements of Operations	27
Consolidated Statements of Changes in Stockholders’ Deficit	28
Consolidated Statements of Cash Flows	29
Notes to Financial Statements	30

24

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and

Stockholders of Geospatial Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Geospatial Holdings, Inc. (a Nevada corporation) as of December 31, 2009 and 2008, and the related 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’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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides 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. as of December 31, 2009 and 2008, 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 14 to the consolidated financial statements, the Company has incurred net losses since inception. Operations and capital requirements since inception have been funded by sales of stock and advances from its chief executive officer, and current liabilities exceed current assets by $3,862,583. 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

25

Geospatial Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

As of December 31,

	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	481,536		$	42,793
Accounts receivable, net of allowance for doubtful accounts of $10,000 at
December 31, 2009 and 2008		263,653			51,271
Costs and estimated earnings in excess of billings on uncompleted contracts		61,624			11,479
Notes receivable		397,373			361,612
Prepaid expenses		371,772			188,358
Total current assets		1,575,958			655,513
Property and equipment:
Field equipment		1,090,205			905,635
Office equipment		106,832			99,616
Vehicles		920,853			17,530
Total property and equipment		2,117,890			1,022,781
Less: accumulated depreciation		(514,105	)		(330,209	)
Net property and equipment		1,603,785			692,572
Other assets:
License fees		1,367,000			1,367,000
Deposits on equipment		500,000			—
Total other assets		1,867,000			1,367,000
Total assets	$	5,046,743		$	2,715,085
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	1,391,488		$	710,493
Accrued expenses		3,670,337			105,168
Billings in excess of costs and estimated earnings on uncompleted contracts		—			25,159
Current portion of capital lease liabilities		210,645			—
Due to stockholder		26,000			32,500
Notes payable to stockholders		140,071			2,118,808
Total current liabilities		5,438,541			2,992,128
Non-current liabilities:
Capital lease liabilities		458,167			—
Convertible note payable to stockholder		1,013,637			—
Total non-current liabilities		1,471,804			—
Total liabilities		6,910,345			2,992,128
Commitments and contingencies (Note 9)		—			—
Stockholders’ deficit:
Preferred stock, $.001 par value; 5,000,000 shares authorized at December 31, 2009 and 2008; 1,575,000 and 0 shares issued and outstanding at December 31, 2009 and 2008, respectively		1,575			—
Common stock, $.001 par value; 100,000,000 shares authorized at December 31, 2009 and 2008; 31,124,369 and 23,759,806 shares issued and outstanding at December 31, 2009 and 2008, respectively		31,124			23,760
Additional paid-in capital		13,473,089			7,270,611
Accumulated deficit		(15,369,390	)		(7,571,414	)
Total stockholders’ deficit		(1,863,602	)		(277,043	)
Total liabilities and stockholders’ deficit	$	5,046,743		$	2,715,085

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

26

Geospatial Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

	Year Ended December 31, 2009			Year Ended December 31, 2008
Sales	$	825,669		$	1,567,575
Cost of sales		929,722			673,397
Gross profit		(104,053	)		894,178
Selling, general and administrative expenses		7,510,950			5,338,285
Net loss from operations		(7,615,003	)		(4,444,107	)
Other income (expense):
Interest income		30,374			21,244
Interest expense		(214,680	)		(59,788	)
Other income		1,333			171
Loss on foreign currency exchange		—			(36,522	)
Total other income and expenses		(182,973	)		(74,895	)
Net loss before income taxes		(7,797,976	)		(4,519,002	)
Provision for (benefit from) income taxes		—			—
Net loss	$	(7,797,976	)	$	(4,519,002	)
Basic and fully-diluted net loss per share of common stock	$	(0.30	)	$	(0.20	)

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

27

Geospatial Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Deficit

For the Years Ended December 31, 2009 and 2008

	Geospatial Mapping Systems, Inc.								Geospatial Holdings, Inc.						Additional Paid-In Capital		Accumulated Deficit			Total
	Preferred Stock			Common Stock					Preferred Stock			Common Stock
	Shares	Amount		Shares		Amount			Shares	Amount		Shares	Amount
Balance, December 31, 2007	—	$	—	17,352,352		$	17,352		—	$	—	—	$	—	$	4,792,324	$	(3,052,412	)	$	1,757,264
Issuance of common stock for cash at $0.80 per share	—		—	1,562,500			1,563		—		—	—		—		1,248,437		—			1,250,000
Issuance of common stock in settlement of note at $0.80 per share	—		—	1,129,336			1,129		—		—	—		—		902,340		—			903,469
Issuance of common stock for cash in settlement of warrant at $0.50 per share	—		—	30,000			30		—		—	—		—		14,970		—			15,000
Issuance of shares of Geospatial Holdings, Inc. common stock to stockholders of Kayenta Kreations, Inc. pursuant to merger	—		—	—			—		—		—	3,685,618		3,686		312,540		—			316,226
Exchange of shares of Geospatial Mapping Systems, Inc. common stock for shares of Geospatial Holdings, Inc. common stock	—		—	(20,074,188	)		(20,074	)	—		—	20,074,188		20,074		—		—			—
Net loss for the year ended December 31, 2008	—		—	—			—		—		—	—		—		—		(4,519,002	)		(4,519,002	)
Balance, December 31, 2008	—		—	—			—		—		—	23,759,806		23,760		7,270,611		(7,571,414	)		(277,043	)
Issuance of common stock for cash at $1.00 per share	—		—	—			—		—		—	250,000		250		249,750		—			250,000
Issuance of common stock for cash at $0.50 per share, less offering costs	—		—	—			—		—		—	4,894,900		4,895		2,346,318		—			2,351,213
Issuance of common stock in settlement of notes payable at $1.00 per share	—		—	—			—		—		—	2,104,638		2,104		2,102,534		—			2,104,638
Issuance of common stock for services at $1.00 per share	—		—	—			—		—		—	115,025		115		114,910		—			115,025
Issuance of Series A Preferred Stock at $1.00 per share, less offering costs	—		—	—			—		1,575,000		1,575	—		—		1,388,966		—			1,390,541
Net loss for the year ended December 31, 2009	—		—	—			—		—		—	—		—		—		(7,797,976	)		(7,797,976	)
Balance, December 31, 2009	—	$	—	—		$	—		1,575,000	$	1,575	31,124,369	$	31,124	$	13,473,089	$	(15,369,390	)	$	(1,863,602	)

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

28

Geospatial Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Year Ended			Year Ended
	December 31,			December 31,
	2009			2008
Cash flows from operating activities:
Net loss	$	(7,797,976	)	$	(4,519,002	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		183,896			150,926
Accrued interest receivable		(30,315	)		(24,026	)
Accrued interest payable		195,539			55,277
Issuance of common stock for reverse acquisition		—			316,226
Issuance of common stock for services		215,025			—
Rent expensed through increase in due to stockholder		45,500			32,500
Changes in operating assets and liablities:
Accounts receivable		(212,382	)		(43,741	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(50,145	)		(11,479	)
Prepaid expenses		(183,414	)		(106,373	)
Accounts payable		680,995			628,252
Accrued expenses		3,565,169			1,060,921
Billings in excess of costs and estimated earnings on uncompleted contracts		(25,159	)		25,159
Net cash used in operating activities		(3,413,267	)		(2,435,360	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(393,733	)		(37,169	)
Expenditures for license fees		—			(937,330	)
Deposit on equipment		(500,000	)		(732,796	)
Notes receivable issued		(5,446	)		(230,000	)
Net cash used in investing activities		(899,179	)		(1,937,295	)
Cash flows from financing activities:
Proceeds from sale of common stock, net of offering costs		2,501,213			1,265,000
Proceeds from sale of Series A Preferred Stock, net of offering costs		1,390,541			—
Net borrowings from stockholders		892,000			2,967,000
Principal payments on capital lease liabilities		(32,565	)		—
Net cash provided by financing activities		4,751,189			4,232,000
Net change in cash and cash equivalents		438,743			(140,655	)
Cash and cash equivalents at beginning of period		42,793			183,448
Cash and cash equivalents at end of period	$	481,536		$	42,793
Supplemental disclosures:
Cash paid during period for interest	$	19,141		$	4,510
Cash paid during period for income taxes		—			—
Non-cash transactions:
Issuance of common stock in settlement of liabilities		2,104,639			903,469
Issuance of common stock for services		215,025			—
Capital lease liabilities incurred		701,377			—
Reclassification of due to stockholder to note payable to stockholder		52,000			—
Accrued license fees		—			592,934
Accrued deposit on equipment		—			497,520

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

29

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies

This summary of significant accounting policies of Geospatial Holdings, Inc., a Nevada corporation (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, professional data management, and pipeline field services. 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 wholly-owned subsidiaries Geospatial Mapping Systems, Inc. (“GMSI”), Utility Services and Consulting Corporation, and Geospatial Pipeline Services, LLC. 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.

30

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:

• Impairment assessment of intangible assets;

• Estimated useful lives of property and equipment;

• Estimated costs to complete fixed-price contracts;

• Realization of deferred income tax assets.

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

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 position 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 allowance for doubtful accounts was $10,000 at December 31, 2009 and 2008.

31

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

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 and $150,926 for the years ended December 31, 2009 and 2008, 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, assets under capital leases and the related accumulated depreciation amounted to $930,946 and $23,734, respectively. The company had no assets under capital lease at December 31, 2008.

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.

32

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

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.

33

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Fair Value Measurements (continued)

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

			Fair Value Measurements at December 31, 2009
	Total Carrying Value at		Quoted prices in active		Significant other		Significant
	December 31, 2009		markets (Level 1)		observable inputs (Level 2)		unobservable inputs (Level 3)
Intangible asset – license fees	$	1,367,000	$	—	$	—	$	1,367,000

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

34

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Revenue Recognition

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

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

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

• Collectibility is reasonably assured.

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

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

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

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

Advance customer payments are recorded as deferred revenue until such time as they are recognized as revenue.

Revenues are recorded net of sales taxes collected.

Advertising

The Company expenses advertising costs as they are incurred. Advertising expense for the years ended December 31, 2009 and 2008 was $160,554 and $4,623, respectively.

35

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Deferred Income Taxes

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

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

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

Stock-Based Payments

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

36

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 1 – Summary of Significant Accounting Policies (continued)

Segment Reporting

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

Recent Accounting Pronouncements

The Company adopted FASB ASC 740-10-25, Income Taxes—Overall—Recognition, on January 1, 2008. FASB ASC 740-10-25 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. FASB ASC 740-10-25 requires the evaluation of tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions have met a “more-likely-than-not” threshold of being sustained by the applicable tax authority. Tax benefits related to tax positions not deemed to meet the “more-likely-than-not” threshold are not permitted to be recognized in the consolidated financial statements. The adoption of FASB ASC 10-25 had a minimal impact on the Company’s consolidated financial statements.

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

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

37

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 2 – Capital Stock

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

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

On December 11, 2009, the Company filed a Certificate of Designations, Powers, Preferences and Rights of the Series A Preferred Stock of Geospatial Holdings, Inc. (the “Certificate of Designations”) with the State of Nevada. The Certificate of Designations designated 1,575,000 shares of Series A Convertible Preferred Stock for issuance by the Company. Each share of Series A Convertible Preferred Stock is convertible to shares of common stock in accordance with the terms of the Certificate of Designations. Each holder of Series A Convertible Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which the Series A Convertible Preferred Stock may be converted. The holders of Series A Convertible Preferred Stock are entitled to a liquidation preference equal to the original issue price, and a dividend preference over the holders of common stock.

Note 3 – Merger

On April 25, 2008, Kayenta acquired all the outstanding common stock of GMSI pursuant to the Merger Agreement.

Prior to the closing of the Merger Agreement, Kayenta shareholders approved a 2.8 for 1 forward stock split, resulting in 3,685,618 shares of Kayenta common stock outstanding at the closing of the Merger Agreement. Pursuant to the Merger Agreement, Kayenta issued one share of Kayenta’s common stock in exchange for each outstanding share of GMSI’s common stock, resulting in 20,074,188 shares of Kayenta common stock, for a total aggregate number of shares of Kayenta common stock of 23,759,806 outstanding upon consummation of the merger. Upon completion of the merger, GMSI became a fully-owned subsidiary of Kayenta, which was subsequently renamed “Geospatial Holdings, Inc.,” and GMSI’s shareholders obtained majority ownership of the shares of common stock of Geospatial Holdings, Inc. After the merger, GMSI’s former stockholders owned approximately 84.5% of the common stock of the Company, and Kayenta’s stockholders owned approximately 15.5% of the common stock of the Company.

38

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 3 – Merger (continued)

In accordance with Accounting and Financial Reporting Interpretations and Guidance issued by the staff of the United States Securities and Exchange Commission, the merger was accounted for as a recapitalization. Accordingly, all consideration paid and costs incurred pursuant to the merger were charged to expense, and no goodwill or other intangible asset was recorded. All historical financial information prior to the consummation of the Merger Agreement is that of GMSI. Kayenta’s results of operations have been included in the Company’s Consolidated Statements of Operations since the completion of the merger on April 25, 2008.

Prior to the merger, Kayenta was a public shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. The acquisition was undertaken to provide the Company a public shell.

Note 4 – Accounts Receivable

Accounts receivable consisted of the following at December 31, 2009:

Billed:
Fixed-price contracts:
Completed contracts	$	43,046
Contracts in progress		2,370
Units of delivery contracts		197,522
Retainage		2,981
Unbilled		27,734
Less: allowance for doubtful accounts		(10,000	)
	$	263,653

39

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 5 – Uncompleted Contracts

Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows at December 31, 2009:

Costs incurred on uncompleted contracts	$	104,152
Estimated earnings		73,420
		177,572
Billings to date		(115,948	)
	$	61,624

Included in the accompanying balance sheet under the following captions:

Costs and estimated earnings in excess of billings on uncompleted contracts	$	61,624
Billings in excess of costs and estimated earnings on contracts in progress		—
	$	61,624

Note 6 – Backlog

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

Backlog balance at December 31, 2008	$	838,627
New contracts awarded during the year		812,430
Contract adjustments		(758,216	)
		892,841
Less: contract revenue earned during the period		(612,191	)
Backlog balance at December 31, 2008	$	280,650

40

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 7 – Notes Receivable

During the years ended 2009 and 2008, the Company advanced cash totaling $5,446 and $230,000, respectively, to Mid-Atlantic Pipe Services, Inc. (“MAPS”) in exchange for Promissory Notes from MAPS. The Promissory Notes bear interest at 8% per annum, which totaled $30,315 and $24,026 for the years ended December 31, 2009 and 2008, respectively. At December 31, 2009 and 2008, MAPS owed the Company $397,373 and $361,612, respectively.

Note 8 – Income Taxes

The Company’s provision for (benefit from) income taxes is summarized below for the years ended December 31, 2009 and 2008:

	Year Ended December 31, 2009			Year Ended December 31, 2008
Current:
Federal	$	—		$	—
State		—			—
		—			—
Deferred:
Federal		(2,449,872	)		(1,319,303	)
State		(777,737	)		(418,826	)
		(3,227,609	)		(1,738,129	)
Total income taxes		(3,227,609	)		(1,738,129	)
Less: valuation allowance		3,227,609			1,738,129
Net income taxes	$	—		$	—

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

	Year Ended December 31, 2009		Year Ended December 31, 2008
Federal statutory rate	35.0	%	35.0	%
State income taxes (net of federal benefit)	6.5		6.5
Valuation allowance	(41.5	)	(41.5	)
Effective rate	0.0	%	0.0	%

41

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 8 – Income Taxes (continued)

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

	As of December 31,
	2009			2008
Start-up costs	$	96,492		$	106,325
License fees		(88,247	)		(50,427	)
Depreciation		(108,618	)		(81,885	)
Allowance for doubtful accounts		4,150			4,150
Accrued expenses		1,330,179			13,488
Uncompleted contracts		(30,469	)		(13,634	)
Net operating loss carryforward		5,024,929			3,022,791
Deferred income taxes		6,228,416			3,000,808
Less: valuation allowance		(6,228,416	)		(3,000,808	)
Net deferred income taxes	$	—		$	—

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

42

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 9 – Commitments and Contingencies

Amended Reduct License Agreement

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

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

Year Ending December 31,	Minimum  Annual Payments
2010	$	10,950,000
2011	$	11,750,000
2012	$	6,612,500

Bank Deposits

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

Lease Obligations

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

Year Ending December 31,	Capital Lease Obligations		Operating Lease Obligations		Total
2010	$	283,701	$	27,100	$	310,801
2011		280,963		19,800		300,763
2012		222,725		—		222,725
Total minimum lease payments		787,389		46,900		834,289
Less: amounts representing interest		118,577		—		118,577
Present value of minimum lease payments	$	668,812	$	46,900	$	715,712

43

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 10 – Concentrations

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

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

	2009		2008
Customer A	25.7	%	*
Customer B	19.4	%	—
Customer C	—		44.3	%
Customer D	—		35.8	%

* Less than 10%.

Note 11 – Related-Party Transactions

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 and engineering/operations staff. The Company incurred $78,000 of lease expense for this building during each of the years ended December 31, 2009 and 2008. The Company owed Mr. Smith $26,000 and $32,500 for unpaid rent at December 31, 2009 and 2008, respectively.

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

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

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

44

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 11 – Related Party Transactions (continued)

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, Mr. Smith may convert the outstanding principal balance of the Smith Convertible Note to the Company’s common stock at a conversion price of $1.00 per share. Interest on the Smith Convertible Note was $13,637 for the year ended December 31, 2009. The balance due on the Smith Convertible Note, including accrued interest, was $1,013,637 at December 31, 2009. Minimum payments on the Smith Convertible Note were as follows as of December 31, 2009:

Year ending December 31, 2010	$	—
Year ending December 31, 2011		1,013,637
Total	$	1,013,637

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

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

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

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

45

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 12 – Net Loss Per Share of Common Stock

Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if dilutive potential common stock had been converted to common stock. The following reconciles amounts reported in the financial statements:

	Year Ended December 31, 2009			Year Ended December 31, 2008
Net loss	$	(7,797,976	)	$	(4,519,002	)
Divided by:
Weighted average shares outstanding		26,190,928			22,134,029
Basic and fully-diluted net loss per share	$	(0.30	)	$	(0.20	)

During 2009, the Company issued 1,575,000 shares of Series A Preferred Stock. At December 31, 2009, each share of Series A Preferred Stock was convertible into one share of common stock. Upon the occurrence of certain events, the conversion ratio of Series A Preferred Stock to common stock may change. The shares of Series A Preferred Stock were not included in the computation of diluted earnings per share for the year ended December 31, 2009 because the effect of their conversion would be antidilutive.

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

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

46

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 13 – Stock-Based Payments

On December 1, 2007, the Company adopted the 2007 Stock Option Plan (the “Plan”), under which the Compensation Committee of the Board of Directors (the “Committee”) may award grants of options to purchase up to 15,000,000 shares of the Company’s common stock to eligible employees, directors, and consultants, subject to exercise prices and vesting requirements determined by the Committee. The Board of Directors has reserved 15,000,000 shares of the Company’s Common Stock for issuance under the Plan. During the year ended December 31, 2009, the Company granted options to purchase 675,000 shares of the Company’s common stock to eligible employees at prices ranging from $0.41 to $1.50 per share. During the year ended December 31, 2008, the Company granted options to purchase 1,870,000 shares of the Company’s common stock to eligible employees at prices ranging from $0.80 to $1.75 per share.

Using the Black-Scholes option pricing model, management has determined that the stock options granted in 2009 and 2008 had no value. Accordingly, no compensation cost or other expense was recorded for the stock options. The current value of a share of the Company’s common stock used in the Black-Scholes option pricing model was determined by an independent valuation. The value per share as determined by the valuation was $0.27 and $0.16 per share as of December 31, 2009 and 2008, respectively.

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

	2009			2008
Risk-free interest rate		4.6	%		2.2	%
Expected dividend yield		None			None
Expected life of options		5 years			5 years
Expected volatility rate		50	%		25	%
Weighted average fair value of options granted	$	0.00		$	0.00

47

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 13 – Stock-Based Payments (continued)

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

	Total Options		Weighted Average Exercise Price		Aggregate Fair Value		Weighted Average Remaining Contractual Term (In Years)
Total options outstanding at January 1, 2008	9,700,000		$	0.50
Granted	1,870,000			0.86
Exercised	—			—
Lapsed and forfeited	—			—
Total options outstanding at December 31, 2008	11,570,000		$	0.56	$	—	9.0
Options vested and expected to vest at December 31, 2008	9,649,998		$	0.51	$	—	8.9
Options exercisable at December 31, 2008	9,649,998		$	0.51	$	—	8.9
Total options outstanding at January 1, 2009	11,570,000		$	0.56
Granted	675,000			0.69
Exercised	—			—
Lapsed and forfeited	(50,000	)		0.80
Total options outstanding at December 31, 2009	12,195,000		$	0.56	$	—	8.1
Options vested and expected to vest at December 31, 2009	10,545,550		$	0.53	$	—	8.0
Options exercisable at December 31, 2009	10,545,550		$	0.53	$	—	8.0

48

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 13 – Stock-Based Payments (continued)

The following is an analysis of nonvested options:

	Nonvested Options		Weighted Average Fair Value
Nonvested options at January 1, 2008	633,334		$	—
Granted	1,870,000			—
Vested	(533,332	)		—
Forfeited	—			—
Nonvested options at December 31, 2008	1,970,002			—
Granted	675,000			—
Vested	(945,552	)		—
Forfeited	(50,000	)		—
Nonvested options at December 31, 2009	1,649,450		$	—

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

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

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

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

49

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 13 – Stock-Based Payments (continued)

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

During 2009, the Company granted warrants to purchase 70,927 shares of the Company’s common stock at $1.50 per share for five years to certain stockholders in connection with the sale of common stock. The warrants expire in 2014.

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

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

Using the Black-Scholes option pricing model, management has determined that the warrants to purchase the Company’s Common Stock granted to non-employees in 2009 and 2008 have no value. Accordingly, no expense was recorded upon the grants of the warrants to purchase the Company’s common stock. The current value of a share of the Company’s common stock used in the Black-Scholes option pricing model was determined by an independent appraisal.

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

	2009			2008
Risk-free interest rate		4.6	%		2.2	%
Expected dividend yield		None			None
Expected life of warrants		5 years			2 years
Expected volatility rate		50	%		25	%
Weighted average fair value of warrants granted	$	0.00		$	0.00

50

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 13 – Stock-Based Payments (continued)

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

	Total Options		Weighted Average Exercise Price		Aggregate Fair Value		Weighted Average Remaining Contractual Term (In Years)
Total warrants outstanding at January 1, 2008	3,100,000		$	0.50
Granted	837,545			2.49
Exercised	(30,000	)		0.50
Lapsed and forfeited	(70,000	)		0.50
Total warrants outstanding at December 31, 2008	3,837,545		$	0.54	$	—	2.1
Warrants vested and expected to vest at December 31, 2008	3,837,545		$	0.54	$	—	2.1
Warrants exercisable at December 31, 2008	3,837,545		$	0.54	$	—	2.1
Total warrants outstanding at January 1, 2009	3,837,545		$	0.54
Granted	6,878,727			0.84
Exercised	—			—
Lapsed and forfeited	(5,000,000	)		0.79
Total warrants outstanding at December 31, 2009	5,716,272		$	0.58	$	—	5.4
Warrants vested and expected to vest at December 31, 2009	5,466,272		$	0.71	$	—	5.2
Warrants exercisable at December 31, 2009	5,466,272		$	0.71	$	—	5.2

51

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 13 – Stock-Based Payments (continued)

The following is an analysis of nonvested warrants:

	Nonvested Warrants		Weighted Average Fair Value
Nonvested warrants at January 1, 2008	—		$	—
Granted	837,545			—
Vested	(837,545	)		—
Forfeited	—			—
Nonvested warrants at December 31, 2008	—			—
Granted	6,878,727			—
Vested	(4,628,727	)		—
Forfeited	(2,000,000	)		—
Nonvested warrants at December 31, 2009	250,000		$	—

During 2009, the Company issued 115,025 shares of the Company’s common stock as payment for services. The Company recorded expense of $115,025, the fair value of the services received.

Note 14 – Going Concern

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

52

Geospatial Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Note 15 – Subsequent Events

On January 1, 2010, the Company issued warrants to purchase 150,000 shares of common stock to a contractor. The warrants have an exercise price of $1.00 per share, and vest over twelve months. The warrants expire on January 1, 2020.

On January 7, 2010, the Company cancelled a warrant to purchase 250,000 shares of the Company’s common stock exercisable at $2.15 per share due to a contractor, and issued warrants to purchase 250,000 shares of the Company’s common stock at an exercise price of $1.38 per share. The warrants expire on January 7, 2020.

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

On March 2, 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 Global Energy Services, LLC and Ridge Global, LLC warrants to purchase 1,600,000 and 2,400,000 shares, respectively, of the Company’s common stock at an exercise price of $1.00 per share. The warrants expire on March 2, 2012. Further, pursuant to the Strategic Advisory Agreement, the Company agreed to expand the number of members of the Company’s board of directors from three to five, and to appoint Timothy F. Sutherland, Chairman and Chief Executive Officer of Pace, and Thomas J. Ridge, President and Chief Executive Officer of Ridge, as members of the Company’s board of directors to fill the newly-created vacancies.

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

53

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

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

Item 9A(T).  Controls and Procedures.

Evaluation of Controls and Procedures

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

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

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

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective at December 31, 2009.

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

Management believes that these matters are due to the small size of the Company’s administrative and accounting staff. Management is taking action in 2010 to improve these matters by 1) increasing the size of the Company’s accounting staff; 2) increasing the size of the Company’s administrative staff; 3) implementing a disaster recovery plan; 4) investigating the feasibility of creating an audit committee of the board of directors; and 5) investigating the feasibility of creating a compensation committee of the board of directors.

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

Changes to Internal Controls over Financial Reporting

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

Item 9B. Other Information.

None.

54

PART III

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

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 shareholders and the election and qualification of their successors.

Name	Age	Position(s)
Mark A. Smith	55	Chairman of the Board of Directors and Chief Executive Officer
Thomas R. Oxenreiter	43	Chief Financial Officer, Secretary, and Director
David Vosbein	68	President and Director
Todd R. Porter	49	Executive Vice President of Worldwide Energy Operations
Richard W. McDonald	66	Executive Vice President of GIS Operations
Richard B. Nieman	73	Executive Director of Corporate Development
Linda M. Ward	56	Executive Vice President of Business Development
Thomas J. Ridge	64	Director
Timothy Sutherland	59	Director

Mark A. Smith has served as our Chairman of the Board and Chief Executive Officer since our inception in 2006. 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 experiences with Underground Solutions, Mr. Smith was involved as a principal or investor in several construction, real estate and technology companies.

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 to 2008. Mr. Oxenreiter served in several capacities, including Controller, for UBICS, Inc. from 2002 to 2005. Prior to 2002, Mr. Oxenreiter worked for several years in public accounting and private industry.

David Vosbein has served as our President since December 15, 2008. Prior to that, Mr. Vosbein was our Executive Vice President since November 3, 2008. Prior to joining the Company, Mr. Vosbein founded the Offshore Group, an independent oil and gas exploration and production company where he served as CEO since 2003. During that time, Mr. Vosbein also 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.

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 multiples organizations to assist our nation’s veterans, serves as chairman of the National Organization on Disability and co-chairs the Flight 93 National Memorial. Mr. Ridge serves on the Advisory Board of Ridge Global, LLC. He also serves on public and private boards, including the Institute for Defense Analyses and the Center for the Study of the Presidency and Congress. He holds a B.S. from Harvard University and J.D. from the Dickinson School of Law.

Timothy Sutherland has served as a Director since March 2, 2010. Mr. 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.

55

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

The following table sets forth a summary for the fiscal years ended December 31, 2009 and 2008 of the cash and non-cash compensation awarded, paid or accrued by the Company to our Named Executive Officers. All currency amounts are expressed in U.S. dollars.

Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Award(s) ($)	Option Award(s) ($)(1)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Mark A. Smith, Chairman of Board of Directors and Chief Executive Officer	2009 2008	327,385 291,029	—   —	—   —	—   —	—   —	—   —	24,641 10,400	352,026 301,426
Thomas R. Oxenreiter, Chief Financial Officer	2009 2008	127,884 110,978	—   —	—   —	—   —	—   —	—   —	18,892 9,900	146,777 120,878
David Vosbein, President	2009 2008	—   —	—   —	—   —	—   —	—   —	—   —	—   —	—   —
Todd R. Porter, Executive Vice President, Worldwide Energy Operations	2009 2008	225,077 59,936	—   —	—   —	—   —	—   —	—   —	50,948 —	276,025 59,936
Richard W. McDonald, Executive Vice President, GIS Operations	2009 2008	188,246 26,067	—   —	—   —	—   —	—   —	—   —	18,554 —	206,800 26,067

(1) This column sets forth the amounts that the Company recognized as compensation expense in its financial statements for 2009 and 2008. The Company determines expense for grants of options to purchase shares of the Company’s common stock (“Stock Options”) under Financial Accounting Standards Board Accounting Standards Codification 718, Stock Compensation. Using the Black-Scholes option pricing model, management has determined that the Stock Options granted in 2009 and 2008 had no value.

(2) This column includes employee benefit amounts including health, dental and life insurance, as well as $26,000 in education reimbursement for Todd R. Porter and $4,150 in reimbursement for tax preparation for Mark A. Smith.

56

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.

	Option Awards							Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number  of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price Per Share ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units  or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Mark A. Smith	8,000,000	(1)	—		—	.50	12-01-2017	—	—	—	—
Thomas R. Oxenreiter	66,666	(2)	33,334	(2)	—	.80	3-13-2018	—	—	—	—
David Vosbein	1,590,000	(3)	—		—	1.00	3-06-2019	—	—	—	—
Todd R. Porter	166,666	(4)	333,334	(4)	—	.80	4-24-2018	—	—	—	—
Richard W. McDonald	40,000	(5)	80,000	(5)	—	1.75	10-10-2018	—	—	—	—

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

(2) Option to purchase 100,000 shares of Common Stock at $0.80 per share granted March 13, 2008 vested one-third on March 13, 2009, one-third on March 13, 2010, and vest one-third on March 13, 2011. The option expires on March 13, 2018.

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

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

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

57

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, GMSI entered into an Employment Agreement with Mark A. Smith, the Company’s Chairman and Chief Executive Officer (the “Smith Employment Agreement”). The 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 Smith Employment Agreement expires on November 30, 2010, after which it is automatically extended each day to the date one year from that day, unless either Mr. Smith or the Company terminate 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 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 Mr. Smith’s salary and target bonus on the date of termination for the remaining term of the 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 December 1, 2007, GMSI entered into an Employment Agreement with Richard Nieman, the Company’s Director of Corporate Development (the “Nieman Employment Agreement”). The Nieman Employment Agreement provides for a base salary of $120,000 per year, plus certain expenses and employee benefits. Pursuant to the Nieman Employment Agreement, Mr. Nieman was awarded options to purchase 1,000,000 shares of the 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 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 Nieman Employment Agreement, and for six months thereafter, Mr. Nieman may terminate the Nieman Employment Agreement. Upon such termination, the Company must pay Mr. Nieman a lump sum equal to Mr. Nieman’s salary on the date of termination for the remaining term of the Nieman Employment Agreement. Also upon such termination, all equity awards granted by the Company to Mr. Nieman immediately vest and remain exercisable for their original term, and all employee benefits remain in place for one year.

58

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

Security Ownership of 5% Beneficial Owners, Directors and Management

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

(i) each person who is known by us to own beneficially more than 5% of our Common Stock or Series A Convertible Preferred Stock;

(ii) each Director;

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

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

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

For purposes of these tables, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon exercise of options, warrants and convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not those held by any other person) and that are exercisable within 60 days from the date hereof have been exercised.

Title of Class	Name and Address or Number in Group	Amount and Nature of Beneficial Ownership		Percentage of Class (%)
Common Stock	Anthony F. Hovey 1724 Plaza 600 Building 600 Stewart Street Seattle, WA 98101	3,450,565	(1)	7.9
Common Stock	Mark A. Smith 229 Howes Run Road Sarver, PA 16055	20,868,695	(2)	40.6
Common Stock	Todd R. Porter 229 Howes Run Road Sarver, PA 16055	343,333	(3)	*
Common Stock	Richard W. McDonald 229 Howes Run Road Sarver, PA 16055	45,000	(4)	*
Common Stock	Thomas R. Oxenreiter 229 Howes Run Road Sarver, PA 16055	78,437	(5)	*
Common Stock	David Vosbein 229 Howes Run Road Sarver, PA 16055	1,590,000	(6)	3.5
Common Stock	Delta Networks Limited SA Molenberglei 42 2627 Schelle, Belgium	3,500,000	(7)	7.5
Common Stock	Thomas J. Ridge 229 Howes Run Road Sarver, PA 16055	2,646,196	(8)	5.8
Common Stock	Timothy F. Sutherland 229 Howes Run Road Sarver, PA 16055	1,600,000	(9)	3.6
Common Stock	All Executive Officers and Directors as a group (9 persons)	24,805,465	(10)	49.4

* Less than one percent.

(1) Includes 20,927 shares of common stock issuable upon exercise of outstanding warrants within 60 days of April 14, 2010, held by Mr. Hovey.

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

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

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

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

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

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

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

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

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

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Item 13. Certain Relationships and Related Transactions.

Transactions with Related Persons

The Company leases its headquarters building from Mark A. Smith, the Company’s Chairman and Chief Executive Officer. The building has approximately 3,200 square feet of office space, and is used by the Company’s corporate and engineering/operations staff. The Company incurred $78,000 of lease expense for this building during each of the years ended December 31, 2009 and 2008. The Company owed Mr. Smith $26,000 and $32,500 for unpaid rent at December 31, 2009 and 2008, respectively.

During the year ended December 31, 2008, Mr. Smith loaned the Company $2,867,000 for working capital purposes. Interest on the loan at 8% per annum, compounded monthly, amounted to $52,242 during the year ended December 31, 2008. During 2008, $903,469 of the loan and accrued interest was settled by the issuance of 1,129,336 shares of the Company’s common stock at 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 rent to the note payable. Interest on the loan at 8% per annum, compounded monthly, amounted to $178,491 during the year ended December 31, 2009.

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

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, Mr. Smith may convert the outstanding principal balance of the Smith Convertible Note to the Company’s common stock at a conversion price of $1.00 per share. Interest on the Smith Convertible Note was $13,637 for the year ended December 31, 2009. The balance due on the Smith Convertible Note, including accrued interest, was $1,013,637 at December 31, 2009. As of March 19, 2010, the balance due on the Smith Convertible Note was $1,031,063. On March 19, 2010, the Company cancelled $1,000,000 of the principal balance of the Smith Convertible Note and in exchange Smith acquired 600,000 shares of the Company's common stock at $1.00 per share on behalf of he and his wife; 200,000 shares of the Company’s common stock at $1.00 per share on behalf of 2000 Irrevocable Trust for Ian Smith; and 200,000 shares or the Company’s common stock at $1.00 per share on behalf of 2000 Irrevocable Trust for Benjamin Smith. After March 19, 2010, the Smith Convertible Note had a remaining balance of $31,063.

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

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

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

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

Transactions with Control Persons

None.

Item 14. Principal Accountant Fees and Services.

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

	2009		2008
Audit fees	$	78,077	$	55,817
Audit-related fees		1,533		32,504
Tax fees		3,198		9,520
Other fees		—		—
Total fees billed	$	82,808	$	97,841

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

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

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

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10.9	Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Mark A. Smith dated effective December 1, 2007 (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.10	Agreement Not to Compete between Mark A. Smith and Geospatial Mapping Systems, Inc. dated effective December 1, 2007 (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.11	Employment Agreement dated December 1, 2007 between Richard Nieman and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.12	Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Richard Nieman dated effective December 1, 2007 (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.13	Agreement Not to Compete between Richard Nieman and Geospatial Mapping Systems, Inc. dated effective December 1, 2007 (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.14	Employment Agreement dated January 8, 2007 between Linda M. Ward and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.15	Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Linda M. Ward dated effective December 1, 2007 (incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.16	Agreement Not to Compete between Linda M. Ward and Geospatial Mapping Systems, Inc. dated effective December 1, 2007 (incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.17	Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Thomas R. Oxenreiter dated effective March 13, 2008 (incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.18	Agreement Not to Compete between Thomas R. Oxenreiter and Geospatial Mapping Systems, Inc. dated effective March 13, 2008 (incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.19	Distribution Agreement between Geospatial Mapping Systems, Inc. and HMIM, Inc., a company duly organized under the laws of Louisiana, dated December 19, 2007 (incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed May 1, 2008)
10.20	The Amendment No. 3 to the Reduct Exclusive License and Distribution Agreement between Reduct NV and Geospatial Holdings, Inc., dated December 18, 2008 (incorporated by reference to Exhibit 10.20 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1 filed on February 10, 2008)
10.21	Employment Agreement dated March 6, 2009 between David Vosbein and Geospatial Holdings, Inc. (incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed March 12, 2009)
10.22	Agreement Not to Compete dated March 6, 2009 between David Vosbein and Geospatial Holdings, Inc. (incorporated by reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K filed March 12, 2009)

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10.23	Warrant No. 1 Issued on March 6, 2009 to David Vosbein (incorporated by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed March 12, 2009)
10.24	Letter of Agreement dated March 10, 2009 among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc., Reduct NV, and Delta Networks Limited SA (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report Form 10-K filed April 15, 2009)
10.25	Letter of Agreement dated March 31, 2009 among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc., Reduct NV, and Delta Networks Limited SA (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report Form 10-K filed April 15, 2009)
10.26	Geospatial Holdings, Inc. 8% Unsecured Promissory Note Due December 31, 2011 in the amount of $2,866,700.00 in favor of Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.27	Note Conversion Agreement dated as of October 30, 2009 by and between Geospatial Holdings, Inc. and Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.28	Geospatial Holdings, Inc. 8% Unsecured Convertible Promissory Note Due December 31, 2011 in the amount of $1,000,000.00 in favor of Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.29	Geospatial Holdings, Inc. 8% Unsecured Promissory Note Due Upon Demand in the amount of $128,262.70 in favor of Mark A. Smith (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.30	Vosbein Warrant Agreement (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.31	Warrant No. 16 issued on October 30, 2009 to David Vosbein (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed November 4, 2009)
10.32	Amended and Restated Exclusive License and Distribution Agreement dated as of December 15, 2009 (incorporated by reference to Exhibit 10.32 to the Company’s Current Report on Form 8-K filed December 22, 2009).
10.33	Strategic Advisory Agreement effective as of March 2, 2010 by and among Geospatial Holdings, Inc., Pace Global Energy Services, LLC and Ridge Global LLC (incorporated by reference to Exhibit 10.32 to the Company’s Current Report on Form 8-K filed March 5, 2010).
10.34	Warrant No. 20 issued on March 2, 2010 to Ridge Global LLC (incorporated by reference to Exhibit 10.33 to the Company’s Current Report on Form 8-K filed March 5, 2010).
10.35	Warrant No. 21 issued on March 2, 2010 to Pace Global Energy Services, LLC (incorporated by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K filed March 5, 2010).
10.36	First Amendment to the Amended and Restated Exclusive License and Distribution Agreement dated as of January 29, 2010 (incorporated by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K filed March 19, 2010).
10.37	Second Amendment to the Amended and Restated Exclusive License and Distribution Agreement dated as of March 12, 2010 (incorporated by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K filed March 19, 2010).
10.38	Subscription Agreement dated as of March 19, 2010 by and between Geospatial Holdings, Inc. and Mark A. and Lisa A. Smith, with respect to 600,000 shares of the Company’s Common Stock*
10.39	Subscription Agreement dated as of March 19, 2010 by and between Geospatial Holdings, Inc. and 2000 Irrevocable Trust for Ian Smith, with respect to 200,000 shares of the Company’s Common Stock*
10.40	Subscription Agreement dated as of March 19, 2010 by and between Geospatial Holdings, Inc. and 2000 Irrevocable Trust for Benjamin Smith, with respect to 200,000 shares of the Company’s Common Stock*
10.41	Employment Agreement dated as of September 15, 2008 by and between Geospatial Mapping Systems, Inc. and Todd Porter.*
10.42	Geospatial Mapping Systems, Inc. 2007 Stock Option Plan Nonqualified Stock Option Agreement dated as of October 10, 2008 by and between Geospatial Mapping Systems, Inc. and Richard McDonald.*
10.43	Agreement Not-To-Compete dated as of October 10, 2008 by and between Geospatial Mapping Systems, Inc. and Richard McDonald.*
21.1	List of Subsidiaries (incorporated by reference to Exhibit 21.1 of the Company’s Post-Effective Amendment No. 3 to Registration Statement on Form S-1 filed on January 12, 2010)
31.1	Certification of Mark A. Smith Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2	Certification of Thomas R. Oxenreiter Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

* Filed herewith.

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SIGNATURES

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

	Geospatial Holdings, Inc.
	(Registrant)
Date: April 15, 2010	By:	/s/ Mark A. Smith
	Name:	Mark A. Smith
	Title:	Chief Executive Officer

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

Signature	Title
/s/ Mark A. Smith Mark A. Smith	Chief Executive Officer and Director (Principal Executive Officer)
/s/ Thomas R. Oxenreiter Thomas R. Oxenreiter	Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer)
/s/ David C. Vosbein David C. Vosbein	President and Director

65

EX-10.38

Exhibit 10.38

EXECUTION COPY

SUBSCRIPTION AND PURCHASE AGREEMENT

THIS SUBSCRIPTION AND PURCHASE AGREEMENT (the “Agreement”) is entered into as of this 19th day of March, 2010 (the “Effective Date”) by and between Geospatial Holdings, Inc., a Nevada corporation (the “Company”), and the investor named on the signature page to this Agreement (the “Investor”).

AGREEMENT

WHEREAS, the Company proposes to issue up to ten million (10,000,000) shares of Common Stock (as defined below) at the price of $1.00 per share for the aggregate consideration of up to ten million dollars ($10,000,000) (the “Offering”); and

WHEREAS, the Investor desires to purchase from the Company and the Company desires to issue and sell to the Investor the Shares (as defined below).

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“Agreement” has the meaning set forth in the preamble.

“Board” means the board of directors of the Company.

“Closing” has the meaning set forth in Section 2.2(a).

“Closing Date” has the meaning set forth in Section 2.2(a).

“Common Stock” means the common stock, par value $.001 per share, of the Company.

“Company” has the meaning set forth in the preamble.

“Company Agreement and Plan of Merger” means that Agreement and Plan of Merger dated March 25, 2008, by and among Kayenta Kreations, Inc. (the predecessor to the Company), Kayenta Subsidiary Corp., Geospatial Mapping Systems, Inc. and Thomas G. Kimble, an individual.

“Contractual Obligation” means as to any Person, any material provision of any security issued by such Person or any material provision of any agreement, lease of real or personal property, undertaking, contract, indenture, mortgage, deed of trust or other instrument including, without limitation, the organizational or governing documents of such Person, to which such Person is a party or by which it or any of its property is bound.

“Convertible Securities” shall mean stock or other securities convertible into or exchangeable for shares of Common Stock.

“December 2009 Subscription Agreement” means that Subscription and Purchase Agreement entered into on December 15, 2009 by and among the Company and certain investors pursuant to which the Company issued to such investors up to one and a half million dollars of Series A Convertible Preferred Stock and pursuant to which the Company granted to such investors certain registration rights set forth therein.

“Effective Date” has the meaning set forth in the preamble.

“Effective Date Deadline” has the meaning set forth in Section 7.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financial Statements” means (i) the audited financial statements of the Company (balance sheet, profit and loss statement, statement of stockholders’ equity and statement of cash flows including notes thereto) at December 31, 2008 for the fiscal year then ended, and (ii) the unaudited financial statements (balance sheet, profit and loss statement, and statement of cash flows) at December 31, 2009 for the six-month period then ended.

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of any government of any nation, state, city, locality or other political subdivision.

“Holder” means (i) any person owning of record Registrable Shares that have not been sold to the public or (ii) any assignee of record of such Registrable Shares in accordance with Section 7.9 hereof.

“Investor” has the meaning set forth in the preamble.

“October 2009 Subscription Agreement” means that Subscription and Purchase Agreement entered into on October 1, 2009 by and among the Company and certain investors pursuant to which the Company issued to such investors up to one million dollars of Common Stock and pursuant to which the Company granted to such investors certain registration rights set forth therein.

“Person” means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Stock” has the meaning set forth in Section 3.6.

“Purchase Price” has the meaning set forth in Section 2.1.

2

“Qualified Public Offering” has the meaning set forth in Section 7.1.

“Register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Shares” means the Shares owned or held by the Holders. Notwithstanding the foregoing, Registrable Shares shall not include any securities sold by a Person to the public either pursuant to a registration statement or Securities Act Rule 144 or sold in a private transaction in which the transferor’s rights under Section 7 of this Agreement are not assigned.

“Registration Expenses” means all expenses incurred by the Company in complying with Sections 7.1, 7.2 and 7.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration.

“Registration Penalty Allocation” has the meaning set forth in Section 7.1.

“Requirements of Law” means, as to any Person, the provisions of the certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule, regulation, right, privilege, qualification, license or franchise, order, judgment, or determination of an arbitrator or a court or other Governmental Authority applicable to or binding upon such Person or any of its property (or to which such Person or any of its property is subject) or applicable to any or all of the transactions contemplated by, or referred to in, this Agreement.

“Restricted Period” has the meaning set forth in Section 7.9.

“SEC” or “Commission” means the Securities and Exchange Commission.

“SEC Reports” shall mean all reports required to be filed with the SEC under the Securities Act and the Exchange Act.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Expenses” means all underwriting discounts and selling commissions applicable to the sale.

“Series A Convertible Preferred Stock” has the meaning set forth in Section 3.6.

“Shares” means the Common Stock being subscribed for, purchased and sold pursuant to this Agreement.

“Stock Option Plan” has the meaning set forth in Section 3.6.

“Violation” has the meaning set forth in Section 7.7.

3

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

2.1 Subscription. Subject to the terms and conditions of this Agreement, the Investor agrees to purchase, and the Company agrees to issue and sell to the Investor at the Closing, the Shares set forth below the Investor’s name on the signature page hereto in exchange for payment by the Investor of the aggregate investment also set forth thereon (the “Purchase Price”).

2.2 Closing.

a. The purchase and sale of the Shares (the “Closing”) shall take place at the offices of Winston & Strawn LLP, 1700 K Street, NW, Washington, D.C. 20006, at 10:00 a.m. Eastern time on March 19, 2010 (the “Closing Date”), or at such other time and place as the Company and the Investor shall mutually agree.

b. At the Closing, the Investor shall deliver the Purchase Price to the Company by wire transfer of immediately available funds to the account of the Company designated on Exhibit A hereto, in total payment of the Purchase Price for the Shares subscribed hereunder, and the Company shall deliver to the Investor a certificate representing the Shares that the Investor is purchasing.

ARTICLE III

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Investor as follows:

3.1 Organization; Good Standing; Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted, to execute and deliver this Agreement, to issue and sell the Shares, and to carry out the provisions of this Agreement.

3.2 Authorization; Binding Effect. All corporate action on the part of the Company, its directors and stockholders, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder at the Closing, and the authorization, issuance, sale, and delivery of the Shares being sold hereunder has been taken or will be taken prior to the Closing. This Agreement, when executed and delivered, will constitute the valid and legally binding obligation of the Company, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The sale of the Shares will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

4

3.3 Valid Issuance of Common Stock. The Shares, when issued, sold, and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. Based in part upon the representations of the Investor in this Agreement, the sale and issuance of the Shares will be in compliance with all Requirements of Law.

3.4 Non-contravention. Assuming the accuracy of the representations and warranties of Investor contained herein, the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby, do not and will not (i) violate any Requirements of Law applicable to the Company, or (ii) result in a material breach or default under any of the Contractual Obligations of the Company, or under any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, in each case applicable to the Company or its properties.

3.5 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under any Requirements of Law, is necessary or required in connection with the execution, delivery or performance by the Company (including, without limitation, the sale of the Shares) or enforcement against the Company of this Agreement or the transactions contemplated hereby, except (i) such filings as have been or will be made prior to the Closing, (ii) any notices of sale required to be filed with the Commission under Regulation D of the Securities Act, and (iii) such post-closing filings as may be required under applicable state securities laws, which will be timely filed within the applicable periods therefor.

3.6 Capitalization. Immediately prior to the Closing Date, the capital stock of the Company shall consist of:

a. Preferred Stock. Five million (5,000,000) shares of preferred stock (the “Preferred Stock”), of which one million five hundred seventy five thousand (1,575,000) are designated Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”), one million, five hundred seventy-five thousand (1,575,000) of which are issued and outstanding, and three million four hundred twenty five thousand (3,425,000) of which are undesignated.

b. Common Stock. One hundred million (100,000,000) shares of Common Stock, of which thirty-one million, one hundred twenty-four thousand, three hundred sixty-nine (31,124,369) shares have been duly authorized, issued and delivered and are validly outstanding, fully paid and nonassessable. The Company has reserved (i) fifteen million (15,000,000) shares of Common Stock for issuance pursuant to its 2007 Stock Option Plan adopted December 1, 2007, as amended and restated April 25, 2008 (the “Stock Option Plan”); (ii) nine million, eight hundred sixty-six thousand, two hundred seventy-two (9,866,272) shares of Common Stock for issuance upon the exercise of outstanding common stock warrants; (iii)

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forty thousand (40,000) shares of Common Stock for issuance to certain stockholders pursuant to the October 2009 Subscription Agreement; and (iv) two million, eight thousand, one hundred twenty-five (2,008,125) shares of Common Stock for issuance upon the conversion of the outstanding Series A Convertible Preferred Stock to Common Stock.

c. Of such reserved shares, (x) options to purchase twelve million, one hundred ninety-five thousand (12,195,000) shares of Common Stock have been granted and remain unexercised; (y) two million, eight hundred five thousand (2,805,000) shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Option Plan. The post-closing capitalization of the Company is set forth in Exhibit B, assuming the issuance and sale of the full Offering amount shown in the first recital clause. Except for securities issuable upon exercise or conversion of the securities described above, the Company has not issued, nor made any commitment to issue, shares, subscriptions, warrants, options, convertible securities or other such rights, nor does the Company have any obligation to distribute to holders of any of its equity securities any evidence of indebtedness or asset.

3.7 Registration Rights. Except as provided in Section 5.12 of the Company Agreement and Plan of Merger, the October 2009 Subscription Agreement, the December 2009 Subscription Agreement, and Article VII of this Agreement, the Company is currently not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may subsequently be issued. The Company is not a party to any trust or agreement regarding the voting of shares (or the giving of written consents) of its capital stock. To the Company’s knowledge, there are no other trusts or agreements regarding the voting of shares of the Company’s capital stock.

3.8 Disclosure. The Company has provided the Investor with access to the Company’s SEC Reports and all information that the Company believes is reasonably necessary to enable the Investor to decide whether to purchase the Shares.

3.9 Exempt Offering. Subject to the truth and accuracy of the Investor’s representations set forth in this Agreement, and the truth and accuracy of the representations made by other investors in this Offering in their respective subscription agreements, the offer, sale and issuance of the Shares under the circumstances contemplated by this Agreement are exempt from the registration requirements of the Securities Act.

3.10 Changes. To the best of the Company’s knowledge, since the date of its most recent SEC Reports there has not been:

a. any change in the assets, liabilities, financial condition, business, property or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been and are not expected to be, individually or in the aggregate, materially adverse;

b. any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties, prospects, or financial condition of the Company (as such business is presently conducted and as it is presently proposed to be conducted);

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c. any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

d. any material change to a material contract or arrangement by which the Company or any of its assets is bound or subject;

e. any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

f. any sale or assignment of any patents, trademarks, copyrights, trade secrets, or other intangible assets;

g. any resignation or termination of employment of any key officer of the Company, and the Company, to the best of its knowledge, does not know of the impending resignation or termination of employment of any such officer;

h. any mortgage, pledge, transfer of a security interest in, or lien, created by the Company with respect to any of its material properties or assets, except as for taxes not yet due or payable or contested by the Company in good faith;

i. any loans or guarantees made by the Company to or for the benefit of any officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of business;

j. any declaration, setting aside, or payment of any dividend or other disposition of the Company’s assets in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock by the Company;

k. to the best of the Company’s knowledge, any other event or condition of any character that might materially and adversely affect the business prospects, or financial condition of the Company (as such business is currently conducted and as it is presently proposed to be conducted); or

l. any agreement or commitment by the Company to do any of the things described in this Section 3.10.

3.11 SEC Reports; Financial Statements. The Company has filed with the Commission all SEC Reports required to be filed by it since the effective date of its registration statement, in each case, within the time periods specified in the Commission’s rules and regulations. Except as otherwise disclosed to the Investor, as of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Company’s financial statements included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in

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accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and any consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

3.12 Brokers; Transaction Costs. Except with respect to its agreement with Convertible Capital, the Company has not entered into, and will not enter into, any contract, agreement, arrangement or understanding with any Person which will result in an obligation of the Investor to pay any finder’s fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. The Investor will not be liable for any costs or expenses incurred by or on behalf of the Company in connection with this Agreement or the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF INVESTOR

The Investor hereby represents and warrants as of the date hereof as follows:

4.1 Authorization/Binding Effect. The Investor has full power and authority to enter into this Agreement, and this Agreement, when executed and delivered, will constitute a valid and legally binding obligation of the Investor, enforceable against Investor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

4.2 Non-contravention. The execution, delivery and performance of this Agreement by the Investor, and the consummation of the transactions contemplated hereby, do not and will not (a) violate any Requirements of Law applicable to Investor, or (b) result in a material breach or default under any of the Contractual Obligations of Investor, or under any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, in each case applicable to Investor or Investor’s properties.

4.3 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under any Requirements of Law, is necessary or required in connection with the execution, delivery or performance by Investor (including, without limitation, the acquisition of the Shares) or enforcement against Investor of this Agreement or the transactions contemplated hereby.

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4.4 Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Investor or any action taken by Investor. The Company shall not be liable for any costs or expenses incurred by or on behalf of Investor in connection with this Agreement or the transactions contemplated hereby.

4.5 Securities Law Representations.

a. This Agreement is made with the Investor in reliance upon the Investor’s representation to the Company, which by the Investor’s execution of this Agreement the Investor hereby confirms, that the Shares to be purchased by the Investor will be acquired for investment for Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Shares.

b. Investor’s financial condition is such that Investor can afford to bear the economic risk of holding the shares for an indefinite period of time and has adequate means for providing for Investor’s current needs and contingencies and to suffer a complete loss of Investor’s investment in the Shares.

c. Investor understands and acknowledges that (i) the Shares are being offered and sold under one or more of the exemptions from registration provided for in Section 4(2), 4(6) or 3(b) of the Securities Act, including Regulation D promulgated thereunder, and any applicable state securities laws, (ii) Investor is purchasing the Shares without being offered or furnished any offering literature or prospectus other than as described in Section 4.6, and (iii) this transaction has not been reviewed or approved by the Shared States Securities and Exchange Commission or by any regulatory authority charged with the administration of the securities laws of any state or foreign country.

d. Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, as amended.

e. Investor has been advised of and consents to the placement of a restrictive legend in the following form on the certificates representing the Shares:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.”

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4.6 Investment Information. The Investor, in making the decision to purchase the Shares, has relied solely upon the Investor’s independent investigations and has had access to the Company’s SEC Reports. The Investor represents that the Investor has read this Agreement and the Company’s SEC Reports and the Investor is familiar with the disclosures herein and therein. In evaluating the suitability of an investment in the Company, the Investor has not relied upon any representations or other information (whether oral or written) other than as set forth in this Agreement, the Company’s SEC Reports or as contained in any written answers to questions furnished by the Company or by any Person on the Company’s behalf.

4.7 Sophistication of Investor. The Investor either (a) has a preexisting personal or business relationship with the Company or its controlling Persons, such as would enable a reasonably prudent investor to be aware of the character and general business and financial circumstances of the Company or its controlling Persons, or (b) by reason of the Investor’s business or financial experience, individually or in conjunction with the Investor’s unaffiliated professional advisors, the Investor is capable of evaluating the merits and risks of an investment in the Shares, making an informed investment decision and protecting the Investor’s own interests.

4.8 Securities Act Compliance. The Investor understands that:

a. The Shares have not been registered under the Securities Act by reason of one or more specific exemptions available under the provisions of the Securities Act which depends in part upon the investment intent and the representations and warranties of the Investor made in this Agreement.

b. In issuing the Shares to the Investor, the Company is relying upon these representations and warranties.

c. Any routine sales of the Shares in reliance upon Rule 144 under the Securities Act (if the provisions of such Rule should then be available as to the Shares) can be made only after the holding period specified in the Rule, in limited amounts, and in accordance with all the terms and conditions of that Rule.

d. In the case of Shares to which Rule 144 is not applicable, compliance with Regulation A under the Securities Act or some other exemption will be required.

e. Rule 144 is not now available for re-sales of the Shares by the Investor.

f. This Agreement does not impose any obligation on the Company to register the Shares or to comply with Regulation A or any other exemption under the Securities Act or to supply any information necessary to permit routine sales under Rule 144.

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4.9 Continuing Effect. The Investor agrees that the representations and warranties set forth in this Article IV are true and accurate as of the date of this Agreement and shall be true and accurate as of the Closing Date, and shall survive the Closing.

ARTICLE V

CONDITIONS OF INVESTOR’S OBLIGATIONS AT CLOSING

The obligations of the Investor under Section 2.2 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall only be effective against the Investor if the Investor consents in writing thereto:

5.1 Representations and Warranties. The representations and warranties of the Company contained in Article III shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, except for subsequent issuances of capital stock of the Company made upon the conversion or exchange of securities described in Section 3.6.

5.2 Performance. The Company shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date.

5.3 Consents and Approvals. All authorizations, approvals, or permits, if any, of any Governmental Authority required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing.

5.4 Minimum Offering Amount. The Company shall have received and entered into binding subscription agreements, including this Agreement, obligating the investors party thereto to purchase, and the Company to issue and sell, at least $250,000 of Common Stock in the Offering.

ARTICLE VI

CONDITIONS OF THE COMPANY’S OBLIGATIONS AT CLOSING

The obligations of the Company under Section 2.2 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions:

6.1 Representations and Warranties. The representations and warranties of the Investor contained in Article IV shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.

6.2 Performance. The Investor shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by the Investor on or before the Closing Date.

6.3 Consents and Approvals. All authorizations, approvals, or permits, if any, of any Governmental Authority required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing.

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6.4 Minimum Offering Amount. The Company shall have received and entered into binding subscription agreements, including this Agreement, obligating the investors party thereto to purchase, and the Company to issue and sell, at least $250,000 of Common Stock in the Offering.

ARTICLE VII

REGISTRATION; COVENANTS OF THE COMPANY

7.1 Registration.

a. Subject to the conditions of this Section 7.1, the Company shall file a registration statement under the Securities Act covering the Registrable Shares as soon as reasonably practicable (a “Qualified Public Offering”) and shall effect by September 1, 2010 (the “Effective Date Deadline”) the registration under the Securities Act of all Registrable Shares. Upon request of the Holders, such registration shall provide for sale or distribution of such Registrable Shares on a delayed or continuous basis pursuant to Rule 415 under the Securities Act to the extent it is available.

b. In the event the Company fails to effect a registration of the Registrable Shares by the Effective Date Deadline, then (i) the Company shall use its best efforts to effect a registration as soon thereafter as practicable, (ii) each Investor shall receive an additional allocation of Registrable Shares equal to two percent (2%) of the total amount of Registrable Shares purchased by the Investor pursuant to this Agreement (the “Registration Penalty Allocation”), and (iii) for each thirty (30) day period after the Effective Date Deadline for which the Company continues to be unable to effect a registration pursuant to this Section 7.1, each Investor shall receive an additional Registration Penalty Allocation.

7.2 Piggyback Registration. The Company shall notify all Holders of Registrable Shares in writing at least thirty (30) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to employee benefit plans or with respect to corporate reorganizations or other transactions under Rule 145 of the Securities Act), which notice will specify the proposed offering price, the kind and number of securities proposed to be registered, the distribution arrangements and such other information that at the time would be appropriate to include in such notice, and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Shares held by such Holder on terms and conditions at least as favorable as those applicable to the securities to be sold by the Company and by any other person thereunder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Shares held by it shall, within fifteen (15) days after the above-described notice from the Company, so notify the Company in writing. If a Holder decides not to include some or all of its Registrable Shares in any registration statement thereafter filed by the Company or decides to withdraw its Registrable Shares from any underwriting or registration pursuant to Section 7.1, such Holder shall nevertheless continue to have the right to include any Registrable Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein

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a. Underwriting. If the registration statement under which the Company gives notice under this Section 7.2 is for an underwritten offering, the Company shall so advise the Holders of Registrable Shares. In such event, the right of any such Holder to be included in a registration pursuant to this Section 7.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Shares in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of securities to be underwritten and advises the Holders of Registrable Shares in writing, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Shares held by the Holders; and third, to any holder of securities of the Company (other than a Holder) on a pro rata basis. In making any such reduction, all shares held by employees of the Company which are not Registrable Shares shall first be excluded. No such reduction shall (i) reduce the securities being offered by the Company for its own account to be included in the registration and underwriting or (ii) reduce the amount of Registrable Shares of the selling Holders included in the registration below thirty three and one-third percent (33 1/3%) of the total amount of securities included in such registration, unless such offering is the Initial Offering, in which event any or all of the Registrable Shares of the Holders may be excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Shares excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership, limited liability company or corporation, the partners and members, retired partners and members and shareholders of such Holder, or the estates and family members of any such partners and members and retired partners and members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

b. Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 7.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 7.4 hereof.

7.3 Form S-3 Registration. If the Company shall receive from Holders of at least seventy five percent (75%) of the Registrable Shares then outstanding a written request or requests that the Company effect a registration on Form S-3 or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Shares owned by such Holder or Holders, the Company will:

a. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and

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b. as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Shares as are specified in such request, together with all or such portion of the Registrable Shares of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 7.3:

(i) if Form S-3 is not available for such offering by the Holders, or

(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Shares and such other securities (if any) at an aggregate price to the public of less than five hundred thousand dollars ($500,000), or

(iii) if the Company shall furnish to the Holders a certificate signed by the chairman of the Board of Directors of the Company or its chief executive officer stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 7.3; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period, or

(iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 7.3.

c. Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Shares and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 7.3 shall not be counted as demands for registration or registrations effected pursuant to Section 7.1 or Section 7.2, respectively.

7.4 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Sections 7.1, 7.2 or 7.3 herein shall be borne by the Company. All Selling Expenses applicable to Registrable Shares sold by Holders incurred in connection with any registrations hereunder shall be borne by the Holders of the securities so registered pro rata on the basis of the number of shares so registered.

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7.5 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

a. Prepare and file with the SEC a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective as soon as possible, and in any event within thirty (30) days of the date on which the obligation to effect such registration arises, and, upon the request of the Holders of a majority of the Registrable Shares registered thereunder, keep such registration statement effective for up to one hundred eighty (180) days or, if a shelf registration pursuant to Securities Act Rule 415, until the Holder or Holders have completed the distribution related thereto.

b. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in paragraph (a) above.

c. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Shares owned by them.

d. Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders.

e. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement, provided that such underwriting agreement shall not provide for indemnification or contribution obligations on the part of the Holders greater than the obligations set forth in Sections 7.7(b) and (d).

f. Notify each Holder of Registrable Shares covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and correct such misrepresentation or omission as expeditiously as reasonably possible.

g. Use its best efforts to furnish, on the date that such Registrable Shares are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) to the Holders requesting registration of Registrable Securities, a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

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h. Cooperate and assist in any filings to be made with the National Association of Securities Dealers, Inc.

i. Cause all such Registrable Shares to be listed on each securities exchange on which similar securities issued by the Company are then listed, or cause such Registrable Shares to be authorized for trading on the Nasdaq Stock Market if any similar securities issued by the Company are then so authorized, if requested by the Holders of a majority of such Registrable Securities.

j. Provide a transfer agent and registrar for all Registrable Shares registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

k. In connection with an underwritten offering, to the extent requested by the managing underwriters or Holders, participate in and support customary efforts to sell the Registrable Shares in the offering; including without limitation, participating in “road shows.”

7.6 Delay of Registration; Furnishing Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7.1, 7.2 or 7.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Shares held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

7.7 Indemnification. In the event any Registrable Shares are included in a registration statement under Section 7.1, 7.2 or 7.3:

a. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, stockholders, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will pay as incurred to each such Holder, partner, stockholder, member, officer, director, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 7.7(a) shall not apply to amounts paid in

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settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder.

b. To the extent permitted by law, each Holder will, if Registrable Shares held by such Holder are included in the securities as to which such registration, qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its stockholders, directors, officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, stockholders, members, officers and directors, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such stockholder, director, officer, controlling person, underwriter or other such Holder, or the partners, stockholders, members, officers and directors of such other Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or the partners, stockholders, members, officers and directors of such other Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 7.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 7.7 exceed the proceeds from the offering received by such Holder; provided further, that any payments will be repaid to each such Holder if the Company acted recklessly.

c. Promptly after receipt by an indemnified party under this Section 7.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however,

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that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if in the reasonable opinion of counsel representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if (and only to the extent) materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 7.7.

d. If the indemnification provided for in this Section 7.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the proceeds from the offering received by such Holder.

e. The obligations of the Company and Holders under this Section 7.7 shall survive completion of any offering of Registrable Shares in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

7.8 Assignment of Registration Rights. The rights to cause the Company to register Registrable Shares pursuant to this Article VII may be transferred or assigned by a Holder to a transferee or assignee of Registrable Shares which (a) is a subsidiary, parent, stockholder, general partner, limited partner, retired partner, member, retired member or Affiliate of a Holder, (b) is a Holder’s Immediate Family member or an estate or trust of or for the benefit of an individual Holder, or (c) acquires at least twenty percent (20%) of the Registrable Shares held by such Holder; provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall become a party to this Agreement.

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7.9 “Market Stand-Off” Agreement; Agreement to Furnish Information. Each Holder hereby agrees that such Holder shall, if requested by the underwriter of any underwritten public offering of the Company’s Common Stock, agree with such underwriter not to sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company (the “Restricted Period”) not to exceed ninety (90) days following the effective date of any registration statement of the Company filed under the Securities Act in connection with the Initial Offering; provided that such agreements shall not apply to Registrable Shares included in such registration statement or sales or similar transactions effected pursuant to a valid exemption from the registration requirements of the Securities Act. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information concerning such Holder as may be reasonably requested by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 7.9 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the Restricted Period.

7.10 Information Regarding the Company. With a view to making available to the Investor the benefits of certain rules and regulations of the SEC which may permit the sale of the Shares to the public without registration, the Company agrees to:

a. Following the date upon which the Company registers the Common Stock with the Commission under Section 12 of the Exchange Act, the Company will file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

b. So long as Investor owns any Shares, furnish to Investor forthwith upon request: (i) a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act (at any time after it has become subject to such reporting requirements); (ii) a copy of the most recent annual or quarterly report of the Company; and (iii) such other reports and documents as the Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell the Shares without registration.

7.11 Restrictions on Transfer.

a. Each certificate representing Shares shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the legend contained in Section 4.5(e).

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b. The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if the holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

c. Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

ARTICLE VIII

GENERAL PROVISIONS

8.1 Indemnification. The Investor agrees to indemnify and hold harmless the Company, its officers, managers, affiliates, counsel, agents and each other Person, if any, who controls or is controlled by it, within the meaning of Section 15 of the Securities Act, against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon (a) any false representation or warranty or breach or failure by the Investor to comply with any covenant or agreement made by the Investor herein or in any other document furnished by the Investor to any of the foregoing in connection with this transaction, or (b) the disposition of any of the Shares contrary to the Investor’s declaration, representations and warranties in this Agreement.

8.2 Amendment. This Agreement may be amended, modified or supplemented at any time by the parties hereto only by an instrument in writing signed on behalf of each of the parties hereto. No agreement made through the use of electronic records or electronic signatures, as those terms are used in the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Sec. 7001 et. seq., shall be enforceable or binding on either party hereto. Notwithstanding the previous sentence, facsimile signatures, telecopied signatures, or copies of signatures in PDF format sent by e-mail, will constitute a sufficient form of writing for purposes of this Section 8.2 and Section 8.3.

8.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

8.4 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

8.5 Governing Law. This Agreement, and any disputes arising hereunder or controversies related hereto, shall be governed by and construed in accordance with the internal laws of the State of New York except for the laws governing conflicts of law thereof (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law).

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8.6 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired.

8.7 Entire Agreement; Waivers. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

8.8 Further Assurances. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.

8.9 Notices. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or first class mail, postage prepaid, or express overnight courier service, to the address set forth on the signature page hereof.

[SIGNATURE PAGE FOLLOWS]

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GEOSPATIAL HOLDINGS, INC.

SUBSCRIPTION AGREEMENT

COUNTERPART SIGNATURE PAGE

IN WITNESS WHEREOF, the Company and the Investor have executed this Agreement as of March     , 2010.

COMPANY:
GEOSPATIAL HOLDINGS, INC.		Address of the Company:
By:	/s/ Mark A. Smith	229 Howes Run Road
Name:	Mark A. Smith	Sarver, PA 16055
Title:	Chief Executive Officer

INVESTOR:
NAME OF INVESTOR:	Address of Investor:
Mark A. And Lisa A. Smith	1001 CARLISLE STREET
Print Name	NATRONA HEIGHTS, PA 15065
/s/ Mark A. Smith
Signature
Title (if Investor is not a natural person)
E-Mail Address: msmith@gooselakecapital.com
Fax Number: 724-353-3049

Number of Shares to be Purchased	Purchase Price
600,000	$	600,000.00

Exhibit A to

Subscription Agreement

Wire Transfer Instructions:

Dollar Bank Pitts

2700 Liberty Avenue

Pittsburgh, PA 15222

Phone 412-261-8111

ABA No.: 243074385

Account No.: 2671774040

For account of:

Geospatial Holdings, Inc.

229 Howes Run Road

Sarver, PA 16055

Phone 412-724-353-3400

Exhibit B to

Subscription Agreement

Post-Offering Capitalization Table.

Please see attached.

GEOSPATIAL HOLDINGS, INC.

INSTRUCTIONS FOR RETURNING

COUNTERPART SIGNATURE PAGE

TO

SUBSCRIPTION AGREEMENT

Return completed and signed signature page by one of the following methods by no later than 5:00 p.m. Eastern time, on March 29, 2010:

1. By U.S. mail or overnight courier service to:

George Samuel III

Winston & Strawn LLP

200 Park Avenue

New York, NY 10166

2. By e-mail to: gsamuel@winston.com

EX-10.39

Exhibit 10.39

EXECUTION COPY

SUBSCRIPTION AND PURCHASE AGREEMENT

THIS SUBSCRIPTION AND PURCHASE AGREEMENT (the “Agreement”) is entered into as of this 19th day of March, 2010 (the “Effective Date”) by and between Geospatial Holdings, Inc., a Nevada corporation (the “Company”), and the investor named on the signature page to this Agreement (the “Investor”).

AGREEMENT

WHEREAS, the Company proposes to issue up to ten million (10,000,000) shares of Common Stock (as defined below) at the price of $1.00 per share for the aggregate consideration of up to ten million dollars ($10,000,000) (the “Offering”); and

WHEREAS, the Investor desires to purchase from the Company and the Company desires to issue and sell to the Investor the Shares (as defined below).

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“Agreement” has the meaning set forth in the preamble.

“Board” means the board of directors of the Company.

“Closing” has the meaning set forth in Section 2.2(a).

“Closing Date” has the meaning set forth in Section 2.2(a).

“Common Stock” means the common stock, par value $.001 per share, of the Company.

“Company” has the meaning set forth in the preamble.

“Company Agreement and Plan of Merger” means that Agreement and Plan of Merger dated March 25, 2008, by and among Kayenta Kreations, Inc. (the predecessor to the Company), Kayenta Subsidiary Corp., Geospatial Mapping Systems, Inc. and Thomas G. Kimble, an individual.

“Contractual Obligation” means as to any Person, any material provision of any security issued by such Person or any material provision of any agreement, lease of real or personal property, undertaking, contract, indenture, mortgage, deed of trust or other instrument including, without limitation, the organizational or governing documents of such Person, to which such Person is a party or by which it or any of its property is bound.

“Convertible Securities” shall mean stock or other securities convertible into or exchangeable for shares of Common Stock.

“December 2009 Subscription Agreement” means that Subscription and Purchase Agreement entered into on December 15, 2009 by and among the Company and certain investors pursuant to which the Company issued to such investors up to one and a half million dollars of Series A Convertible Preferred Stock and pursuant to which the Company granted to such investors certain registration rights set forth therein.

“Effective Date” has the meaning set forth in the preamble.

“Effective Date Deadline” has the meaning set forth in Section 7.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financial Statements” means (i) the audited financial statements of the Company (balance sheet, profit and loss statement, statement of stockholders’ equity and statement of cash flows including notes thereto) at December 31, 2008 for the fiscal year then ended, and (ii) the unaudited financial statements (balance sheet, profit and loss statement, and statement of cash flows) at December 31, 2009 for the six-month period then ended.

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of any government of any nation, state, city, locality or other political subdivision.

“Holder” means (i) any person owning of record Registrable Shares that have not been sold to the public or (ii) any assignee of record of such Registrable Shares in accordance with Section 7.9 hereof.

“Investor” has the meaning set forth in the preamble.

“October 2009 Subscription Agreement” means that Subscription and Purchase Agreement entered into on October 1, 2009 by and among the Company and certain investors pursuant to which the Company issued to such investors up to one million dollars of Common Stock and pursuant to which the Company granted to such investors certain registration rights set forth therein.

“Person” means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Stock” has the meaning set forth in Section 3.6.

“Purchase Price” has the meaning set forth in Section 2.1.

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“Qualified Public Offering” has the meaning set forth in Section 7.1.

“Register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Shares” means the Shares owned or held by the Holders. Notwithstanding the foregoing, Registrable Shares shall not include any securities sold by a Person to the public either pursuant to a registration statement or Securities Act Rule 144 or sold in a private transaction in which the transferor’s rights under Section 7 of this Agreement are not assigned.

“Registration Expenses” means all expenses incurred by the Company in complying with Sections 7.1, 7.2 and 7.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration.

“Registration Penalty Allocation” has the meaning set forth in Section 7.1.

“Requirements of Law” means, as to any Person, the provisions of the certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule, regulation, right, privilege, qualification, license or franchise, order, judgment, or determination of an arbitrator or a court or other Governmental Authority applicable to or binding upon such Person or any of its property (or to which such Person or any of its property is subject) or applicable to any or all of the transactions contemplated by, or referred to in, this Agreement.

“Restricted Period” has the meaning set forth in Section 7.9.

“SEC” or “Commission” means the Securities and Exchange Commission.

“SEC Reports” shall mean all reports required to be filed with the SEC under the Securities Act and the Exchange Act.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Expenses” means all underwriting discounts and selling commissions applicable to the sale.

“Series A Convertible Preferred Stock” has the meaning set forth in Section 3.6.

“Shares” means the Common Stock being subscribed for, purchased and sold pursuant to this Agreement.

“Stock Option Plan” has the meaning set forth in Section 3.6.

“Violation” has the meaning set forth in Section 7.7.

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ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

2.1 Subscription. Subject to the terms and conditions of this Agreement, the Investor agrees to purchase, and the Company agrees to issue and sell to the Investor at the Closing, the Shares set forth below the Investor’s name on the signature page hereto in exchange for payment by the Investor of the aggregate investment also set forth thereon (the “Purchase Price”).

2.2 Closing.

a. The purchase and sale of the Shares (the “Closing”) shall take place at the offices of Winston & Strawn LLP, 1700 K Street, NW, Washington, D.C. 20006, at 10:00 a.m. Eastern time on March 19, 2010 (the “Closing Date”), or at such other time and place as the Company and the Investor shall mutually agree.

b. At the Closing, the Investor shall deliver the Purchase Price to the Company by wire transfer of immediately available funds to the account of the Company designated on Exhibit A hereto, in total payment of the Purchase Price for the Shares subscribed hereunder, and the Company shall deliver to the Investor a certificate representing the Shares that the Investor is purchasing.

ARTICLE III

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Investor as follows:

3.1 Organization; Good Standing; Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted, to execute and deliver this Agreement, to issue and sell the Shares, and to carry out the provisions of this Agreement.

3.2 Authorization; Binding Effect. All corporate action on the part of the Company, its directors and stockholders, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder at the Closing, and the authorization, issuance, sale, and delivery of the Shares being sold hereunder has been taken or will be taken prior to the Closing. This Agreement, when executed and delivered, will constitute the valid and legally binding obligation of the Company, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The sale of the Shares will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

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3.3 Valid Issuance of Common Stock. The Shares, when issued, sold, and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. Based in part upon the representations of the Investor in this Agreement, the sale and issuance of the Shares will be in compliance with all Requirements of Law.

3.4 Non-contravention. Assuming the accuracy of the representations and warranties of Investor contained herein, the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby, do not and will not (i) violate any Requirements of Law applicable to the Company, or (ii) result in a material breach or default under any of the Contractual Obligations of the Company, or under any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, in each case applicable to the Company or its properties.

3.5 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under any Requirements of Law, is necessary or required in connection with the execution, delivery or performance by the Company (including, without limitation, the sale of the Shares) or enforcement against the Company of this Agreement or the transactions contemplated hereby, except (i) such filings as have been or will be made prior to the Closing, (ii) any notices of sale required to be filed with the Commission under Regulation D of the Securities Act, and (iii) such post-closing filings as may be required under applicable state securities laws, which will be timely filed within the applicable periods therefor.

3.6 Capitalization. Immediately prior to the Closing Date, the capital stock of the Company shall consist of:

a. Preferred Stock. Five million (5,000,000) shares of preferred stock (the “Preferred Stock”), of which one million five hundred seventy five thousand (1,575,000) are designated Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”), one million, five hundred seventy-five thousand (1,575,000) of which are issued and outstanding, and three million four hundred twenty five thousand (3,425,000) of which are undesignated.

b. Common Stock. One hundred million (100,000,000) shares of Common Stock, of which thirty-one million, one hundred twenty-four thousand, three hundred sixty-nine (31,124,369) shares have been duly authorized, issued and delivered and are validly outstanding, fully paid and nonassessable. The Company has reserved (i) fifteen million (15,000,000) shares of Common Stock for issuance pursuant to its 2007 Stock Option Plan adopted December 1, 2007, as amended and restated April 25, 2008 (the “Stock Option Plan”); (ii) nine million, eight hundred sixty-six thousand, two hundred seventy-two (9,866,272) shares of Common Stock for issuance upon the exercise of outstanding common stock warrants; (iii)

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forty thousand (40,000) shares of Common Stock for issuance to certain stockholders pursuant to the October 2009 Subscription Agreement; and (iv) two million, eight thousand, one hundred twenty-five (2,008,125) shares of Common Stock for issuance upon the conversion of the outstanding Series A Convertible Preferred Stock to Common Stock.

c. Of such reserved shares, (x) options to purchase twelve million, one hundred ninety-five thousand (12,195,000) shares of Common Stock have been granted and remain unexercised; (y) two million, eight hundred five thousand (2,805,000) shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Option Plan. The post-closing capitalization of the Company is set forth in Exhibit B, assuming the issuance and sale of the full Offering amount shown in the first recital clause. Except for securities issuable upon exercise or conversion of the securities described above, the Company has not issued, nor made any commitment to issue, shares, subscriptions, warrants, options, convertible securities or other such rights, nor does the Company have any obligation to distribute to holders of any of its equity securities any evidence of indebtedness or asset.

3.7 Registration Rights. Except as provided in Section 5.12 of the Company Agreement and Plan of Merger, the October 2009 Subscription Agreement, the December 2009 Subscription Agreement, and Article VII of this Agreement, the Company is currently not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may subsequently be issued. The Company is not a party to any trust or agreement regarding the voting of shares (or the giving of written consents) of its capital stock. To the Company’s knowledge, there are no other trusts or agreements regarding the voting of shares of the Company’s capital stock.

3.8 Disclosure. The Company has provided the Investor with access to the Company’s SEC Reports and all information that the Company believes is reasonably necessary to enable the Investor to decide whether to purchase the Shares.

3.9 Exempt Offering. Subject to the truth and accuracy of the Investor’s representations set forth in this Agreement, and the truth and accuracy of the representations made by other investors in this Offering in their respective subscription agreements, the offer, sale and issuance of the Shares under the circumstances contemplated by this Agreement are exempt from the registration requirements of the Securities Act.

3.10 Changes. To the best of the Company’s knowledge, since the date of its most recent SEC Reports there has not been:

a. any change in the assets, liabilities, financial condition, business, property or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been and are not expected to be, individually or in the aggregate, materially adverse;

b. any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties, prospects, or financial condition of the Company (as such business is presently conducted and as it is presently proposed to be conducted);

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c. any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

d. any material change to a material contract or arrangement by which the Company or any of its assets is bound or subject;

e. any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

f. any sale or assignment of any patents, trademarks, copyrights, trade secrets, or other intangible assets;

g. any resignation or termination of employment of any key officer of the Company, and the Company, to the best of its knowledge, does not know of the impending resignation or termination of employment of any such officer;

h. any mortgage, pledge, transfer of a security interest in, or lien, created by the Company with respect to any of its material properties or assets, except as for taxes not yet due or payable or contested by the Company in good faith;

i. any loans or guarantees made by the Company to or for the benefit of any officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of business;

j. any declaration, setting aside, or payment of any dividend or other disposition of the Company’s assets in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock by the Company;

k. to the best of the Company’s knowledge, any other event or condition of any character that might materially and adversely affect the business prospects, or financial condition of the Company (as such business is currently conducted and as it is presently proposed to be conducted); or

l. any agreement or commitment by the Company to do any of the things described in this Section 3.10.

3.11 SEC Reports; Financial Statements. The Company has filed with the Commission all SEC Reports required to be filed by it since the effective date of its registration statement, in each case, within the time periods specified in the Commission’s rules and regulations. Except as otherwise disclosed to the Investor, as of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Company’s financial statements included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in

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accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and any consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

3.12 Brokers; Transaction Costs. Except with respect to its agreement with Convertible Capital, the Company has not entered into, and will not enter into, any contract, agreement, arrangement or understanding with any Person which will result in an obligation of the Investor to pay any finder’s fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. The Investor will not be liable for any costs or expenses incurred by or on behalf of the Company in connection with this Agreement or the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF INVESTOR

The Investor hereby represents and warrants as of the date hereof as follows:

4.1 Authorization/Binding Effect. The Investor has full power and authority to enter into this Agreement, and this Agreement, when executed and delivered, will constitute a valid and legally binding obligation of the Investor, enforceable against Investor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

4.2 Non-contravention. The execution, delivery and performance of this Agreement by the Investor, and the consummation of the transactions contemplated hereby, do not and will not (a) violate any Requirements of Law applicable to Investor, or (b) result in a material breach or default under any of the Contractual Obligations of Investor, or under any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, in each case applicable to Investor or Investor’s properties.

4.3 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under any Requirements of Law, is necessary or required in connection with the execution, delivery or performance by Investor (including, without limitation, the acquisition of the Shares) or enforcement against Investor of this Agreement or the transactions contemplated hereby.

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4.4 Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Investor or any action taken by Investor. The Company shall not be liable for any costs or expenses incurred by or on behalf of Investor in connection with this Agreement or the transactions contemplated hereby.

4.5 Securities Law Representations.

a. This Agreement is made with the Investor in reliance upon the Investor’s representation to the Company, which by the Investor’s execution of this Agreement the Investor hereby confirms, that the Shares to be purchased by the Investor will be acquired for investment for Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Shares.

b. Investor’s financial condition is such that Investor can afford to bear the economic risk of holding the shares for an indefinite period of time and has adequate means for providing for Investor’s current needs and contingencies and to suffer a complete loss of Investor’s investment in the Shares.

c. Investor understands and acknowledges that (i) the Shares are being offered and sold under one or more of the exemptions from registration provided for in Section 4(2), 4(6) or 3(b) of the Securities Act, including Regulation D promulgated thereunder, and any applicable state securities laws, (ii) Investor is purchasing the Shares without being offered or furnished any offering literature or prospectus other than as described in Section 4.6, and (iii) this transaction has not been reviewed or approved by the Shared States Securities and Exchange Commission or by any regulatory authority charged with the administration of the securities laws of any state or foreign country.

d. Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, as amended.

e. Investor has been advised of and consents to the placement of a restrictive legend in the following form on the certificates representing the Shares:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.”

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4.6 Investment Information. The Investor, in making the decision to purchase the Shares, has relied solely upon the Investor’s independent investigations and has had access to the Company’s SEC Reports. The Investor represents that the Investor has read this Agreement and the Company’s SEC Reports and the Investor is familiar with the disclosures herein and therein. In evaluating the suitability of an investment in the Company, the Investor has not relied upon any representations or other information (whether oral or written) other than as set forth in this Agreement, the Company’s SEC Reports or as contained in any written answers to questions furnished by the Company or by any Person on the Company’s behalf.

4.7 Sophistication of Investor. The Investor either (a) has a preexisting personal or business relationship with the Company or its controlling Persons, such as would enable a reasonably prudent investor to be aware of the character and general business and financial circumstances of the Company or its controlling Persons, or (b) by reason of the Investor’s business or financial experience, individually or in conjunction with the Investor’s unaffiliated professional advisors, the Investor is capable of evaluating the merits and risks of an investment in the Shares, making an informed investment decision and protecting the Investor’s own interests.

4.8 Securities Act Compliance. The Investor understands that:

a. The Shares have not been registered under the Securities Act by reason of one or more specific exemptions available under the provisions of the Securities Act which depends in part upon the investment intent and the representations and warranties of the Investor made in this Agreement.

b. In issuing the Shares to the Investor, the Company is relying upon these representations and warranties.

c. Any routine sales of the Shares in reliance upon Rule 144 under the Securities Act (if the provisions of such Rule should then be available as to the Shares) can be made only after the holding period specified in the Rule, in limited amounts, and in accordance with all the terms and conditions of that Rule.

d. In the case of Shares to which Rule 144 is not applicable, compliance with Regulation A under the Securities Act or some other exemption will be required.

e. Rule 144 is not now available for re-sales of the Shares by the Investor.

f. This Agreement does not impose any obligation on the Company to register the Shares or to comply with Regulation A or any other exemption under the Securities Act or to supply any information necessary to permit routine sales under Rule 144.

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4.9 Continuing Effect. The Investor agrees that the representations and warranties set forth in this Article IV are true and accurate as of the date of this Agreement and shall be true and accurate as of the Closing Date, and shall survive the Closing.

ARTICLE V

CONDITIONS OF INVESTOR’S OBLIGATIONS AT CLOSING

The obligations of the Investor under Section 2.2 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall only be effective against the Investor if the Investor consents in writing thereto:

5.1 Representations and Warranties. The representations and warranties of the Company contained in Article III shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, except for subsequent issuances of capital stock of the Company made upon the conversion or exchange of securities described in Section 3.6.

5.2 Performance. The Company shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date.

5.3 Consents and Approvals. All authorizations, approvals, or permits, if any, of any Governmental Authority required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing.

5.4 Minimum Offering Amount. The Company shall have received and entered into binding subscription agreements, including this Agreement, obligating the investors party thereto to purchase, and the Company to issue and sell, at least $250,000 of Common Stock in the Offering.

ARTICLE VI

CONDITIONS OF THE COMPANY’S OBLIGATIONS AT CLOSING

The obligations of the Company under Section 2.2 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions:

6.1 Representations and Warranties. The representations and warranties of the Investor contained in Article IV shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.

6.2 Performance. The Investor shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by the Investor on or before the Closing Date.

6.3 Consents and Approvals. All authorizations, approvals, or permits, if any, of any Governmental Authority required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing.

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6.4 Minimum Offering Amount. The Company shall have received and entered into binding subscription agreements, including this Agreement, obligating the investors party thereto to purchase, and the Company to issue and sell, at least $250,000 of Common Stock in the Offering.

ARTICLE VII

REGISTRATION; COVENANTS OF THE COMPANY

7.1 Registration.

a. Subject to the conditions of this Section 7.1, the Company shall file a registration statement under the Securities Act covering the Registrable Shares as soon as reasonably practicable (a “Qualified Public Offering”) and shall effect by September 1, 2010 (the “Effective Date Deadline”) the registration under the Securities Act of all Registrable Shares. Upon request of the Holders, such registration shall provide for sale or distribution of such Registrable Shares on a delayed or continuous basis pursuant to Rule 415 under the Securities Act to the extent it is available.

b. In the event the Company fails to effect a registration of the Registrable Shares by the Effective Date Deadline, then (i) the Company shall use its best efforts to effect a registration as soon thereafter as practicable, (ii) each Investor shall receive an additional allocation of Registrable Shares equal to two percent (2%) of the total amount of Registrable Shares purchased by the Investor pursuant to this Agreement (the “Registration Penalty Allocation”), and (iii) for each thirty (30) day period after the Effective Date Deadline for which the Company continues to be unable to effect a registration pursuant to this Section 7.1, each Investor shall receive an additional Registration Penalty Allocation.

7.2 Piggyback Registration. The Company shall notify all Holders of Registrable Shares in writing at least thirty (30) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to employee benefit plans or with respect to corporate reorganizations or other transactions under Rule 145 of the Securities Act), which notice will specify the proposed offering price, the kind and number of securities proposed to be registered, the distribution arrangements and such other information that at the time would be appropriate to include in such notice, and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Shares held by such Holder on terms and conditions at least as favorable as those applicable to the securities to be sold by the Company and by any other person thereunder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Shares held by it shall, within fifteen (15) days after the above-described notice from the Company, so notify the Company in writing. If a Holder decides not to include some or all of its Registrable Shares in any registration statement thereafter filed by the Company or decides to withdraw its Registrable Shares from any underwriting or registration pursuant to Section 7.1, such Holder shall nevertheless continue to have the right to include any Registrable Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein

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a. Underwriting. If the registration statement under which the Company gives notice under this Section 7.2 is for an underwritten offering, the Company shall so advise the Holders of Registrable Shares. In such event, the right of any such Holder to be included in a registration pursuant to this Section 7.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Shares in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of securities to be underwritten and advises the Holders of Registrable Shares in writing, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Shares held by the Holders; and third, to any holder of securities of the Company (other than a Holder) on a pro rata basis. In making any such reduction, all shares held by employees of the Company which are not Registrable Shares shall first be excluded. No such reduction shall (i) reduce the securities being offered by the Company for its own account to be included in the registration and underwriting or (ii) reduce the amount of Registrable Shares of the selling Holders included in the registration below thirty three and one-third percent (33 1/3%) of the total amount of securities included in such registration, unless such offering is the Initial Offering, in which event any or all of the Registrable Shares of the Holders may be excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Shares excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership, limited liability company or corporation, the partners and members, retired partners and members and shareholders of such Holder, or the estates and family members of any such partners and members and retired partners and members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

b. Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 7.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 7.4 hereof.

7.3 Form S-3 Registration. If the Company shall receive from Holders of at least seventy five percent (75%) of the Registrable Shares then outstanding a written request or requests that the Company effect a registration on Form S-3 or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Shares owned by such Holder or Holders, the Company will:

a. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and

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b. as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Shares as are specified in such request, together with all or such portion of the Registrable Shares of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 7.3:

(i) if Form S-3 is not available for such offering by the Holders, or

(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Shares and such other securities (if any) at an aggregate price to the public of less than five hundred thousand dollars ($500,000), or

(iii) if the Company shall furnish to the Holders a certificate signed by the chairman of the Board of Directors of the Company or its chief executive officer stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 7.3; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period, or

(iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 7.3.

c. Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Shares and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 7.3 shall not be counted as demands for registration or registrations effected pursuant to Section 7.1 or Section 7.2, respectively.

7.4 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Sections 7.1, 7.2 or 7.3 herein shall be borne by the Company. All Selling Expenses applicable to Registrable Shares sold by Holders incurred in connection with any registrations hereunder shall be borne by the Holders of the securities so registered pro rata on the basis of the number of shares so registered.

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7.5 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

a. Prepare and file with the SEC a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective as soon as possible, and in any event within thirty (30) days of the date on which the obligation to effect such registration arises, and, upon the request of the Holders of a majority of the Registrable Shares registered thereunder, keep such registration statement effective for up to one hundred eighty (180) days or, if a shelf registration pursuant to Securities Act Rule 415, until the Holder or Holders have completed the distribution related thereto.

b. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in paragraph (a) above.

c. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Shares owned by them.

d. Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders.

e. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement, provided that such underwriting agreement shall not provide for indemnification or contribution obligations on the part of the Holders greater than the obligations set forth in Sections 7.7(b) and (d).

f. Notify each Holder of Registrable Shares covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and correct such misrepresentation or omission as expeditiously as reasonably possible.

g. Use its best efforts to furnish, on the date that such Registrable Shares are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) to the Holders requesting registration of Registrable Securities, a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

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h. Cooperate and assist in any filings to be made with the National Association of Securities Dealers, Inc.

i. Cause all such Registrable Shares to be listed on each securities exchange on which similar securities issued by the Company are then listed, or cause such Registrable Shares to be authorized for trading on the Nasdaq Stock Market if any similar securities issued by the Company are then so authorized, if requested by the Holders of a majority of such Registrable Securities.

j. Provide a transfer agent and registrar for all Registrable Shares registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

k. In connection with an underwritten offering, to the extent requested by the managing underwriters or Holders, participate in and support customary efforts to sell the Registrable Shares in the offering; including without limitation, participating in “road shows.”

7.6 Delay of Registration; Furnishing Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7.1, 7.2 or 7.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Shares held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

7.7 Indemnification. In the event any Registrable Shares are included in a registration statement under Section 7.1, 7.2 or 7.3:

a. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, stockholders, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will pay as incurred to each such Holder, partner, stockholder, member, officer, director, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 7.7(a) shall not apply to amounts paid in

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settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder.

b. To the extent permitted by law, each Holder will, if Registrable Shares held by such Holder are included in the securities as to which such registration, qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its stockholders, directors, officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, stockholders, members, officers and directors, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such stockholder, director, officer, controlling person, underwriter or other such Holder, or the partners, stockholders, members, officers and directors of such other Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or the partners, stockholders, members, officers and directors of such other Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 7.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 7.7 exceed the proceeds from the offering received by such Holder; provided further, that any payments will be repaid to each such Holder if the Company acted recklessly.

c. Promptly after receipt by an indemnified party under this Section 7.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however,

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that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if in the reasonable opinion of counsel representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if (and only to the extent) materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 7.7.

d. If the indemnification provided for in this Section 7.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the proceeds from the offering received by such Holder.

e. The obligations of the Company and Holders under this Section 7.7 shall survive completion of any offering of Registrable Shares in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

7.8 Assignment of Registration Rights. The rights to cause the Company to register Registrable Shares pursuant to this Article VII may be transferred or assigned by a Holder to a transferee or assignee of Registrable Shares which (a) is a subsidiary, parent, stockholder, general partner, limited partner, retired partner, member, retired member or Affiliate of a Holder, (b) is a Holder’s Immediate Family member or an estate or trust of or for the benefit of an individual Holder, or (c) acquires at least twenty percent (20%) of the Registrable Shares held by such Holder; provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall become a party to this Agreement.

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7.9 “Market Stand-Off” Agreement; Agreement to Furnish Information. Each Holder hereby agrees that such Holder shall, if requested by the underwriter of any underwritten public offering of the Company’s Common Stock, agree with such underwriter not to sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company (the “Restricted Period”) not to exceed ninety (90) days following the effective date of any registration statement of the Company filed under the Securities Act in connection with the Initial Offering; provided that such agreements shall not apply to Registrable Shares included in such registration statement or sales or similar transactions effected pursuant to a valid exemption from the registration requirements of the Securities Act. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information concerning such Holder as may be reasonably requested by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 7.9 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the Restricted Period.

7.10 Information Regarding the Company. With a view to making available to the Investor the benefits of certain rules and regulations of the SEC which may permit the sale of the Shares to the public without registration, the Company agrees to:

a. Following the date upon which the Company registers the Common Stock with the Commission under Section 12 of the Exchange Act, the Company will file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

b. So long as Investor owns any Shares, furnish to Investor forthwith upon request: (i) a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act (at any time after it has become subject to such reporting requirements); (ii) a copy of the most recent annual or quarterly report of the Company; and (iii) such other reports and documents as the Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell the Shares without registration.

7.11 Restrictions on Transfer.

a. Each certificate representing Shares shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the legend contained in Section 4.5(e).

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b. The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if the holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

c. Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

ARTICLE VIII

GENERAL PROVISIONS

8.1 Indemnification. The Investor agrees to indemnify and hold harmless the Company, its officers, managers, affiliates, counsel, agents and each other Person, if any, who controls or is controlled by it, within the meaning of Section 15 of the Securities Act, against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon (a) any false representation or warranty or breach or failure by the Investor to comply with any covenant or agreement made by the Investor herein or in any other document furnished by the Investor to any of the foregoing in connection with this transaction, or (b) the disposition of any of the Shares contrary to the Investor’s declaration, representations and warranties in this Agreement.

8.2 Amendment. This Agreement may be amended, modified or supplemented at any time by the parties hereto only by an instrument in writing signed on behalf of each of the parties hereto. No agreement made through the use of electronic records or electronic signatures, as those terms are used in the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Sec. 7001 et. seq., shall be enforceable or binding on either party hereto. Notwithstanding the previous sentence, facsimile signatures, telecopied signatures, or copies of signatures in PDF format sent by e-mail, will constitute a sufficient form of writing for purposes of this Section 8.2 and Section 8.3.

8.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

8.4 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

8.5 Governing Law. This Agreement, and any disputes arising hereunder or controversies related hereto, shall be governed by and construed in accordance with the internal laws of the State of New York except for the laws governing conflicts of law thereof (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law).

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8.6 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired.

8.7 Entire Agreement; Waivers. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

8.8 Further Assurances. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.

8.9 Notices. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or first class mail, postage prepaid, or express overnight courier service, to the address set forth on the signature page hereof.

[SIGNATURE PAGE FOLLOWS]

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GEOSPATIAL HOLDINGS, INC.

SUBSCRIPTION AGREEMENT

COUNTERPART SIGNATURE PAGE

IN WITNESS WHEREOF, the Company and the Investor have executed this Agreement as of March     , 2010.

COMPANY:
GEOSPATIAL HOLDINGS, INC.		Address of the Company:
By:	/s/ Mark A. Smith	229 Howes Run Road
Name:	Mark A. Smith	Sarver, PA 16055
Title:	Chief Executive Officer

INVESTOR:
NAME OF INVESTOR:	Address of Investor:
2000 IRREVOCABLE TRUST FOR IAN SMITH	1001 CARLISIE STREET
Print Name	NATRONA HEIGHTS, PA 15065
/s/ Lisa A. Smith
Signature
Trustee
Title (if Investor is not a natural person)
E-Mail Address: msmith@gooselakecapital.com
Fax Number: 724-353-3049

Number of Shares to be Purchased	Purchase Price
200,000	$	200,000.00

Exhibit A to

Subscription Agreement

Wire Transfer Instructions:

Dollar Bank Pitts

2700 Liberty Avenue

Pittsburgh, PA 15222

Phone 412-261-8111

ABA No.: 243074385

Account No.: 2671774040

For account of:

Geospatial Holdings, Inc.

229 Howes Run Road

Sarver, PA 16055

Phone 412-724-353-3400

Exhibit B to

Subscription Agreement

Post-Offering Capitalization Table.

Please see attached.

GEOSPATIAL HOLDINGS, INC.

INSTRUCTIONS FOR RETURNING

COUNTERPART SIGNATURE PAGE

TO

SUBSCRIPTION AGREEMENT

Return completed and signed signature page by one of the following methods by no later than 5:00 p.m. Eastern time, on March 29, 2010:

1. By U.S. mail or overnight courier service to:

George Samuel III

Winston & Strawn LLP

200 Park Avenue

New York, NY 10166

2. By e-mail to: gsamuel@winston.com

EX-10.40

Exhibit 10.40

EXECUTION COPY

SUBSCRIPTION AND PURCHASE AGREEMENT

THIS SUBSCRIPTION AND PURCHASE AGREEMENT (the “Agreement”) is entered into as of this 19th day of March, 2010 (the “Effective Date”) by and between Geospatial Holdings, Inc., a Nevada corporation (the “Company”), and the investor named on the signature page to this Agreement (the “Investor”).

AGREEMENT

WHEREAS, the Company proposes to issue up to ten million (10,000,000) shares of Common Stock (as defined below) at the price of $1.00 per share for the aggregate consideration of up to ten million dollars ($10,000,000) (the “Offering”); and

WHEREAS, the Investor desires to purchase from the Company and the Company desires to issue and sell to the Investor the Shares (as defined below).

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“Agreement” has the meaning set forth in the preamble.

“Board” means the board of directors of the Company.

“Closing” has the meaning set forth in Section 2.2(a).

“Closing Date” has the meaning set forth in Section 2.2(a).

“Common Stock” means the common stock, par value $.001 per share, of the Company.

“Company” has the meaning set forth in the preamble.

“Company Agreement and Plan of Merger” means that Agreement and Plan of Merger dated March 25, 2008, by and among Kayenta Kreations, Inc. (the predecessor to the Company), Kayenta Subsidiary Corp., Geospatial Mapping Systems, Inc. and Thomas G. Kimble, an individual.

“Contractual Obligation” means as to any Person, any material provision of any security issued by such Person or any material provision of any agreement, lease of real or personal property, undertaking, contract, indenture, mortgage, deed of trust or other instrument including, without limitation, the organizational or governing documents of such Person, to which such Person is a party or by which it or any of its property is bound.

“Convertible Securities” shall mean stock or other securities convertible into or exchangeable for shares of Common Stock.

“December 2009 Subscription Agreement” means that Subscription and Purchase Agreement entered into on December 15, 2009 by and among the Company and certain investors pursuant to which the Company issued to such investors up to one and a half million dollars of Series A Convertible Preferred Stock and pursuant to which the Company granted to such investors certain registration rights set forth therein.

“Effective Date” has the meaning set forth in the preamble.

“Effective Date Deadline” has the meaning set forth in Section 7.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financial Statements” means (i) the audited financial statements of the Company (balance sheet, profit and loss statement, statement of stockholders’ equity and statement of cash flows including notes thereto) at December 31, 2008 for the fiscal year then ended, and (ii) the unaudited financial statements (balance sheet, profit and loss statement, and statement of cash flows) at December 31, 2009 for the six-month period then ended.

“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of any government of any nation, state, city, locality or other political subdivision.

“Holder” means (i) any person owning of record Registrable Shares that have not been sold to the public or (ii) any assignee of record of such Registrable Shares in accordance with Section 7.9 hereof.

“Investor” has the meaning set forth in the preamble.

“October 2009 Subscription Agreement” means that Subscription and Purchase Agreement entered into on October 1, 2009 by and among the Company and certain investors pursuant to which the Company issued to such investors up to one million dollars of Common Stock and pursuant to which the Company granted to such investors certain registration rights set forth therein.

“Person” means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Stock” has the meaning set forth in Section 3.6.

“Purchase Price” has the meaning set forth in Section 2.1.

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“Qualified Public Offering” has the meaning set forth in Section 7.1.

“Register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Shares” means the Shares owned or held by the Holders. Notwithstanding the foregoing, Registrable Shares shall not include any securities sold by a Person to the public either pursuant to a registration statement or Securities Act Rule 144 or sold in a private transaction in which the transferor’s rights under Section 7 of this Agreement are not assigned.

“Registration Expenses” means all expenses incurred by the Company in complying with Sections 7.1, 7.2 and 7.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration.

“Registration Penalty Allocation” has the meaning set forth in Section 7.1.

“Requirements of Law” means, as to any Person, the provisions of the certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule, regulation, right, privilege, qualification, license or franchise, order, judgment, or determination of an arbitrator or a court or other Governmental Authority applicable to or binding upon such Person or any of its property (or to which such Person or any of its property is subject) or applicable to any or all of the transactions contemplated by, or referred to in, this Agreement.

“Restricted Period” has the meaning set forth in Section 7.9.

“SEC” or “Commission” means the Securities and Exchange Commission.

“SEC Reports” shall mean all reports required to be filed with the SEC under the Securities Act and the Exchange Act.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Expenses” means all underwriting discounts and selling commissions applicable to the sale.

“Series A Convertible Preferred Stock” has the meaning set forth in Section 3.6.

“Shares” means the Common Stock being subscribed for, purchased and sold pursuant to this Agreement.

“Stock Option Plan” has the meaning set forth in Section 3.6.

“Violation” has the meaning set forth in Section 7.7.

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ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

2.1 Subscription. Subject to the terms and conditions of this Agreement, the Investor agrees to purchase, and the Company agrees to issue and sell to the Investor at the Closing, the Shares set forth below the Investor’s name on the signature page hereto in exchange for payment by the Investor of the aggregate investment also set forth thereon (the “Purchase Price”).

2.2 Closing.

a. The purchase and sale of the Shares (the “Closing”) shall take place at the offices of Winston & Strawn LLP, 1700 K Street, NW, Washington, D.C. 20006, at 10:00 a.m. Eastern time on March 19, 2010 (the “Closing Date”), or at such other time and place as the Company and the Investor shall mutually agree.

b. At the Closing, the Investor shall deliver the Purchase Price to the Company by wire transfer of immediately available funds to the account of the Company designated on Exhibit A hereto, in total payment of the Purchase Price for the Shares subscribed hereunder, and the Company shall deliver to the Investor a certificate representing the Shares that the Investor is purchasing.

ARTICLE III

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Investor as follows:

3.1 Organization; Good Standing; Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted, to execute and deliver this Agreement, to issue and sell the Shares, and to carry out the provisions of this Agreement.

3.2 Authorization; Binding Effect. All corporate action on the part of the Company, its directors and stockholders, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder at the Closing, and the authorization, issuance, sale, and delivery of the Shares being sold hereunder has been taken or will be taken prior to the Closing. This Agreement, when executed and delivered, will constitute the valid and legally binding obligation of the Company, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The sale of the Shares will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

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3.3 Valid Issuance of Common Stock. The Shares, when issued, sold, and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. Based in part upon the representations of the Investor in this Agreement, the sale and issuance of the Shares will be in compliance with all Requirements of Law.

3.4 Non-contravention. Assuming the accuracy of the representations and warranties of Investor contained herein, the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby, do not and will not (i) violate any Requirements of Law applicable to the Company, or (ii) result in a material breach or default under any of the Contractual Obligations of the Company, or under any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, in each case applicable to the Company or its properties.

3.5 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under any Requirements of Law, is necessary or required in connection with the execution, delivery or performance by the Company (including, without limitation, the sale of the Shares) or enforcement against the Company of this Agreement or the transactions contemplated hereby, except (i) such filings as have been or will be made prior to the Closing, (ii) any notices of sale required to be filed with the Commission under Regulation D of the Securities Act, and (iii) such post-closing filings as may be required under applicable state securities laws, which will be timely filed within the applicable periods therefor.

3.6 Capitalization. Immediately prior to the Closing Date, the capital stock of the Company shall consist of:

a. Preferred Stock. Five million (5,000,000) shares of preferred stock (the “Preferred Stock”), of which one million five hundred seventy five thousand (1,575,000) are designated Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”), one million, five hundred seventy-five thousand (1,575,000) of which are issued and outstanding, and three million four hundred twenty five thousand (3,425,000) of which are undesignated.

b. Common Stock. One hundred million (100,000,000) shares of Common Stock, of which thirty-one million, one hundred twenty-four thousand, three hundred sixty-nine (31,124,369) shares have been duly authorized, issued and delivered and are validly outstanding, fully paid and nonassessable. The Company has reserved (i) fifteen million (15,000,000) shares of Common Stock for issuance pursuant to its 2007 Stock Option Plan adopted December 1, 2007, as amended and restated April 25, 2008 (the “Stock Option Plan”); (ii) nine million, eight hundred sixty-six thousand, two hundred seventy-two (9,866,272) shares of Common Stock for issuance upon the exercise of outstanding common stock warrants; (iii)

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forty thousand (40,000) shares of Common Stock for issuance to certain stockholders pursuant to the October 2009 Subscription Agreement; and (iv) two million, eight thousand, one hundred twenty-five (2,008,125) shares of Common Stock for issuance upon the conversion of the outstanding Series A Convertible Preferred Stock to Common Stock.

c. Of such reserved shares, (x) options to purchase twelve million, one hundred ninety-five thousand (12,195,000) shares of Common Stock have been granted and remain unexercised; (y) two million, eight hundred five thousand (2,805,000) shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Option Plan. The post-closing capitalization of the Company is set forth in Exhibit B, assuming the issuance and sale of the full Offering amount shown in the first recital clause. Except for securities issuable upon exercise or conversion of the securities described above, the Company has not issued, nor made any commitment to issue, shares, subscriptions, warrants, options, convertible securities or other such rights, nor does the Company have any obligation to distribute to holders of any of its equity securities any evidence of indebtedness or asset.

3.7 Registration Rights. Except as provided in Section 5.12 of the Company Agreement and Plan of Merger, the October 2009 Subscription Agreement, the December 2009 Subscription Agreement, and Article VII of this Agreement, the Company is currently not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may subsequently be issued. The Company is not a party to any trust or agreement regarding the voting of shares (or the giving of written consents) of its capital stock. To the Company’s knowledge, there are no other trusts or agreements regarding the voting of shares of the Company’s capital stock.

3.8 Disclosure. The Company has provided the Investor with access to the Company’s SEC Reports and all information that the Company believes is reasonably necessary to enable the Investor to decide whether to purchase the Shares.

3.9 Exempt Offering. Subject to the truth and accuracy of the Investor’s representations set forth in this Agreement, and the truth and accuracy of the representations made by other investors in this Offering in their respective subscription agreements, the offer, sale and issuance of the Shares under the circumstances contemplated by this Agreement are exempt from the registration requirements of the Securities Act.

3.10 Changes. To the best of the Company’s knowledge, since the date of its most recent SEC Reports there has not been:

a. any change in the assets, liabilities, financial condition, business, property or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been and are not expected to be, individually or in the aggregate, materially adverse;

b. any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties, prospects, or financial condition of the Company (as such business is presently conducted and as it is presently proposed to be conducted);

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c. any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

d. any material change to a material contract or arrangement by which the Company or any of its assets is bound or subject;

e. any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

f. any sale or assignment of any patents, trademarks, copyrights, trade secrets, or other intangible assets;

g. any resignation or termination of employment of any key officer of the Company, and the Company, to the best of its knowledge, does not know of the impending resignation or termination of employment of any such officer;

h. any mortgage, pledge, transfer of a security interest in, or lien, created by the Company with respect to any of its material properties or assets, except as for taxes not yet due or payable or contested by the Company in good faith;

i. any loans or guarantees made by the Company to or for the benefit of any officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of business;

j. any declaration, setting aside, or payment of any dividend or other disposition of the Company’s assets in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock by the Company;

k. to the best of the Company’s knowledge, any other event or condition of any character that might materially and adversely affect the business prospects, or financial condition of the Company (as such business is currently conducted and as it is presently proposed to be conducted); or

l. any agreement or commitment by the Company to do any of the things described in this Section 3.10.

3.11 SEC Reports; Financial Statements. The Company has filed with the Commission all SEC Reports required to be filed by it since the effective date of its registration statement, in each case, within the time periods specified in the Commission’s rules and regulations. Except as otherwise disclosed to the Investor, as of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Company’s financial statements included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in

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accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and any consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

3.12 Brokers; Transaction Costs. Except with respect to its agreement with Convertible Capital, the Company has not entered into, and will not enter into, any contract, agreement, arrangement or understanding with any Person which will result in an obligation of the Investor to pay any finder’s fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. The Investor will not be liable for any costs or expenses incurred by or on behalf of the Company in connection with this Agreement or the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF INVESTOR

The Investor hereby represents and warrants as of the date hereof as follows:

4.1 Authorization/Binding Effect. The Investor has full power and authority to enter into this Agreement, and this Agreement, when executed and delivered, will constitute a valid and legally binding obligation of the Investor, enforceable against Investor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

4.2 Non-contravention. The execution, delivery and performance of this Agreement by the Investor, and the consummation of the transactions contemplated hereby, do not and will not (a) violate any Requirements of Law applicable to Investor, or (b) result in a material breach or default under any of the Contractual Obligations of Investor, or under any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, in each case applicable to Investor or Investor’s properties.

4.3 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirements of Law, and no lapse of a waiting period under any Requirements of Law, is necessary or required in connection with the execution, delivery or performance by Investor (including, without limitation, the acquisition of the Shares) or enforcement against Investor of this Agreement or the transactions contemplated hereby.

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4.4 Broker’s, Finder’s or Similar Fees. There are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Investor or any action taken by Investor. The Company shall not be liable for any costs or expenses incurred by or on behalf of Investor in connection with this Agreement or the transactions contemplated hereby.

4.5 Securities Law Representations.

a. This Agreement is made with the Investor in reliance upon the Investor’s representation to the Company, which by the Investor’s execution of this Agreement the Investor hereby confirms, that the Shares to be purchased by the Investor will be acquired for investment for Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Shares.

b. Investor’s financial condition is such that Investor can afford to bear the economic risk of holding the shares for an indefinite period of time and has adequate means for providing for Investor’s current needs and contingencies and to suffer a complete loss of Investor’s investment in the Shares.

c. Investor understands and acknowledges that (i) the Shares are being offered and sold under one or more of the exemptions from registration provided for in Section 4(2), 4(6) or 3(b) of the Securities Act, including Regulation D promulgated thereunder, and any applicable state securities laws, (ii) Investor is purchasing the Shares without being offered or furnished any offering literature or prospectus other than as described in Section 4.6, and (iii) this transaction has not been reviewed or approved by the Shared States Securities and Exchange Commission or by any regulatory authority charged with the administration of the securities laws of any state or foreign country.

d. Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, as amended.

e. Investor has been advised of and consents to the placement of a restrictive legend in the following form on the certificates representing the Shares:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.”

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4.6 Investment Information. The Investor, in making the decision to purchase the Shares, has relied solely upon the Investor’s independent investigations and has had access to the Company’s SEC Reports. The Investor represents that the Investor has read this Agreement and the Company’s SEC Reports and the Investor is familiar with the disclosures herein and therein. In evaluating the suitability of an investment in the Company, the Investor has not relied upon any representations or other information (whether oral or written) other than as set forth in this Agreement, the Company’s SEC Reports or as contained in any written answers to questions furnished by the Company or by any Person on the Company’s behalf.

4.7 Sophistication of Investor. The Investor either (a) has a preexisting personal or business relationship with the Company or its controlling Persons, such as would enable a reasonably prudent investor to be aware of the character and general business and financial circumstances of the Company or its controlling Persons, or (b) by reason of the Investor’s business or financial experience, individually or in conjunction with the Investor’s unaffiliated professional advisors, the Investor is capable of evaluating the merits and risks of an investment in the Shares, making an informed investment decision and protecting the Investor’s own interests.

4.8 Securities Act Compliance. The Investor understands that:

a. The Shares have not been registered under the Securities Act by reason of one or more specific exemptions available under the provisions of the Securities Act which depends in part upon the investment intent and the representations and warranties of the Investor made in this Agreement.

b. In issuing the Shares to the Investor, the Company is relying upon these representations and warranties.

c. Any routine sales of the Shares in reliance upon Rule 144 under the Securities Act (if the provisions of such Rule should then be available as to the Shares) can be made only after the holding period specified in the Rule, in limited amounts, and in accordance with all the terms and conditions of that Rule.

d. In the case of Shares to which Rule 144 is not applicable, compliance with Regulation A under the Securities Act or some other exemption will be required.

e. Rule 144 is not now available for re-sales of the Shares by the Investor.

f. This Agreement does not impose any obligation on the Company to register the Shares or to comply with Regulation A or any other exemption under the Securities Act or to supply any information necessary to permit routine sales under Rule 144.

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4.9 Continuing Effect. The Investor agrees that the representations and warranties set forth in this Article IV are true and accurate as of the date of this Agreement and shall be true and accurate as of the Closing Date, and shall survive the Closing.

ARTICLE V

CONDITIONS OF INVESTOR’S OBLIGATIONS AT CLOSING

The obligations of the Investor under Section 2.2 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall only be effective against the Investor if the Investor consents in writing thereto:

5.1 Representations and Warranties. The representations and warranties of the Company contained in Article III shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, except for subsequent issuances of capital stock of the Company made upon the conversion or exchange of securities described in Section 3.6.

5.2 Performance. The Company shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date.

5.3 Consents and Approvals. All authorizations, approvals, or permits, if any, of any Governmental Authority required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing.

5.4 Minimum Offering Amount. The Company shall have received and entered into binding subscription agreements, including this Agreement, obligating the investors party thereto to purchase, and the Company to issue and sell, at least $250,000 of Common Stock in the Offering.

ARTICLE VI

CONDITIONS OF THE COMPANY’S OBLIGATIONS AT CLOSING

The obligations of the Company under Section 2.2 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions:

6.1 Representations and Warranties. The representations and warranties of the Investor contained in Article IV shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.

6.2 Performance. The Investor shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by the Investor on or before the Closing Date.

6.3 Consents and Approvals. All authorizations, approvals, or permits, if any, of any Governmental Authority required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and effective as of the Closing.

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6.4 Minimum Offering Amount. The Company shall have received and entered into binding subscription agreements, including this Agreement, obligating the investors party thereto to purchase, and the Company to issue and sell, at least $250,000 of Common Stock in the Offering.

ARTICLE VII

REGISTRATION; COVENANTS OF THE COMPANY

7.1 Registration.

a. Subject to the conditions of this Section 7.1, the Company shall file a registration statement under the Securities Act covering the Registrable Shares as soon as reasonably practicable (a “Qualified Public Offering”) and shall effect by September 1, 2010 (the “Effective Date Deadline”) the registration under the Securities Act of all Registrable Shares. Upon request of the Holders, such registration shall provide for sale or distribution of such Registrable Shares on a delayed or continuous basis pursuant to Rule 415 under the Securities Act to the extent it is available.

b. In the event the Company fails to effect a registration of the Registrable Shares by the Effective Date Deadline, then (i) the Company shall use its best efforts to effect a registration as soon thereafter as practicable, (ii) each Investor shall receive an additional allocation of Registrable Shares equal to two percent (2%) of the total amount of Registrable Shares purchased by the Investor pursuant to this Agreement (the “Registration Penalty Allocation”), and (iii) for each thirty (30) day period after the Effective Date Deadline for which the Company continues to be unable to effect a registration pursuant to this Section 7.1, each Investor shall receive an additional Registration Penalty Allocation.

7.2 Piggyback Registration. The Company shall notify all Holders of Registrable Shares in writing at least thirty (30) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to employee benefit plans or with respect to corporate reorganizations or other transactions under Rule 145 of the Securities Act), which notice will specify the proposed offering price, the kind and number of securities proposed to be registered, the distribution arrangements and such other information that at the time would be appropriate to include in such notice, and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Shares held by such Holder on terms and conditions at least as favorable as those applicable to the securities to be sold by the Company and by any other person thereunder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Shares held by it shall, within fifteen (15) days after the above-described notice from the Company, so notify the Company in writing. If a Holder decides not to include some or all of its Registrable Shares in any registration statement thereafter filed by the Company or decides to withdraw its Registrable Shares from any underwriting or registration pursuant to Section 7.1, such Holder shall nevertheless continue to have the right to include any Registrable Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein

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a. Underwriting. If the registration statement under which the Company gives notice under this Section 7.2 is for an underwritten offering, the Company shall so advise the Holders of Registrable Shares. In such event, the right of any such Holder to be included in a registration pursuant to this Section 7.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Shares in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of securities to be underwritten and advises the Holders of Registrable Shares in writing, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Shares held by the Holders; and third, to any holder of securities of the Company (other than a Holder) on a pro rata basis. In making any such reduction, all shares held by employees of the Company which are not Registrable Shares shall first be excluded. No such reduction shall (i) reduce the securities being offered by the Company for its own account to be included in the registration and underwriting or (ii) reduce the amount of Registrable Shares of the selling Holders included in the registration below thirty three and one-third percent (33 1/3%) of the total amount of securities included in such registration, unless such offering is the Initial Offering, in which event any or all of the Registrable Shares of the Holders may be excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Shares excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership, limited liability company or corporation, the partners and members, retired partners and members and shareholders of such Holder, or the estates and family members of any such partners and members and retired partners and members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

b. Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 7.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 7.4 hereof.

7.3 Form S-3 Registration. If the Company shall receive from Holders of at least seventy five percent (75%) of the Registrable Shares then outstanding a written request or requests that the Company effect a registration on Form S-3 or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Shares owned by such Holder or Holders, the Company will:

a. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and

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b. as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Shares as are specified in such request, together with all or such portion of the Registrable Shares of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 7.3:

(i) if Form S-3 is not available for such offering by the Holders, or

(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Shares and such other securities (if any) at an aggregate price to the public of less than five hundred thousand dollars ($500,000), or

(iii) if the Company shall furnish to the Holders a certificate signed by the chairman of the Board of Directors of the Company or its chief executive officer stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 7.3; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period, or

(iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 7.3.

c. Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Shares and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 7.3 shall not be counted as demands for registration or registrations effected pursuant to Section 7.1 or Section 7.2, respectively.

7.4 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Sections 7.1, 7.2 or 7.3 herein shall be borne by the Company. All Selling Expenses applicable to Registrable Shares sold by Holders incurred in connection with any registrations hereunder shall be borne by the Holders of the securities so registered pro rata on the basis of the number of shares so registered.

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7.5 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

a. Prepare and file with the SEC a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective as soon as possible, and in any event within thirty (30) days of the date on which the obligation to effect such registration arises, and, upon the request of the Holders of a majority of the Registrable Shares registered thereunder, keep such registration statement effective for up to one hundred eighty (180) days or, if a shelf registration pursuant to Securities Act Rule 415, until the Holder or Holders have completed the distribution related thereto.

b. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in paragraph (a) above.

c. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Shares owned by them.

d. Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders.

e. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement, provided that such underwriting agreement shall not provide for indemnification or contribution obligations on the part of the Holders greater than the obligations set forth in Sections 7.7(b) and (d).

f. Notify each Holder of Registrable Shares covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and correct such misrepresentation or omission as expeditiously as reasonably possible.

g. Use its best efforts to furnish, on the date that such Registrable Shares are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) to the Holders requesting registration of Registrable Securities, a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

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h. Cooperate and assist in any filings to be made with the National Association of Securities Dealers, Inc.

i. Cause all such Registrable Shares to be listed on each securities exchange on which similar securities issued by the Company are then listed, or cause such Registrable Shares to be authorized for trading on the Nasdaq Stock Market if any similar securities issued by the Company are then so authorized, if requested by the Holders of a majority of such Registrable Securities.

j. Provide a transfer agent and registrar for all Registrable Shares registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

k. In connection with an underwritten offering, to the extent requested by the managing underwriters or Holders, participate in and support customary efforts to sell the Registrable Shares in the offering; including without limitation, participating in “road shows.”

7.6 Delay of Registration; Furnishing Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7.1, 7.2 or 7.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Shares held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

7.7 Indemnification. In the event any Registrable Shares are included in a registration statement under Section 7.1, 7.2 or 7.3:

a. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, stockholders, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will pay as incurred to each such Holder, partner, stockholder, member, officer, director, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 7.7(a) shall not apply to amounts paid in

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settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder.

b. To the extent permitted by law, each Holder will, if Registrable Shares held by such Holder are included in the securities as to which such registration, qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its stockholders, directors, officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, stockholders, members, officers and directors, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such stockholder, director, officer, controlling person, underwriter or other such Holder, or the partners, stockholders, members, officers and directors of such other Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or the partners, stockholders, members, officers and directors of such other Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 7.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 7.7 exceed the proceeds from the offering received by such Holder; provided further, that any payments will be repaid to each such Holder if the Company acted recklessly.

c. Promptly after receipt by an indemnified party under this Section 7.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however,

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that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if in the reasonable opinion of counsel representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if (and only to the extent) materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7.7, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 7.7.

d. If the indemnification provided for in this Section 7.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the proceeds from the offering received by such Holder.

e. The obligations of the Company and Holders under this Section 7.7 shall survive completion of any offering of Registrable Shares in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

7.8 Assignment of Registration Rights. The rights to cause the Company to register Registrable Shares pursuant to this Article VII may be transferred or assigned by a Holder to a transferee or assignee of Registrable Shares which (a) is a subsidiary, parent, stockholder, general partner, limited partner, retired partner, member, retired member or Affiliate of a Holder, (b) is a Holder’s Immediate Family member or an estate or trust of or for the benefit of an individual Holder, or (c) acquires at least twenty percent (20%) of the Registrable Shares held by such Holder; provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall become a party to this Agreement.

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7.9 “Market Stand-Off” Agreement; Agreement to Furnish Information. Each Holder hereby agrees that such Holder shall, if requested by the underwriter of any underwritten public offering of the Company’s Common Stock, agree with such underwriter not to sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company (the “Restricted Period”) not to exceed ninety (90) days following the effective date of any registration statement of the Company filed under the Securities Act in connection with the Initial Offering; provided that such agreements shall not apply to Registrable Shares included in such registration statement or sales or similar transactions effected pursuant to a valid exemption from the registration requirements of the Securities Act. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information concerning such Holder as may be reasonably requested by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 7.9 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the Restricted Period.

7.10 Information Regarding the Company. With a view to making available to the Investor the benefits of certain rules and regulations of the SEC which may permit the sale of the Shares to the public without registration, the Company agrees to:

a. Following the date upon which the Company registers the Common Stock with the Commission under Section 12 of the Exchange Act, the Company will file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

b. So long as Investor owns any Shares, furnish to Investor forthwith upon request: (i) a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act (at any time after it has become subject to such reporting requirements); (ii) a copy of the most recent annual or quarterly report of the Company; and (iii) such other reports and documents as the Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell the Shares without registration.

7.11 Restrictions on Transfer.

a. Each certificate representing Shares shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the legend contained in Section 4.5(e).

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b. The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if the holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

c. Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

ARTICLE VIII

GENERAL PROVISIONS

8.1 Indemnification. The Investor agrees to indemnify and hold harmless the Company, its officers, managers, affiliates, counsel, agents and each other Person, if any, who controls or is controlled by it, within the meaning of Section 15 of the Securities Act, against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon (a) any false representation or warranty or breach or failure by the Investor to comply with any covenant or agreement made by the Investor herein or in any other document furnished by the Investor to any of the foregoing in connection with this transaction, or (b) the disposition of any of the Shares contrary to the Investor’s declaration, representations and warranties in this Agreement.

8.2 Amendment. This Agreement may be amended, modified or supplemented at any time by the parties hereto only by an instrument in writing signed on behalf of each of the parties hereto. No agreement made through the use of electronic records or electronic signatures, as those terms are used in the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Sec. 7001 et. seq., shall be enforceable or binding on either party hereto. Notwithstanding the previous sentence, facsimile signatures, telecopied signatures, or copies of signatures in PDF format sent by e-mail, will constitute a sufficient form of writing for purposes of this Section 8.2 and Section 8.3.

8.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

8.4 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

8.5 Governing Law. This Agreement, and any disputes arising hereunder or controversies related hereto, shall be governed by and construed in accordance with the internal laws of the State of New York except for the laws governing conflicts of law thereof (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law).

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8.6 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired.

8.7 Entire Agreement; Waivers. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

8.8 Further Assurances. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.

8.9 Notices. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered or first class mail, postage prepaid, or express overnight courier service, to the address set forth on the signature page hereof.

[SIGNATURE PAGE FOLLOWS]

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GEOSPATIAL HOLDINGS, INC.

SUBSCRIPTION AGREEMENT

COUNTERPART SIGNATURE PAGE

IN WITNESS WHEREOF, the Company and the Investor have executed this Agreement as of March     , 2010.

COMPANY:
GEOSPATIAL HOLDINGS, INC.		Address of the Company:
By:	/s/ Mark A. Smith	229 Howes Run Road
Name:	Mark A. Smith	Sarver, PA 16055
Title:	Chief Executive Officer

INVESTOR:
NAME OF INVESTOR:	Address of Investor:
2000 IRREVOCABLE TRUST FOR BENJAMIN SMITH	1001 CARLISIE STREET
Print Name	NATRONA HEIGHTS, PA 15065
/s/ Lisa A. Smith
Signature
Title (if Investor is not a natural person)
E-Mail Address: msmith@gooselakecapital.com
Fax Number: 724-353-3049

Number of Shares to be Purchased	Purchase Price
200,000	$	200,000.00

Exhibit A to

Subscription Agreement

Wire Transfer Instructions:

Dollar Bank Pitts

2700 Liberty Avenue

Pittsburgh, PA 15222

Phone 412-261-8111

ABA No.: 243074385

Account No.: 2671774040

For account of:

Geospatial Holdings, Inc.

229 Howes Run Road

Sarver, PA 16055

Phone 412-724-353-3400

Exhibit B to

Subscription Agreement

Post-Offering Capitalization Table.

Please see attached.

GEOSPATIAL HOLDINGS, INC.

INSTRUCTIONS FOR RETURNING

COUNTERPART SIGNATURE PAGE

TO

SUBSCRIPTION AGREEMENT

Return completed and signed signature page by one of the following methods by no later than 5:00 p.m. Eastern time, on March 29, 2010:

1. By U.S. mail or overnight courier service to:

George Samuel III

Winston & Strawn LLP

200 Park Avenue

New York, NY 10166

2. By e-mail to: gsamuel@winston.com

EX-10.41

Exhibit 10.41

EMPLOYMENT AGREEMENT

THIS AGREEMENT (“Agreement”), by and between GEOSPATIAL MAPPING SYSTEMS, INC., a Delaware corporation (the “Company”), and Todd Porter (the “Executive”) is entered into as of                     , 2008 (the “Employment Date”).

In consideration of the mutual covenants set forth herein, the Company and the Executive hereby agree as follows:

1. Employment. The Company hereby agrees to employ the Executive, and the Executive agrees to continue to serve the Company, in the capacities described in Section 3 of this Agreement, during the Period of Employment (as defined in Section 2 of this Agreement), in accordance with the terms and conditions of this Agreement.

2. Period of Employment. The term “Period of Employment” shall mean the period which commenced on the Employment Date and, unless earlier terminated pursuant to Section 6, ends on April 21st, 2011.

3. Duties During the Period of Employment.

3.1 Duties. During the Period of Employment, the Executive shall be employed as an Executive Vice President of the Company or other position as assigned by the President.

3.2 Scope. Throughout the Period of Employment, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote substantially all of his business time and attention to the business and affairs of the Company. It shall not be a violation of this Agreement for the Executive to (a) serve on corporate, civic or charitable boards or committees, (b) deliver lectures, fulfill speaking engagements or teach occasional courses or seminars at educational institutions, or (c) manage personal investments and engage in any other activities, so long as such activities under clauses (a), (b) and (c) do not interfere, in any significant respect, with the Executive’s responsibilities hereunder or otherwise violate this Agreement or the Agreement Not to Compete executed and delivered by the Executive pursuant to the provisions of Section 12.

4. Compensation and Other Payments.

4.1 Salary. During the Period of Employment, the Executive’s Base Salary shall initially be at the rate of Two Hundred Twenty Thousand Dollars ($220,000) per year (the “Base Salary”). Executive shall participate in the Company’s Executive Bonus Compensation Plan to be established by the Compensation Committee of the Company’s board of directors.

4.2 Stock Options. The Company hereby grants to the Executive a ten (10) year stock option award with respect to Five Hundred Thousand (500,000) shares of common stock of the Company at an exercise price of eighty cents ($0.80) per share. This option award (a) 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 this Agreement.

4.3 Other Compensation. During the Period of Employment, the Executive shall be entitled to participate, at a level and on a basis commensurate with the Executive’s position and responsibilities, in any and all supplemental compensation plans or arrangements established by the Company for its senior executives, including but not limited to any equity-based incentive compensation plans or arrangements.

5. Other Executive Benefits.

5.1 Business Expenses. Subject to the Executive’s compliance with the policies and procedures approved by the Board and applicable to all senior executives of the Company, the Company shall promptly reimburse the Executive for all expenses and disbursements reasonably incurred by the Executive in the performance of his duties hereunder during the Period of Employment.

5.2 Benefit Plans. The Executive and his eligible family members shall be entitled, subject to any normally applicable waiting periods and eligibility criteria, to participate, on terms no less favorable to the Executive than the terms offered to other senior executives of the Company, in any group and/or executive life, hospitalization or disability insurance plan, health program, pension, profit sharing, 401(k) and similar benefit plans (qualified, non-qualified and supplemental) or other fringe benefits (it being understood that items such as stock options and other equity awards are not fringe benefits) of the Company (collectively referred to as the “Benefits”). Anything contained herein to the contrary notwithstanding, the Benefits described herein shall not duplicate benefits made available to the Executive pursuant to any other provision of this Agreement. (Note: medical and dental insurance to be paid 100% by Company. Life insurance shall be equal to 4 times base salary and disability shall be at limits set by the Company’s Compensation Committee for all executives).

5.3 Holidays and Vacation. During the Period of Employment, the Executive shall be entitled to four (4) weeks paid holidays and other absences from work that are reasonably consistent with the performance of the Executive’s duties as provided in this Agreement. Such vacations and absences shall be consistent with those generally provided to other senior executives of the Company..

5.4 Company Automobile. During the Period of Employment, the Executive shall be reimbursed for use of an automobile in accordance with a policy approved by the Board.

5.5 Education Reimbursement. Upon the successful completion of the Executive’s current E-MBA program Company shall reimburse Executive $26,500.

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6. Termination.

6.1 Death. The Period of Employment shall terminate automatically upon the Executive’s death.

6.2 Disability. If the Company determines in good faith that the Disability of the Executive has occurred (pursuant to the definition of “Disability” set forth below), it may give to the Executive written notice of its intention to terminate the Executive’s employment. In such event, the Period of Employment shall terminate effective on the 30th day after receipt by the Executive of such written notice given at any time after a period of 120 consecutive days of Disability or a period of 180 days of Disability within any 12 consecutive months, and, in either case, while such Disability is continuing (“Disability Effective Date”). The Disability Effective Date shall not occur if the Executive returns to performance of the Executive’s duties as contemplated in this Agreement within 30 days after receipt of such notice. For purposes of this Agreement, “Disability” means the Executive’s inability to substantially perform his duties hereunder, with reasonable accommodation, as evidenced by a certificate signed either by a physician mutually acceptable to the Company and the Executive or, if the Company and the Executive cannot agree upon a physician, by a physician selected by agreement of a physician designated by the Company and a physician designated by the Executive; provided, however, that if such physicians cannot agree upon a third physician within 30 days, such third physician shall be designated by the American Arbitration Association. Until the Disability Effective Date, the Executive shall be entitled to all compensation and benefits provided for under Sections 4 and 5 hereof. It is understood that nothing in this Section 6.2 shall serve to limit the Company’s obligations under Section 7.3, below.

6.3 By the Company for Cause. During the Period of Employment, the Company may terminate the Executive’s employment immediately for “Cause.” For purposes of this Agreement, “Cause” means (a) a material breach of this Agreement by the Executive or the gross neglect of the Executive’s duties hereunder (after the provision to the Executive by the Company of written notice reasonably specifying the breach and/or performance deficiency and thirty (30) days to cure such breach), (b) the Executive’s willful misconduct or gross negligence, which is demonstrably and materially injurious to the Company monetarily or otherwise, or (c) the Executive’s engaging in egregious misconduct involving serious moral turpitude to the extent that the Executive’s credibility and reputation no longer conforms to the standards of employees of the Company employed in a similar level or position. For purposes of this definition, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interest of the Company. Any act, or failure to act, based upon direction given in a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. The foregoing notwithstanding, the Company may not terminate the Executive’s employment for Cause, and any purported termination by the Company of Executive’s employment shall be presumed other than for Cause, unless (i) a determination that Cause exists is made and approved by at least a 3/4ths majority of the Board, (ii) the Executive is given at least seven (7) days written notice of the Board meeting called to make such determination, including written notice of the particulars purporting to establish Cause and (iii) the Executive and his legal counsel are given the opportunity to address that meeting.

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6.4 By Executive for Good Reason. During the Period of Employment, the Executive’s employment hereunder may be terminated by the Executive for Good Reason upon (30) days’ written notice. For purposes of this Agreement, “Good Reason” means, without the Executive’s written consent, any material breach of this Agreement by the Company (after the provision to the Company by the Executive of written notice reasonably specifying the breach and/or performance deficiency and thirty (30) days to cure such breach).

6.5 Other than for Cause or Good Reason. The Executive or the Company may terminate this Agreement for any reason other than for Good Reason or Cause, respectively, upon 30 days’ written notice to the Company or the Executive, as the case may be.

6.6 Notice of Termination. Any termination by the Company or by the Executive shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 18.2 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (a) indicates the specific termination provision in this Agreement relied upon, (b) sets forth in reasonable detail, if applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination. The failure by the Executive or Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of the basis for termination shall not waive any right of such party hereunder or preclude such party from asserting such fact or circumstance in enforcing his or its rights hereunder.

6.7 Date of Termination. “Date of Termination” means the date specified in the Notice of Termination; provided, however, that if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

7. Obligations of the Company Upon Termination. The following provisions of this Section 7 describe the entire obligations of the Company to the Executive upon termination of his employment under this Agreement.

7.1 Termination by the Company for Cause or by Executive’s Resignation without Good Reason. In the event the Period of Employment terminates by reason of the termination of the Executive’s employment by the Company for Cause, or by reason of the resignation of the Executive other than for Good Reason, the Company shall pay to the Executive all Accrued Obligations. “Accrued Obligations” shall mean, as of the Date of Termination, the sum of (a) the Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, (b) the amount of any bonus, incentive compensation, deferred compensation and other cash compensation earned by the Executive as of the Date of Termination to the extent not theretofore paid, and (c) any vacation pay, expense reimbursements and other cash entitlements earned by the Executive as of the Date of Termination to the extent not theretofore paid.

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7.2 Death. If the Period of Employment is terminated by death, the Executive’s beneficiaries shall be paid the Accrued Obligations. In addition, all equity awards granted to the Executive by the Company that have not yet vested shall fully vest on the Date of Termination; and all vested options (whether previously vested or vesting under this sentence) shall remain exercisable for a period equal to their full original terms.

7.3 Disability. If the Period of Employment is terminated because of Disability, the Executive shall be paid the Accrued Obligations. In addition, all equity awards granted to the Executive by the Company that have not yet vested shall fully vest on the Date of Termination; and all vested options (whether previously vested or vesting under this sentence) shall remain exercisable for a period equal to their full original terms.

7.4 Resignation with Good Reason or Termination without Cause. If the Company terminates the Executive’s employment other than for Cause (and other than due to the Executive’s Disability), or if the Executive terminates his employment for Good Reason, the Executive shall receive, in addition to payment of the Accrued Obligations, the following:

7.4.1. A lump sum cash payment in an amount equal to the number of months remaining in the Period of Employment multiplied by the sum of (a) 1/12^th of the Executive’s annual Base Salary on the Date of Termination (without regard to any reduction in Base Salary not approved by the Executive).

7.4.2 Immediate vesting in all equity awards granted to the Executive by the Company but not yet vested as of the Date of Termination;

7.4.3 Continued exercisability, for a period equal to their full original terms, for all vested options, whether previously vested or vesting under subsection 7.4.2;

7.4.4 For a period of 12 months after the Date of Termination, the Company shall continue health, prescription drug, dental, disability and life insurance benefits to the Executive and/or the Executive’s eligible family members at least equal to those which would have been provided to them in accordance with Section 5.2 of this Agreement if the Executive’s employment had not been terminated (provided that any benefits provided under this subsection 7.4.4 are subject to immediate early termination if the Executive becomes eligible to receive similar types of benefits through subsequent employment).

7.5 Release. Any and all compensation and benefits payable pursuant to Section 7.4, above, beyond payments of the Accrued Obligations shall be payable only if the Executive delivers to the Company a general release, in a form reasonably prescribed by the Company, of all claims of the Executive arising up to the date of the release; and such release shall be delivered by the Executive within twenty-one (21) days after presentation thereof to the Executive by the Company.

7.6 Exclusive Rights. It is understood that the Executive’s rights under this Section 7 are in lieu of all other rights which the Executive may otherwise have had upon termination of employment under this Agreement.

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7.7 No Right of Set-Off. The Company shall have no right to reduce, because of any debt or financial obligation of the Executive to the Company, the amount of any compensation or benefit otherwise payable by the Company to the Executive under this Agreement or under any other plan, policy, arrangement or practice of the Company.

8. Taxes. In the event that the aggregate of all payments or benefits made or provided to, or that may be made or provided to, the Executive under this Agreement and under all other plans, programs and arrangements of the Company (the “Aggregate Payment”) is determined to constitute an “excess parachute payment,” as such term is defined in Section 280G(b) of the Internal Revenue Code, the Company shall pay to the Executive prior to the time any excise tax imposed by Section 4999 of the Internal Revenue Code (“Excise Tax”) is payable with respect to such Aggregate Payment, an additional amount which, after the imposition of all income and excise taxes thereon, is equal to the Excise Tax on the Aggregate Payment. The determination of whether the Aggregate Payment constitutes an excess parachute payment and, if so, the amount to be provided to the Executive and the time of payment pursuant to this Section 8 shall be made by an independent auditor (the “Auditor”) jointly selected by the Company and the Executive and paid by the Company. The Auditor shall be a nationally recognized United States public accounting firm which has not, during the two (2) years immediately preceding the date of its selection, acted in any way on behalf of the Company or any affiliate thereof. If the Executive and the Company cannot agree on the firm to serve as the Auditor, then the Executive and the Company shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. Notwithstanding the foregoing, in the event that the amount of the Executive’s Excise Tax liability is subsequently determined to be greater than the Excise Tax liability with respect to which any initial payment to the Executive under this Section 8 has been made, the Company shall pay to the Executive an additional amount (grossed up for all taxes), with respect to such additional Excise Tax (and any interest and penalties thereon) at the time and in the amount reasonably determined by the Auditor. Similarly, if the amount of the Executive’s Excise Tax liability is subsequently determined to be less than the Excise Tax liability with respect to which any prior payment to the Executive has been made under this Section 8, the Executive shall refund to the Company the excess amount received, after reduction for any nonrefundable tax, penalties and/or interest incurred by the Executive in connection with the receipt of such excess, and such refund shall be paid promptly after the Executive has received any corresponding refund of excess Excise Tax paid to the Internal Revenue Service. The Executive and the Company shall cooperate with each other in connection with any proceeding or claim relating to the existence or amount of liability for Excise Tax, and all expenses incurred by the Executive in connection therewith shall be paid by the Company promptly upon notice of demand from the Executive.

9. Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Except as otherwise set forth herein with respect to health, prescription drug, dental, disability and life insurance benefits, any severance benefits payable to the Executive shall not be subject to reduction for any compensation received from other employment.

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10. Indemnification. The Executive shall be indemnified by the Company against liability as an officer and director of the Company and any subsidiary or affiliate of the Company to the maximum extent permitted by applicable law. To the full extent permitted under the corporate governing documents of the Company, and subject to the terms of any policies and procedures applicable to all directors and senior officers of the Company, the Company shall advance to the Executive payment of reasonable costs of defending against any claims covered by the foregoing indemnification commitment. The Executive’s rights under this Section 10 shall continue so long as he may be subject to such liability, whether or not this Agreement may have terminated prior thereto.

11. Confidential Information and Trade Secrets. As a condition to the Company’s obligations hereunder, the Executive shall execute and deliver to the Company an Agreement Not to Compete in the form attached as Exhibit A to this Agreement. The Company hereby acknowledges receipt of an Agreement Not to Compete executed by the Executive.

12. Withholding. Anything in this Agreement to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive shall be subject to withholding at the time payments are actually made to the Executive and received by him of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provision for payment of taxes as required by law, provided that it is satisfied that all requirements of law as to its responsibilities to withhold such taxes have been satisfied.

13. Arbitration. Any dispute or controversy between the Company and the Executive arising out of or relating to this Agreement, other than a dispute arising out of or related to the Non-Disclosure of Confidential Information and Trade Secrets Agreement, shall be settled by arbitration conducted under the rules of (but not necessarily administered by) the American Arbitration Association (“AAA”) in accordance with its National Rules for the Resolution, of Employment Disputes then in effect, and judgment on any award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any arbitration shall be held before a single arbitrator who shall be selected by the agreement of the Company and the Executive, unless the parties are unable to agree to an arbitrator, in which case the arbitrator will be selected under the procedures of the AAA. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. Either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over the parties and seek interim provisional, injunctive or other interim equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company and the Executive. The Company and the Executive acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. The arbitration proceeding shall be conducted in Pittsburgh, Pennsylvania or such other location to which the parties may agree. The Company shall pay the costs of any arbitrator appointed hereunder.

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14. Disputes; Payment of Attorneys’ Fees. In the event that the Executive is the prevailing party, or is successful to a material degree, in pursuing or defending, whether in arbitration or litigation, any claim or dispute relating to the Executive’s employment with the Company, including but not limited to any claim or dispute relating to (a) this Agreement, (b) termination of the Executive’s employment with the Company or (c) the failure or refusal of the Company or the Executive to perform fully in accordance with the terms hereof, the Company shall promptly reimburse the Executive for all reasonable costs and expenses (including, but not limited to, attorneys’ fees) relating solely, or reasonably allocable, to such claim or dispute. In any other case, the Executive and the Company shall each bear all of their own costs and expenses (including, but not limited to, attorneys’ fees). Upon written request from the Executive while any claim or dispute described in the first sentence of this Section 14 is pending, the Company shall promptly reimburse the Executive for all reasonable costs and expenses relating to such claim or dispute; provided that the Executive agrees in writing that he will repay the Company in full for such reimbursement if he is not ultimately successful to a material degree with respect to the substance of such claim or dispute. In addition, the Company shall promptly reimburse the Executive for all reasonable costs and expenses (including, but not limited to, attorneys’ fees) incurred by the Executive in preparing responses to Internal Revenue Service (“IRS”) audits of the Executive’s personal income tax returns or otherwise defending such tax returns in any administrative proceeding or civil litigation relating thereto that is occasioned by or connected with an audit by the IRS of one or more income tax returns of the Company. The provisions of this Section 14 shall survive the expiration or termination of this Agreement and the Period of Employment.

15. Successors.

15.1 This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s heirs and legal representatives.

15.2 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

15.3 As used in this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

16. Representations.

16.1 The Company represents and warrants that (a) the execution of this Agreement has been duly authorized by the Company, including action of the Board, (b) the execution, delivery and performance of this Agreement by the Company does not and will not violate any law, regulation, order, judgment or decree or any agreement, plan or corporate governance document of the Company, and (c) upon the execution and delivery of this Agreement by the Executive, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

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16.2 The Executive represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by the Executive does not and will not violate any law, regulation, order, judgment or decree or any agreement to which the Executive is a party or by which he is bound, (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

17. Miscellaneous.

17.1 This Agreement shall be governed by and construed in accordance with the laws of the state of Pennsylvania, without reference to principles of choice of law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors or legal representatives.

17.2 All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made the second business day after the date of mailing, if delivered by registered or certified mail, postage prepaid; upon delivery, if sent by hand delivery; upon delivery, if sent by prepaid courier, with a record of receipt; or the next day after the date of dispatch, if sent by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by registered or certified mail, postage prepaid, return receipt requested), to the parties at the following addresses:

if to the Executive, to:

Todd Porter

18940 KZ Road

Cypress, TX 77433

Telephone: 832-732-0665

if to Company, to:

Geospatial Mapping Systems, Inc.

229 Howes Run Road

Sarver, PA 16055

Attention: General Counsel

Facsimile: 724-353-3049

Telephone: 724-353-3400

Any party hereto may change the address to which notice to it, or copies thereof, shall be addressed, by giving notice thereof to the other parties hereto in conformity with the foregoing.

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17.3 None of the provisions of this Agreement shall be deemed to impose a penalty.

17.4 The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

17.5 Any party’s failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof.

17.6 This Agreement supersedes any and all prior communications, understandings, and agreements, written or oral, between the Company and the Executive with respect to the subject matter hereof, and contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. In the event of any inconsistency between this Agreement and any plan, policy, arrangement or practice of the Company, the relevant provision of this Agreement shall control.

17.7 This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

GEOSPATIAL MAPPING SYSTEMS, INC.
By:	/s/ Mark A. Smith
Its:	Chief Executive Officer
Todd Porter
/s/ Todd Porter

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EX-10.42

Exhibit 10.42

EXECUTION COPY

GEOSPATIAL MAPPING SYSTEMS, INC.

2007 STOCK OPTION PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

This OPTION AWARD AGREEMENT (“Agreement”) is dated effective October 10, 2008 (the “Grant Date”), and is between Geospatial Mapping Systems, Inc., a Delaware corporation (the “Company”), and Richard McDonald (the “Participant”). Any term capitalized but not defined in this Agreement will have the meaning set forth in the Geospatial Mapping Systems, Inc. 2007 Stock Option Plan (the “Plan”).

1. Option Grant. In accordance with the terms of the Plan and subject to the terms and conditions of this Agreement, the Company hereby grants to the Participant an option to purchase all or any part of an aggregate of One Hundred Thousand (120,000) of the Company’s Shares (the “Option”). The Participant may exercise this Option only after it has become vested in accordance with the provisions of Section 4. This Option is a nonqualified option that is not intended to meet the requirements of Code Section 422.

2. Exercise Price. The Exercise Price will be $1.75 per Share, which is no less than the Fair Market Value of a Share on the Grant Date.

3. Payment of Exercise Price. At the time the Option is exercised, the Participant must pay the Exercise Price to the Company in full either: (i) in United States dollars, in cash or by check, bank draft, or money order payable to the order of the Company; (ii) with Shares owned by the Participant with a Fair Market Value equal to the Exercise Price being duly endorsed for transfer to the Company free and clear of any encumbrance; (iii) through a simultaneous exercise of the Participant’s Award and sale of the shares thereby acquired pursuant to a brokerage arrangement approved in advance by the Committee to assure its conformity with the terms and conditions of the Plan; (iv) any combination of cash, check, Shares and/or, with the prior consent of the Committee, which consent may be refused for any reason, vested Options meeting the requirements of (i) through (iii) above; or (v) by any other means the Committee determines to be consistent with the Plan’s purposes and applicable law.

(a) Upon the Participant’s exercise of the Option, the Participant must satisfy any withholding obligation by paying the amount of any required withholding tax to the Company. If the Participant does not pay the amount of required withholding to the Company, the Company will withhold from the Shares delivered or from other amounts payable to the Participant, the minimum amount of funds required to cover all applicable federal, state and local income and employment taxes required to be withheld by the Company by reason of such exercise of the Option.

(b) Shares used to satisfy the Exercise Price and/or any required withholding tax (including Shares underlying surrendered Options) will be valued at their Fair Market Value, determined according to the Plan, as of (i) the last day of the calendar month ending on or immediately preceding the date of the Participant’s exercise, or (ii) the end of the Company’s most recently concluded Fiscal Year, whichever date produces the lower Fair Market Value figure.

(c) The Company will issue no Shares pursuant to the Option before the Participant has: (i) paid the Exercise Price, and any withholding obligation, in full; (ii) executed any applicable Shareholder Agreement; and (iii) satisfied all conditions and/or restrictions applicable to the Options or Shares.

4. Term, Vesting and Exercise of the Option.

(a) The Option will expire on the tenth anniversary of the Grant Date (the “Expiration Date”).

(b) One Third of the Options shall vest and become exercisable 12 months from the Grant Date and one third shall vest on each 12 month anniversary of the Grant Date.

(c) After the Option has vested, and while it is exercisable, the Participant may exercise the Option in whole or in part by signed written notice to the Company indicating the number of Shares being purchased. An Option must be exercised as to a whole number of Shares.

5. Termination of Service. After termination of Service, the Participant’s right to exercise the Option will be subject to the following rules:

(a) Unvested Option Forfeited. The Participant will forfeit the Option to the extent that it was not vested and exercisable on the date his or her Service terminated, regardless of the reason for such termination.

(b) Disability or Death. If the Participant’s Service terminates as a result of Disability or death, the Participant (or in the case of his or her death, the Participant’s estate) may exercise the Option to the extent that it was vested and exercisable on the date of such termination of Service within the six-month period following such termination of Service.

(d) Other Termination of Service. If the Participant’s Service terminates for any reason other than Cause, Disability or death, the Participant may exercise the Option to the extent that it was vested and exercisable on the date of such termination of Service within the sixty-day period following such termination of Service.

(e) In no event may the Option be exercised after the Expiration Date.

6. Termination of Service for Cause. Notwithstanding anything in this Agreement to the contrary, if the Participant has been terminated from Service for Cause, the Participant will forfeit his or her right to exercise the Option, whether or not it has already vested and become exercisable.

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7. Confidentiality, Competition, and Nonsolicitation. Participant has entered into an Agreement Not-To-Compete dated October 10, 2008.

8. Transferability of Option and Shares Acquired Upon Exercise of Option. The Participant may not sell, transfer, pledge, assign or otherwise alienate or hypothecate the Option, other than by will or by the laws of descent and distribution. The Company will not be required (i) to transfer on its books any Options or Shares that have been sold or transferred, or (ii) to treat as owner of such Options or Shares, to accord the right to vote as such owner or to pay dividends, if any, to any transferee to whom such Options or Shares have been transferred, in violation of the Plan, this Agreement, or any shareholders agreement.

(a) During the Participant’s lifetime, only the Participant or his or her guardian or legal representative may exercise the Option. The Board may, in its discretion, require a guardian or legal representative to supply it with the evidence the Board reasonably deems necessary to establish the authority of the guardian or legal representative to exercise the Option on behalf of the Participant or transferee, as the case may be.

(b) Prior to the consummation of a Public Offering, in no event may a Participant sell, transfer or otherwise dispose of an Owned Share without the Board’s advanced written approval.

9. Securities Law Requirements.

(a) If at any time the Board determines that exercising the Option or issuing Shares would violate applicable securities laws, the Option will not be exercisable, and the Company will not be required to issue Shares. The Board may declare any provision of this Agreement or action of its own null and void, if it determines the provision or action fails to comply with the short-swing trading rules. As a condition to exercise, the Company may require the Participant to make written representations it deems necessary or desirable to comply with applicable securities laws.

(b) No Person who acquires Shares under this Agreement may sell the Shares, unless they make the offer and sale pursuant to an effective registration statement under the Securities Exchange Act, which is current and includes the Shares to be sold, or an exemption from the registration requirements of that Act.

10. No Obligation to Exercise Option. Neither the Participant nor his or her transferee is or will be obligated by the grant of the Option to exercise it.

11. No Limitation on Rights of the Company. The grant of the Option does not and will not in any way affect the right or power of the Company to make adjustments, reclassifications or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.

12. Plan and Agreement Not a Contract of Employment or Service. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of the Participant’s employment or Service will be affected in any way by the Plan, this Agreement or related

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instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights on the Participant to continue to be employed or remain in Service with any Company Party, nor will it interfere with the Company’s or any Company Party’s right to discharge the Participant or to deal with him or her regardless of the existence of the Plan, this Agreement or the Option.

13. Participant to Have No Rights as a Shareholder. Before the date as of which he or she is recorded on the books of the Company as the holder of any Shares underlying the Option, the Participant will have no rights as a shareholder with respect to those Shares.

14. Notice. Any notice or other communication required or permitted under this Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender’s expense. Notice will be deemed given when delivered personally or, if mailed, three days after the date of deposit in the United States mail or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to Geospatial Mapping Systems, Inc. 229 Howes Run Road, Sarver, PA 16055. Notice to the Participant should be sent to the address set forth on the signature page below. Either party may change the Person and/or address to whom the other party must give notice under this Section by giving such other party written notice of such change, in accordance with the procedures described above.

15. Successors. All obligations of the Company under this Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business of the Company, or a merger, consolidation, or otherwise.

16. Governing Law. To the extent not preempted by federal law, this Agreement will be construed and enforced in accordance with, and governed by, the laws of the State of Delaware, without giving effect to its conflicts of laws principles that would require the application of the law of any other jurisdiction; provided, however, that in the event the Company’s state of incorporation shall be changed, then the law of the new state of incorporation shall govern.

17. Plan Document Controls. The rights granted under this Agreement are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in this Agreement. If the terms of this Agreement conflict with the terms of the Plan document, the Plan document will control.

18. Amendment of the Agreement. The Company and the Participant may amend this Agreement only by a written instrument signed by both parties.

19. Counterparts. The parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement.

[signature page follows]

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IN WITNESS WHEREOF, the Company and the Participant have duly executed this Agreement as of the date first written above.

GEOSPATIAL MAPPING SYSTEMS, INC.
		(Participant’s Signature)
By:
	Its:	Participant’s Name and Address for notices
		RICHARD MCDONALD 4038 WOODVILLE ROAD LEETONIA, OH 44431

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OPTION EXERCISE FORM

The undersigned holder of an option to purchase shares of Geospatial Mapping Systems, Inc. pursuant to a Stock Option Award Agreement under the Geospatial Mapping Systems, Inc. 2007 Stock Option Plan, effective [            ], 2007, hereby exercises his/her Option to purchase                      of such shares, at the Option price of $    .     per share, in accordance with the terms and conditions of such Option Award Agreement.

I hereby agree to be bound by all of the provisions of, and to execute any applicable Shareholder Agreement or related document required by the Company.

Date of Exercise
	Signature of Person Exercising Option

Please type or print legibly your name, as you want it to appear on your stock certificate, your address and your social security number in the space provided below.

Name:                                                                                                                 

Address:                                                                                                            

(Street)

(City)                        (State)                                     (Zip Code)

Social Security Number:                                                                                   

EX-10.43

Exhibit 10.43

EXECUTION COPY

AGREEMENT NOT-TO-COMPETE

This Agreement Not-To-Compete (the “Agreement”) is made and entered into as of October 10, 2008, by and between Geospatial Mapping Systems, Inc., a Delaware corporation (the “Company”) and Richard McDonald (the “Employee”).

WHEREAS, the Employee is employed by the Company;

WHEREAS, in the course of the Employee’s employment, the Employee will obtain extensive knowledge of and experience in the business conducted by the Company;

WHEREAS, the Employee will enjoy extensive high level contacts with customers and prospective customers of the Company and will have access to confidential and proprietary information of the Company;

WHEREAS, the Company has entered into a Nonqualified Option Agreement with the Employee in consideration for the Employee entering into this Agreement;

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows:

1. Confidential Information.

(a) The Employee acknowledges that (i) during employment by, and as a result of the Employee’s relationship with, the Company, the Employee will obtain knowledge of and gain access to information regarding the business, operations, products, proposed products, production methods, processes, customer lists, advertising, marketing and promotional plans and materials, price lists, pricing policies, financial information and other trade secrets of the Company, other confidential information of, and material proprietary to, the Company or designated as being confidential by the Company which is not generally known to persons outside of the Company, including information and material originated, discovered or developed in whole or in part by the Employee (collectively referred to herein as “Confidential Information”), (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of the Company would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the business of the Company; and (iii) the engaging by the Employee in any of the activities prohibited by this Section 1 may constitute improper appropriation and/or use of such information and trade secrets. The Employee expressly acknowledges the trade secret status of the Confidential Information and that the Confidential Information constitutes a protectable business interest of one or more members of the Company. Accordingly, the Employee agrees that during the Period of Employment with the Company (or any member thereof) and, to the fullest extent permitted by law, thereafter, the Employee will, in a fiduciary capacity for the benefit of the Company, hold all Confidential Information strictly in confidence and will not directly or indirectly reveal, report, disclose, publish or transfer any of such Confidential Information to any person, firm or other entity, or utilize any of the Confidential Information for any purpose, except in furtherance of the Employee’s employment with the Company or with any member of the Company or as may be required by law.

1

EXECUTION COPY

(b) Proprietary Interest. All inventions, designs, improvements, patents, copyrights and discoveries conceived by the Employee during the Period of Employment that are useful in or directly or indirectly related to the business of any member of the Company, or to any experimental work carried on by any member of the Company, shall be the property of the Company. The Employee will promptly and fully disclose to the Company all such inventions, designs, improvements, patents, copyrights and discoveries (whether developed individually or with other persons) and shall take all steps necessary and reasonably required to assure the Company’s ownership thereof and to assist the Company in protecting or defending proprietary rights therein of the Company and/or the appropriate member of the Company.

(c) Return of Materials. The Employee expressly acknowledges that all lists, books, records and other Confidential Information of the Company obtained in connection with the business of any member of the Company is the exclusive property of the Company and the appropriate member of the Company and that upon the termination of the Period of Employment, or earlier if so requested by the Company, the Employee will immediately surrender and return to the Company all such items and all other property belonging to any member of the Company then in the possession of the Employee, and the Employee shall not make or retain any copies thereof.

2. Noncompetition and Nonsolicitation.

(a) The Employee agrees that during the Period of Employment and for a period of twelve full months following the Date of Termination (the “Non-Compete Period”), the Employee will not, directly or indirectly, individually or otherwise, engage in a business competing with any of the businesses conducted by any member of the Company any where in the United States, nor without the prior written consent of the Board directly or indirectly have any interest in, own, manage, operate, control, be connected with as a stockholder, joint venturer, lender, officer, employee, partner or consultant, or otherwise engage, invest or participate in any business that is competitive with any of the businesses conducted by any member of the Company; provided, however, that nothing contained in this Section 2(a) shall prevent the Employee from being the registered or beneficial owner of up to 2% of any class of the capital stock of a corporation registered under the Securities Exchange Act of 1934, as amended. The Employee further agrees that during the Non-Compete Period the Employee will not, in any manner, directly or indirectly, for the Employee’s benefit or for the benefit of any other person, firm or entity, (1) induce or attempt to induce any employee of any member of the Company to terminate or abandon his or her employment with any such member for any purpose whatsoever, (2) solicit from any customer doing business with any member of the Company during the Non-Compete Period, business of the same or similar nature to the business of any member of the Company with such customer, or (3) otherwise interfere with the business or accounts of any member of the Company.

(b) As consideration for the Employee’s agreement to the provisions of Sections 1 and 2(a), the Company has entered into the Employment Agreement with Employee.

2

EXECUTION COPY

3. Injunctive Relief. The Employee acknowledges that a breach of the covenants contained in Section 1 or Section 2 hereof shall cause irreparable damage to the Company, the exact amount of which shall be difficult to ascertain, and that the remedies at law for any such breach shall be inadequate. Accordingly, the Employee agrees that, notwithstanding any provision of the Employment Agreement to the contrary, if the Employee breaches any of the covenants contained in Section 1 or Section 2 hereof, then the Company shall be entitled to injunctive relief in addition to any other remedy or remedies available to the Company at law or in equity.

4. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made the second business day after the date of mailing, if delivered by registered or certified mail, postage prepaid; upon delivery, if sent by hand delivery; upon delivery, if sent by prepaid courier, with a record of receipt; or the next day after the date of dispatch, if sent by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by registered or certified mail, postage prepaid, return receipt requested), to the parties at the following addresses:

if to the Employee, to:

Richard McDonald

4038 Woodville Road

Leetonia, OH 44431

if to Company, to:

Geospatial Mapping Systems, Inc.

229 Howes Run Road

Sarver, PA 16055

Attention: General Counsel

Facsimile: 724-353-3049

Telephone: 724-353-3400

Any party hereto may change the address to which notice to it, or copies thereof, shall be addressed, by giving notice thereof to the other parties hereto in conformity with the foregoing.

5. Entire Agreement. This Agreement, together with the Employment Agreement, constitutes the entire agreement between the parties and supersedes all prior written and oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may not be changed orally, but only by an agreement in writing signed by both parties.

6. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one agreement.

3

EXECUTION COPY

7. Governing Law and Construction. This Agreement shall be governed under and construed in accordance with the laws of the state of Pennsylvania, without regard to the principles of conflicts of laws. The paragraph headings and captions contained herein are for reference purposes and convenience only and shall not in any way affect the meaning or interpretation of this Agreement. It is intended by the parties that this Agreement be interpreted in accordance with its fair and simple meaning, not for or against either party, and neither party shall be deemed to be the drafter of this Agreement.

8. Severability. If any portion or provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, the remaining portions or provisions hereof shall not be affected. The covenants in this Agreement are severable and separate, and the unenforceability of any specific covenant shall not affect the enforceability of any other covenant. Moreover, in the event that any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that the court deems reasonable, and this Agreement shall thereby be reformed.

9. Binding Effect. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the permitted successors, assigns, heirs, administrators, executors and personal representatives of the parties.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and in the year first written above.

COMPANY:

GEOSPATIAL MAPPING SYSTEMS, INC.

By: Mark A. Smith

Its: Chief Executive Officer

Richard McDonald

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EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

I, Mark A. Smith, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009 of Geospatial Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 15, 2010	By:	/s/ Mark A. Smith
	Name:	Mark A. Smith
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

I, Thomas R. Oxenreiter, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009 of Geospatial Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 15, 2010	By:	/s/ Thomas R. Oxenreiter
	Name:	Thomas R. Oxenreiter
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350

As Adopted Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Geospatial Holdings, Inc. (the “Company”) for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Mark A Smith, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 15, 2010	By:	/s/ Mark A. Smith
	Name:	Mark A. Smith
	Title:	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350

As Adopted Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Geospatial Holdings, Inc. (the “Company”) for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Thomas R. Oxenreiter, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: April 15, 2010	By:	/s/ Thomas R. Oxenreiter
	Name:	Thomas R. Oxenreiter
	Title:	Chief Financial Officer