As filed with the Securities and Exchange Commission on __________, 2016

Registration No. 333-194824

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

POST-EFFECTIVE

AMENDMENT NO. 1

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

GEOSPATIAL CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	1623	87-0554463
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industry Classification Code Number)	(I.R.S. Employer Identification No.)

229 Howes Run Road,

Sarver, PA 16055

(724) 353-3400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Mark A. Smith

Chief Executive Officer

Geospatial Corporation

229 Howes Run Road,

Sarver, PA 16055

(724) 353-3400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:

David J. Lowe

Sherrard, German & Kelly, P.C.

Two PNC Plaza, 28th Floor

620 Liberty Avenue

Pittsburgh, PA 15222

(412) 355-0200

Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box: ☒

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (do not check if a smaller reporting company)	Smaller reporting company	☒

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8 (a), may determine.

EXPLANATORY NOTE

On March 20, 2014, the registrant filed a registration statement with the Securities and Exchange Commission (the “Commission”) on Form S-1 (Registration No. 333-194824), which was amended on each of November 11, 2014, March 9, 2015, May 19, 2015 and June 12, 2015 (as so amended, the “Registration Statement” or the “Form S-1”). The Registration Statement was declared effective on July 10, 2015, and registered for resale by the selling stockholders named in the prospectus up to 108,358,470 shares of the registrant’s common stock, par value $0.001 per share. This Post-Effective Amendment No. 1 to Form S-1 is being filed by the registrant for the purpose of updating the financial statements and including information contained in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 that was filed with the commission on April 14, 2016 and information contained in the registrant’s Quarterly Report on Form 10-Q for the quarter ended march 31, 2016 that was filed with the Commission on May 20, 2016.

No additional securities are being registered under this Post-Effective Amendment No. 1. All filing fees payable in connection with the registration of the shares of common stock covered by the Registration Statement were paid by the registrant at the time of the filing of the Form S-1.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED _________, 2016

PROSPECTUS

 

108,358,470 SHARES OF COMMON STOCK

This prospectus relates to the resale by the selling stockholders identified in this prospectus of up to 108,358,470 shares of the Company’s common stock. All of these shares, when sold, will be sold by these selling stockholders. The selling stockholders may sell these shares at prevailing market or privately negotiated prices, including (without limitation) in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or though agents designated from time to time or through underwriters or dealers. We will not control or determine any such market or privately negotiated price at which the selling stockholders decide to sell their shares. There are no minimum purchase requirements.

The selling stockholders and any participating broker-dealers may be deemed “underwriters” of the shares of the Company’s common stock which they are offering within the meaning of the Securities Act of 1933 (as amended, the “Securities Act”), and any commissions or discounts given to any such broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. The selling stockholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute their common stock. Brokers or dealers effecting transactions in shares of the Company’s common stock should confirm the registration of these securities under the securities laws of the states in which transactions occur or the existence of an exemption from registration.

The Company is not selling any shares of common stock in this offering and therefore will not receive any proceeds from the sale of the Company’s common stock hereunder. The Company will pay the expenses of this offering relating to the filing and effectiveness of the resale registration statement of which this prospectus is a part (the “Registration Statement”). We will use our best efforts to maintain the effectiveness of the Registration Statement from the effective date until all securities registered under the Registration Statement have been sold or are otherwise able to be sold pursuant to Rule 144 promulgated under the Securities Act.

Our common stock is traded in the OTCQB Venture Marketplace maintained by the OTC Markets Group under the symbol “GSPH”. On June 28, 2016, the last reported sale price of our common stock on the OTCQB Venture marketplace was $0.06 per share.

Our business and investment in these securities involves significant risks. See “Risk Factors” beginning on page 1, to read about factors you should consider before buying these securities.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is                                            , 2016

Table of Contents

PROSPECTUS SUMMARY	1
RISK FACTORS	1
RISK FACTORS RELATED TO OUR BUSINESS	1
RISK FACTORS RELATED TO OUR COMMON STOCK	5
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS	9
USE OF PROCEEDS	9
DIVIDEND POLICY	9
MARKET FOR OUR COMMON STOCK	9
NUMBER OF STOCKHOLDERS	10
DILUTION	10
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	10
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	14
OUR BUSINESS	14
MANAGEMENT	17
EXECUTIVE COMPENSATION	17
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	20
SELLING STOCKHOLDERS	21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	25
DESCRIPTION OF CAPITAL STOCK	26
SHARES ELIGIBLE FOR FUTURE SALE	28
PLAN OF DISTRIBUTION	28
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	30
LEGAL MATTERS	30
EXPERTS	30
WHERE YOU CAN FIND MORE INFORMATION	30
FINANCIAL STATEMENTS	F-1

We have not authorized anyone to provide information different from that contained in this prospectus. When you make a decision about whether to invest in these securities, you should not rely upon any information other than the information in this prospectus. Neither the delivery of this prospectus nor sale of these securities means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these securities in any circumstances under which the offer or solicitation is unlawful.

Through and including                     , 2016 (the 40th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PROSPECTUS SUMMARY

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the “Risk Factors” section, the financial statements and the notes to the financial statements. As used throughout this prospectus, the terms “the “Company,” “we,” “us,” and “our” refer to Geospatial Corporation and, where appropriate, our consolidated subsidiaries.

About Our Company

Geospatial Corporation (formerly known as Geospatial Holdings, Inc.) provides cloud-based geospatial solutions to accurately locate and digitally map in 3D, underground pipelines and other infrastructure.

We provide two types of services to our clients. We provide data acquisition services utilizing various technologies to accurately locate the exact position and depth of underground pipelines and conduits along with information on existing aboveground infrastructure. We also provide data management services in which we securely manage our clients’ critical infrastructure data through the licensing of our cloud-based GeoUnderground GIS (Geographic Information System) software.

We were incorporated in Nevada in 1995. We did not commence our current business, however, until 2008. The mailing address and telephone number of our principal executive offices are: 229 Howes Run Road, Sarver, Pennsylvania 16055; 724-353-3400. We maintain an internet site at www.geospatialcorporation.com which contains information concerning us. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this prospectus and should not be considered a part of this prospectus.

Our common stock is considered a “penny stock” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which means that securities broker-dealers cannot recommend the common stock, which may make trading the common stock difficult.

Risk Factors

Investing in our securities involves significant risks. You should carefully read the section entitled “Risk Factors” below for an explanation of these risks before investing in our securities.

About this Offering

This prospectus relates to the resale by the selling stockholders identified in this prospectus of up to 108,358,470 shares of the Company’s common stock. The selling stockholders may sell their shares of common stock from time to time at prevailing market or privately negotiated prices. We will not receive any proceeds from the sale of the shares of common stock by the selling stockholders. As of June 28, 2016, 176,259,740 shares of the Company’s common stock were issued and outstanding.

RISK FACTORS

You should carefully consider the following risk factors and all other information contained in this prospectus. Our business and our securities involve a high degree of risk. The following summarizes material risks relating to our business and our common stock. If any of the following risks actually occur, they would likely harm our business, financial condition, and results of operations.

RISK FACTORS RELATED TO OUR BUSINESS

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

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

1 

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

Our Company has incurred net losses since inception. Our operations and capital requirements have been funded by sales of our common stock and preferred stock and advances from our chief executive officer. At March 31, 2016, our current liabilities exceeded our current assets by $4,005,821, and our total liabilities exceeded our total assets by $3,898,160. Those factors create uncertainty about our ability to continue as a going concern.

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

We will require significant capital resources in order to profitably grow our business. We estimate that we will be able to conduct our planned operations for approximately one month using currently-available capital resources. We currently use funds in our operations at a rate of approximately $200,000 per month. We anticipate that we will need at least $5 million to fund our planned operations for the next twelve months.

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

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

Our business development will depend on unpatented proprietary know-how and trade secrets to establish and protect our intellectual property rights. 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 technologies could compete aggressively against us in the pricing of certain services. As a result, our business, financial condition and results of operations may be materially adversely affected.

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

If we are not able to respond adequately to technological advances in the pipeline services industry, our business, reputation, results of operations and financial condition may be adversely affected.

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

We compete with many other resource providers and our failure to compete effectively with these providers may adversely affect our business, results of operations, financial condition and future prospects.

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. Many of our competitors have significantly greater marketing and sales resources than we do. In this competitive environment, we must provide technical proficiency, quality of service and experience to ensure future contract awards and revenue and profit growth.

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.

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

2 

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

Our success depends, in part, on the efforts of certain key individuals, including the members of our senior management team. 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.

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

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

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

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 our ability to estimate and manage costs. Under each type of contract, if we are unable to control costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.

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

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

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

3 

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

We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet the required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If a project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling that project. In addition, performance of a project can be affected by a number of factors beyond our control, including unavoidable delays from weather conditions, changes in the project scope of services requested by the client 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. 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 the project, which may reduce or eliminate our overall profitability.

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

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

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

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

Our potential involvement in partnerships and joint ventures and our 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 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 customers, vendors, investors, or others with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours. If we are unable to resolve these conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by 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.

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.

4 

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

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

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

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

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

Due to the Company’s financial condition, we have been unable to prepare and file our federal and state tax returns for the 2009 tax year through the current tax year. Although we do not owe income taxes, we may be liable for franchise taxes, penalties, and interest. We intend to comply fully with our current and prior federal and state tax reporting obligations in 2015. We have accrued a liability for the taxes, penalties, and interest for which we are liable, which we estimate to be approximately $45,000, and for the cost to prepare and file the returns, which we estimate to be approximately $50,000.

RISK FACTORS RELATED TO OUR COMMON STOCK

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

Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stocks.” Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to:

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

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

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

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

5 

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 believe are appropriate.

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

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Trading of our common stock is limited which may negatively impact the price of our common stock and make it difficult for our stockholders to sell their shares.

Trading of our common stock is currently conducted on the OTCQB Venture Marketplace. The liquidity of our common stock is limited by, among other things, the number of shares that can be bought and sold at a given price and the lack of coverage by security analysts and the media, and may also be adversely affected by delays in the timing of transactions. Currently, there are approximately 225 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 asked 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.

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

As of June 28, 2016, we had 176,259,740 shares of common stock outstanding. Approximately 41,998,611 of such shares are currently unrestricted and freely tradable on the OTCQB Venture Marketplace where the Company’s common stock trades. In addition, 78,476,039 shares of our common stock were registered for sale pursuant to this prospectus upon the effectiveness of the related registration statement on July 10, 2015. Of our remaining outstanding shares, as of the date of this prospectus, some of such shares may become eligible for resale in the future under Rule 144 under the Securities Act.

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

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

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

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

We are contractually obligated to issue additional shares of our common stock to certain investors because we have not registered their shares of our common stock under the Securities Act. We will continue to accrue obligations to issue additional shares of common stock until the shares covered by this prospectus are registered under the Securities Act. We cannot guarantee that such registration will become effective. We estimate that we will need to issue approximately 6.3 million shares of common stock before our registration becomes effective. The issuance of such shares may result in significant dilution in the value of our common stock. We have recorded a liability on our books for the estimated value of the shares that we will be required to issue. An increase in the estimated value of the shares, or an increase in the estimated number of shares to be issued, will negatively impact our results of operations.

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

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

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

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

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

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

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

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

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

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

· developments concerning intellectual property rights and regulatory approvals;

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

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

· developments in the pipeline management services industry;

· the results of product liability or intellectual property lawsuits;

· future issuances of common stock or other securities;

· the addition or departure of key personnel;

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

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

Further, the stock 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. Given these fluctuations, an investment in our stock could lose value. A significant drop in our stock price could expose us to the risk of securities class action lawsuits. Defending against such lawsuits could result in substantial costs and divert management’s attention and resources, thereby causing an investment in our stock to lose additional value.

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

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

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

Effective internal controls are necessary for us to provide reliable financial reports. A failure to provide effective internal controls may present opportunities for fraud and erroneous reporting of financial reports and operating results. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. 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.

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The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. These laws, rules and regulations 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.

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

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

Our shares of common stock will not be registered under the Exchange Act and as a result we will have limited reporting obligations, and those reporting obligations may be suspended automatically if we have fewer than 300 stockholders of record on the first day of our fiscal year, which could make our common stock less attractive to investors.

Our Common Stock is not registered under the Exchange Act, and we do not intend to register our common stock under the Exchange Act for the foreseeable future. As a result, although, upon the effectiveness of the Registration Statement of which this prospectus forms a part, we will be required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our shares of common stock are not registered under the Exchange Act, we will not be subject to the federal proxy rules and our directors, executive officers and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.

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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

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

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

Our business involves various risks, including, but not limited to, our ability to implement our business strategies as planned in a timely manner or at all; our lack of operating history; our ability to protect our proprietary technologies; our ability to obtain financing sufficient to meet our capital needs; and our inability to use historical financial data to evaluate our financial performance. See “Risk Factors” beginning on page 1.

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

USE OF PROCEEDS

All shares of our common stock offered by this prospectus are being registered for the account of the selling stockholders. The Company will not receive any proceeds from the sale of the shares of our common stock by the selling stockholders.

DIVIDEND POLICY

We have never paid or declared any cash dividends. Future payment of dividends, if any, will be at the discretion of our board of directors and will depend, among other criteria, upon our earnings, capital requirements, and financial condition as well as other relative factors. Management intends to retain any and all earnings to finance the development of our business, at least in the foreseeable future. Such a policy is likely to be maintained as long as necessary to provide working capital for 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.

MARKET FOR OUR COMMON STOCK

Our common stock is traded on the OTCQB Venture Marketplace. The last reported sales price per share of the Company’s common stock as reported on the OTCQB Venture Marketplace on June 28, 2016 was $0.06.

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

Quarter Ended	High		Low
March 31, 2014	$	0.91	$	0.64
June 30, 2014	$	0.88	$	0.36
September 30, 2014	$	0.68	$	0.30
December 31, 2014	$	0.61	$	0.22
March 31, 2015	$	0.35	$	0.17
June 30, 2015	$	0.28	$	0.14
September 30, 2015	$	0.38	$	0.13
December 31, 2015	$	0.20	$	0.04
March 31, 2016	$	0.07	$	0.03

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NUMBER OF STOCKHOLDERS

As of June 28, 2016, there were approximately 225 holders of record of the Company’s common stock.

DILUTION

The Company’s common stock to be sold by the selling stockholders is common stock that is already issued and outstanding. Accordingly, there will be no dilution to our existing stockholders.

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

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

Some of the information contained in this MD&A or set forth elsewhere in this prospectus, 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 “SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS” above. In addition, you should read the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the Forward-Looking Statements contained in the following discussion and analysis.

Overview

We provide cloud-based geospatial solutions to accurately locate and digitally map underground pipelines and other infrastructure in three dimensions. Our professional staff offers the expertise, ability, and technologies required to design and execute solutions that are delivered in a cloud-based GIS (geographic information system) platform.

We believe that the market for aggregating and maintaining positional data for underground assets is maturing, and that business and governmental entities are beginning to understand the value of such data. We believe that this developing market presents us with an opportunity to deliver long-term value to our shareholders. In order to realize that value, our primary challenge is to raise working capital sufficient to operate our business, and investment capital to hire employees, acquire assets, and expand our business. Management is currently focused on raising capital, and planning to position our business to capitalize on the maturing market for positional data once such capital is in place, including identifying new technologies for aggregating positional data, developing our GeoUnderground software, and planning the strategies and processes for our upcoming marketing campaigns. We use financial and non-financial performance indicators to assess our business, including liquidity measures, revenues, gross margins, operating revenue, and backlog.

Liquidity and Capital Resources

At March 31, 2016, we had current assets of $442,666, and current liabilities of $4,448,487.

Our Company has incurred net losses since inception. Our operations and capital requirements have been funded by sales of our common and preferred stock and advances from our chief executive officer. At March 31, 2016, current liabilities exceeded current assets by $4,005,821, and total liabilities exceeded total assets by $3,898,160. Those factors raise doubts about our ability to continue as a going concern.

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

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On January 16, 2015, we issued a Senior Secured Promissory Note to Horberg Enterprises LLC (the “Horberg Note”) in the principal amount of $500,000. The Horberg Note was due on April 8, 2015, and accrued no interest through the due date. The Horberg Note was secured by liens on all of our assets. We also issued Horberg Enterprises LLC warrants to purchase 1,500,000 shares of our common stock in consideration for its purchasing the Horberg Note. Proceeds from the issuance of the Horberg Note were used for working capital purposes. We repaid the Horberg Note on April 3, 2015.

On April 2, 2015, we issued a Secured Promissory Note to David M. Truitt (the “Truitt Note”) in the principal amount of $1,000,000. The Truitt Note bears interest at 10% per annum. The Truitt Note is secured by liens on all of our assets, and is convertible into shares of our common stock at the option of the holder. We also issued Mr. Truitt warrants to purchase 2,000,000 shares of our common stock in consideration for his purchasing the Truitt Note. Proceeds from the issuance of the Truitt Note were used to repay the Horberg Note and for working capital purposes. The initial due date of the Truitt Note was October 2, 2015.

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

On March 16, 2016 we designated 10.0 million shares of preferred stock as Series C Convertible Preferred Stock (“Series C Stock”). Series C Stock is convertible to common stock at a conversion ratio of 20 shares of common stock for each share of Series C Stock, subject to adjustment for stock dividends, splits, and similar events. Series C Stock has a liquidation preference equal to its original issue price, and has voting rights equal to five times the number of shares of common stock into which the Series C Stock is convertible. On March 16, 2016, we sold 1,250,000 shares of Series C Stock to Mr. Truitt for consideration of $250,000.

During the second quarter of 2016, we sold 1,500,000 shares of Series C Stock to Mr. Truitt for $300,000. Also during the second quarter of 2016, we converted notes payable totaling approximately $197,000 to shares of Series C Stock, and we converted a note payable of approximately $54,000 to warrants to purchase common stock. We also converted approximately $1.3 million of our officers’ accrued salaries to shares of common stock, and approximately $162,000 of other liabilities to our officers to shares of Series C Stock.

Management is continuing efforts to secure funding sufficient for the Company’s operating and capital requirements through private sales of Series C Stock and common stock, and to negotiate settlements or extensions of existing liabilities. The proceeds of such sales of stock, if any, will be used to fund general working capital needs.

Beginning in 2012, we changed the focus of our company to position us to generate revenue from data acquisition and data management. We expanded our service offerings to provide data acquisition services utilizing twelve different technologies. We developed new, cloud-based mapping software to be marketed under our existing name GeoUndergound that replaced our previous version of GeoUnderground. We currently utilize GeoUnderground to deliver data to customers. We intend to offer GeoUnderground as a subscription-based stand-alone product beginning in 2016. We believe that our changes to our operating focus will enable us to begin to generate significant revenue from operations.

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

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

Results of Operations for the Three Months Ended March 31, 2016 and 2015

We had sales of $181,200 during the three months ended March 31, 2016, and no sales during the three months ended March 31, 2015. Cost of sales were $57,933 and $37,593 for the three months ended March 31, 2016 and 2015, respectively. Our sales have fluctuated throughout 2016 and 2015 as our ability to market and perform jobs was hampered by our financial condition. We expect sales and cost of sales to continue to fluctuate as our business continues to mature.

Selling, general, and administrative (“SG&A”) expenses were $379,823 and $666,642 for the three months ended March 31, 2016 and 2015, respectively. The decrease in SG&A costs for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 was due to decreases in payroll cost and professional fees due to reductions in staffing necessitated by our financial position.

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Other income and expense for the three months ended March 31, 2016 and 2015 was a net income of $504,282 and $710,489, respectively, which included interest expense of $63,219 and $84,142, respectively, gains on extinguishment of debt of $74,918 and $73,181, respectively, and gains related to registration payment arrangements of $492,583 and $721,450, respectively. The decrease in interest expense in 2016 was due to interest on Senior Secured Redeemable Note in 2015 prior to its conversion to common stock.

Income or expense related to registration payment arrangements result from a series of Stock Subscription Agreements we entered into in 2009 and 2010 (the “Stock Subscription Agreements”). We are required to register the shares of common stock sold pursuant to the Stock Subscription Agreements under the Securities Act. Our failure to register the shares of common stock under the Securities Act timely resulted in our obligation to issue additional shares (“Penalty Shares”) to investors who purchased shares pursuant to the Stock Subscription Agreements. We recorded a liability on our books for the value of the estimated number of shares to be issued. We incur expense on our registration payment arrangements when the estimated number of Penalty Shares to be issued increases, or when the value of our common stock increases. We record income on our registration payment arrangements when the estimated number of Penalty Shares to be issued decreases, or when the value of our common stock decreases.

During the three months ended March 31, 2016 and 2015, we had income related to registration payment arrangements due to decreases in the value of our common stock. We expect that income or expense related to registration payment arrangements will fluctuate as the price of our common stock and the estimate of the number of Penalty Shares to be issued fluctuate.

We had no benefit from income taxes during the three months ended March 31, 2016 and 2015, as our deferred tax benefit was completely offset by a valuation allowance due to the uncertainty of realization of the benefit.

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

Sales were $89,700 for the year ended December 31, 2015, compared to $286,951 for the year ended December 31, 2014. Cost of sales was $155,633 for the year ended December 31, 2015, compared to $193,250 for the year ended December 31, 2014. Our sales fluctuated throughout 2015 and 2014 as our ability to market and perform jobs was hampered by our financial condition. We expect sales and cost of sales to continue to fluctuate as our business continues to mature.

SG&A expenses were $2,431,156 for the year ended December 31, 2015, compared to $3,080,446 for the year ended December 31, 2014. The decrease in SG&A costs for the year ended December 31, 2015 compared to the year ended December 31, 2014 was due to reductions in professional fees and sales and marketing expenses due to our financial condition.

Other income and expense for the year ended December 31, 2015 was a net income of $1,700,811, which included interest expense of $456,174, gains on extinguishment of debt of $299,225, and income related to registration payment arrangements of $1,857,760. Other income and expense for the year ended December 31, 2014 was a net income of $222,938, which included interest expense of $160,246, and gains on extinguishment of debt of $383,184. The increase in interest expense in 2015 was due to higher loan balances and a charge of $250,000 for amortization of discount on a Secured Promissory Note due to our recognition of beneficial conversion features. The gains on extinguishment of debt resulted from settlement agreements on prior liabilities and reduction of prior accounts payable that have extended beyond the statute of limitations.

12 

Income and expenses related to registration payment arrangements results from the Stock Subscription Agreements described above under “Results of Operations for the Three Months Ended march 31, 2016 and 2015”. In 2015, we recorded income related to registration payment arrangements of $1,857,760, which resulted from decreases in the estimated value of our stock due to a decrease in stock price. We expect that income or expenses related to registration payment arrangements will fluctuate as the price of our stock and the estimate of the number of Penalty Shares to be granted fluctuate.

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

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of March 31, 2016.

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:

Registration Payment Arrangements. We are contractually obligated to issue shares of our common stock to certain investors for failure to register their shares of our common stock under the Securities Act. We have recorded a liability for the estimated number of shares to be issued at the fair value of the stock to be issued. We review on a quarterly basis our estimate of the number of shares to be issued and the fair value of the stock to be issued.

Realization of Deferred Income Tax Assets. We provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between financial reporting and tax accounting methods and any available operating loss or tax credit carryovers. At March 31, 2016, 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.

Estimated Costs to Complete Fixed-Price Contracts. We record revenues for fixed-price contracts under the percentage-of-completion method of accounting, whereby revenues are recognized ratably as those contracts are completed. This rate is based primarily on the proportion of contract costs incurred to date to total contract costs projected to be incurred for the entire project, or the proportion of measurable output completed to date to total output anticipated for the entire project. We review our estimates of costs to complete each contract quarterly, and make adjustments if necessary. At March 31, 2016, we do not believe that material changes to contract cost estimates at completion for any of our open contracts are reasonably likely to occur.

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QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

Foreign Currency Risk—Our functional currency is the United States dollar. We do not currently have any assets or liabilities denominated in foreign currencies. Consequently, we have no direct exposure to foreign currency risk.

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

OUR BUSINESS

Company Overview

The Company was incorporated on December 26, 1995 in the state of Nevada as Kayenta Kreations, Inc. In connection with a merger in 2008, the Company changed its name to Geospatial Holdings, Inc., and in 2013, changed its name to Geospatial Corporation (“we” or the “Company”). Geospatial Mapping Systems, Inc. is the Company’s wholly-owned subsidiary and operating unit.

General Description of the Business

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

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

We provide two types of services to our clients. Data acquisition entails utilizing various technologies to accurately locate the exact position and depth of underground pipelines and conduits along with information on existing aboveground infrastructure. We provide data management services in which we securely manage this critical infrastructure data through the licensing of our cloud-based GeoUnderground GIS (Geographic Information System) software.

Product Development and Introduction

The GIS technology and mapping industry is characterized by rapid technological change in computer hardware, operating systems and software. In addition, consumers’ requirements and preferences rapidly evolve, as do their expectations of the performance of their software and the accuracy of the collected data managed by their software. To keep pace with these changes, we maintain a vigorous program of new product development to address demands in the marketplace for our products. Just as the transition from mainframes to personal computers transformed the industry thirty years ago, we believe our industry is undergoing a similar transition from the personal computer to cloud, social and mobile information management and sharing.

We dedicate considerable technical and financial resources to research and development to further enhance our existing products and to create new software products and data acquisition technologies. Our software is primarily developed internally, however, we also use independent firms or contractors to perform some of our product development activities.

We spent $108,264 and $193,637 on research and development during the years ended December 31, 2015 and 2014, respectively.

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Sales and Marketing Efforts

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

We intend to establish Regional Technical Sales Managers (“RTSMs”) in various sales regions across the United States, Canada, the Middle East, and Australia. Each RTSM will 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.

We intend to engage in direct-sale marketing efforts, whereby we will require that each of our RTSMs establish relationships and schedule webinar 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 our data acquisition technologies, GeoUnderground, and its associated benefits. We also intend to demonstrate the use and functionality of GeoUnderground at numerous national and regional trade shows sponsored by related industry groups. In addition, we will expect each RTSM to generate sales leads through social media and webinars.

Financing

From January 1, 2014 through December 31, 2015, we raised approximately $3.2 million in cash through the private sale of our common stock and exercises of warrants to purchase common stock and Series B Convertible Preferred Stock. In addition, during that period, we raised approximately $1.8 million in cash through the issuance of notes payable, converted approximately $1.7 million of our liabilities to common stock, and issued common stock for services totaling $82,500. We intend to continue to sell our common stock and Series C Convertible Preferred Stock in private transactions to fund our general working capital needs.

Intellectual Property and Licenses

We maintain a program to legally protect our investment in technology through a combination of patent, copyright, trademark and trade secret protections, confidentiality procedures and contractual provisions. The nature and extent of legal protection associated with each such intellectual property right depends on, among other things, the type of intellectual property right and the given jurisdiction in which such right arises. We believe our intellectual property rights are valuable and important to our business.

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

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

We believe that because of the limitations of laws protecting our intellectual property and the rapid, ongoing technological changes in data collection and GIS software industries, we must rely principally upon data acquisition enhancements, GIS software engineering and marketing skills to maintain and enhance our competitive market position.

Customers

To date, we have successfully completed over 200 projects for a varied group of clients including contractors, municipalities, government agencies, utilities, telecoms, and engineering companies. We are not dependent on one or a few major customers.

Government Contracts

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

15 

Competition

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

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

The software industry has limited barriers to entry, and the availability of computing power with continually expanding performance at progressively lower prices contributes to the ease of market entry. The GIS industry is presently undergoing a platform shift from the personal computer to cloud and mobile computing. This shift lowers the barriers to entry and poses a disruptive challenge to established GIS software companies. In addition, some of our competitors in certain markets have greater financial, technical, sales and marketing and other resources than we do. Because of these and other factors, competitive conditions in our industry are likely to continue to intensify in the future. Increased competition could result in price reductions, reduced net revenue and profit margins and loss of market share, any of which could harm our business.

We believe that the principal competitive factors (in the order of importance) in the areas of services we offer are: (i) quality of available technologies and software, (ii) quality of service, (iii) reputation, (iv) experience, (v) technical proficiency, (vi) local geographic presence, and (vii) cost of service. We believe that we are well positioned 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 management professionals and technicians. A shortage of qualified technical professionals currently exists in the engineering/GIS industry in the United States.

Seasonality

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

Personnel

We believe that our success will greatly depend on our ability to identify, attract and retain capable employees. As of June 7, 2015, we had six employees, all of whom are full-time employees. We believe that our relations with these employees are good. None of our employees are represented by a labor union or otherwise represented under a collective bargaining agreement.

Environmental Compliance

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

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

Description of Property

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

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

Legal Proceedings

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

16 

MANAGEMENT

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

Name	Age	Position(s)
Mark A. Smith	62	Chairman of the Board of Directors and Chief Executive Officer
Troy G. Taggart	50	President
Thomas R. Oxenreiter	50	Chief Financial Officer, Secretary, and Director

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

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

Thomas R. Oxenreiter, CPA has served as our Chief Financial Officer, Secretary, and Director since 2008. Mr. Oxenreiter worked for several years in public accounting and private industry. Mr. Oxenreiter is a graduate of Villanova University. Mr. Oxenreiter’s financial expertise led us to conclude that he would be a valuable member of our Board of Directors. As our current Chief Financial Officer, he is well suited to inform the Board of the current operations of the Company. As a Certified Public Accountant, he brings significant financial expertise.

EXECUTIVE COMPENSATION

The following table sets forth a summary for the fiscal years ended December 31, 2015 and 2014 of the cash and non-cash compensation awarded, paid or accrued by the Company to our Chief Executive Officer and our two most highly compensated officers other than our Chief Executive Officer who served in such capacities in 2015 (collectively, the “Named Executive Officers”). All currency amounts are expressed in U.S. dollars.

Summary Compensation Table 

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

(1) The Company has determined that stock appreciation rights granted in 2015 to the Named Executive Officers have no value.

(2) This column includes employee benefit amounts including health insurance.

17 

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, 2015.

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

18 

(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) Stock appreciation rights on 3,000,000 shares of common stock at $0.07 per share granted October 18, 2013, vested one-third on October 18, 2013, one-third on October 18, 2014, and one-third on October 18, 2015. The stock appreciation rights expire on October 18, 2023.

(3) Stock appreciation rights on 100,000 shares of common stock at $0.15 per shares granted on October 23, 2015, vested one-half on October 23, 2015, and will vest one-half on October 23, 2016. The stock appreciation rights expire on October 23, 2025.

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

Director Compensation

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

Employment Agreements and Change in Control Arrangements

On October 18, 2013, the Company entered into an Employment Agreement with Mark A. Smith, the Company’s Chairman and Chief Executive Officer (the “2013 Smith Employment Agreement”). The 2013 Smith Employment Agreement provides for a base salary of $320,000 per year, plus certain expenses and employee benefits, and an annual bonus dependent upon the attainment of certain performance measures. The 2013 Smith Employment Agreement has an initial expiration date of October 18, 2016, which expiration date is automatically extended by one day during each day of the term of the agreement so that the unexpired term is always three years, unless either Mr. Smith or the Company terminates the automatic extension provision.

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

Prior to October 18, 2013, the Company and Mr. Smith were parties to an Employment Agreement dated December 1, 2007 (the “2007 Smith Employment Agreement”), which provided 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 2007 Smith Employment Agreement expired on November 30, 2010, after which it was automatically extended each day to the date one year from that day, until it was superseded by the 2013 Smith Employment Agreement. Pursuant to the 2007 Smith Employment Agreement, Mr. Smith was awarded options to purchase 8,000,000 shares of the Company’s common stock at an exercise price of $0.50 per share.

Upon a change in control, as defined in the 2007 Smith Employment Agreement, and for six months thereafter, Mr. Smith could terminate the 2007 Smith Employment Agreement. Upon such termination, the Company would 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 2013 Smith Employment Agreement. Also upon such termination, all equity awards granted by the Company to Mr. Smith would immediately vest and remain exercisable for their original term, and all employee benefits would remain in place for one year.

19 

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

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

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transactions with Related Persons

The Company leases its headquarters building from Mark A. Smith, the Company’s Chairman and Chief Executive Officer. The building has approximately 3,200 square feet of office space, and is used by the Company’s corporate, technical, and operations staff. The Company incurred $78,000 of lease expense for this building in each of the years ended December 31, 2014 and 2013. The lease is cancellable by either party upon 30 days’ notice.

At December 31, 2012, the Company owed Mr. Smith $175,867 on a note payable (the “Smith Note”). Interest on the Smith Note at 8% amounted to $8,336 for the year ended December 31, 2013The Smith Note was converted to shares of the Company’s common stock, and warrants to purchase the Company’s common stock on August 20, 2013, as described below.

At December 31, 2012, the Company owed Mr. Smith $38,799 on a convertible note payable (the “Convertible Note”). The Convertible Note was convertible to the Company’s common stock at a price of $1.00 per share. Interest on the Convertible Note at 8% amounted to $1,839 for the year ended December 31, 2013. The Convertible Note was converted to shares of the Company’s common stock, and warrants to purchase the Company’s common stock on August 20, 2013, as described below.

At December 31, 2012, the Company owed Mr. Smith $165,182 on a demand note payable (the “Demand Note”). The amount owed on the Demand Note was converted to shares of the Company’s common stock, and warrants to purchase the Company’s common stock on August 20, 2013, as described below. During 2014, Mr. Smith advanced the Company $29,000 under the Demand Note. Interest on the Demand Note at 8% amounted to $123 during the three months ended March 31, 2015, and $47 and $7,830 for the years ended December 31, 2014 and 2013, respectively. The balance of the Demand Note was $29,047 at December 31, 2014. The Company repaid the Demand Note in January, 2015.

On November 9, 2012, the Company and Mr. Smith entered into a Lease Agreement, pursuant to which the Company leases equipment from Mr. Smith. The lease is for 60 months, and is for substantially the same terms for which Mr. Smith leases the equipment from the manufacturer. Interest on the lease amounted to $346 and $439 for the years ended December 31, 2014 and 2013, respectively.

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

On May 18, 2016, the Company and Mr. Smith entered into a Conversion Agreement (the “Second Smith Conversion Agreement”), pursuant to which Mr. Smith converted accrued salaries totaling $766,833 to 19,170,831 shares of the Company’s common stock and warrants to purchase 23,004,998 shares of the Company’s common stock at an exercise price of $0.04 per share. Mr. Smith also converted, pursuant to the Second Smith Conversion Agreement, $156,782 of unreimbursed business expenses and unpaid rent for the Company’s offices to 783,912 shares of the Company’s Series C Convertible Preferred Stock.

On May 18, 2016, the Company and Troy G. Taggart, the Company’s President, entered into a Conversion Agreement, pursuant to which Mr. Taggart converted accrued salaries totaling $215,490 to 5,387,241 shares of the Company’s common stock and warrants to purchase 6,464,689 shares of the Company’s common stock at an exercise price of $0.04 per share.

20 

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

During 2015, Mr. Oxenreiter advanced the Company $18,891, which amount was evidenced by a promissory note of the Company. Interest on such promissory note at 10% amounted to $448 for the year ended December 31, 2015. In addition, Mr. Oxenreiter received warrants to purchase 18,891 shares of the Company’s common stock in connection with the promissory note. The promissory note was repaid during 2015.

On May 18, 2016, the Company and Mr. Oxenreiter entered into a Conversion Agreement (the “Second Oxenreiter Conversion Agreement”), pursuant to which Mr. Oxenreiter converted accrued salaries totaling $226,458 to 5,661,460 shares of the Company’s common stock and warrants to purchase 6,793,753 shares of the Company’s common stock at an exercise price of $0.04 per share. Mr. Oxenreiter also converted, pursuant to the Second Oxenreiter Conversion Agreement, $5,000 of unreimbursed business expenses to 25,000 shares of the Company’s Series C Convertible Preferred Stock.

SELLING STOCKHOLDERS

The shares being sold by the selling stockholders consist of 108,358,470 shares of the Company’s common stock. We are registering the common stock in order to permit the selling stockholders to offer the shares for resale from time to time. The selling stockholders identified in the table below may from time to time offer and sell under this prospectus any or all of the shares of common stock described under the column “Shares of Common Stock Being Offered” in the table below. The table below has been prepared based upon the information furnished to us by the selling stockholders. Except as indicated in the footnotes to the table below, the selling stockholders have not had any positions, office or other material relationship with us during the last three years.

We do not know when or in what amounts the selling stockholders may offer shares for sale. The selling stockholders might not sell any or all of the shares registered pursuant to the registration statement of which this prospectus forms a part. Because the selling stockholders may offer all or some of the shares registered pursuant to the registration statement of which this prospectus forms a part and because there are currently no agreements or understandings with respect to the sale of any shares, we cannot estimate the number of shares that will be held by the selling stockholders after completion of this offering. However, for purposes of this table, we have assumed that, except as set forth below, after completion of this offering, none of the shares covered by this prospectus will be held by the selling stockholders.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares of our common stock. Unless otherwise indicated below, to our knowledge, the selling stockholders named in the table have sole voting and investment power with respect to the shares of common stock beneficially owned by them. For the table below, beneficial ownership of the common stock is determined in accordance with the rules of the SEC and includes any shares of common stock over which a selling stockholder exercises sole or shared voting or investment powers, or of which a selling stockholder has a right to acquire ownership at any time within 60 days of June 28, 2016. The percentages of shares owned after the offering are based on 176,259,740 shares of our common stock outstanding as of June 28, 2016, which includes the outstanding shares of common stock offered by this prospectus. The inclusion of any shares in this table does not constitute an admission of beneficial ownership by the person named below.

The selling stockholders may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their shares of common stock since the date on which the information in the table below is presented. Information about the selling stockholders may change over time.

21 

Name of Selling Stockholder	Natural Person or Persons Who Exercise Voting and/or Dispositive Powers with Respect to Securities	Shares of Common Stock Beneficially Owned Prior to the Offering	Shares of Common Stock Being Offered	Shares of Common Stock Beneficially Owned After the Offering	Percentage of Common Stock Beneficially Owned After the Offering (1)
2000 Irrevocable Trust FBO Benjamin Smith	Lesa Smith	377,000	352,000	25,000	*
2000 Irrevocable Trust FBO Ian Smith	Lesa Smith	377,000	352,000	25,000	*
24W57, LLC	Eric J. Edidin	100,000	100,000	—	*
Anderson, William N.		680,050	300,500	379,550	*
Arthur S. Yorkes SEP IRA	Arthur S. Yorkes	44,500	44,500	—	*
Barrett, Chad		1,142,857	1,142,857	—	*
Benjamin Media, Inc.	Bernard Krzys	530,025	150,000	380,025	*
Bensen, Earl LeRoy		110,000	100,000	10,000	*
Bensen, Matthew F.		6,858,140	6,234,680	623,460	*
Besite, LLC	Jai G. Parekh	499,999	499,999	—	*
Blacker, George F.		400,000	400,000	—	*
Blecher, Jacqueline Ann		15,000	15,000	—	*
Bloom, Jon M.		304,150	276,500	27,650	*
Brodsky, Mark		100,000	100,000	—	*
Bryant, Thomas N. & Joanne M.		325,000	300,000	25,000	*
Camille Rader Roth IRA	Camille Rader	50,000	50,000	—	*
Capitol Outdoor LLC	John Polis	50,000	50,000	—	*
Case, Russell		25,000	25,000	—	*
Clarke, Kelvin		70,000	20,000	50,000	*
Cloutier, Richard Alan		42,857	42,857	—	*
Coley, Geoffrey O’Connor		400,000	400,000	—	*
Daniel Ron Kloster TRS FBO Interventional Pain Management Specialists LLC 401K Plan FBO Dina Kloster	Daniel Ron Kloster	50,000	50,000	—	*
Daniel Ron Kloster Ttee FBO Interventional Pain Management Specialists LLC 401K Plan FBO Daniel Kloster	Daniel Ron Kloster	1,571,420	1,428,570	142,850	*
Darling, Denver		314,280	285,710	28,570	*
deLaski Family Foundation	Kathleen deLaski	7,150,587	7,150,587	—	*
Delta Networks Limited SA (2)	Peter Magnus	12,000,000	12,000,000	—	*
DeLuca, Marc C.		142,857	142,857	—	*
Devlin, John Manning, Jr.		30,000	10,000	20,000	*
Devlin, Michael H. II		20,000	20,000	—	*
Devlin, Robert M.		70,000	20,000	50,000	*
Donia Hachem Revocable Trust	Donia Hachem	714,285	714,285	—	*
Durham, Robert Allen		142,856	142,856	—	*

22 

Eagan, Brendon		35,715	35,715	—	*
Early, Richard E.		1,178,550	1,071,420	107,130	*
Erickson, Patricia S.		1,571,420	1,428,570	142,850	*
Erickson, Thomas F.		200,000	200,000	—	*
Esses, Sam		614,286	585,715	28,571	*
Evans, Darlene Anne		150,000	150,000	—	*
Evans, James A.		500,000	500,000	—	*
Fabricant, David		292,710	142,850	149,860	*
Fertitta, Thomas D.		20,000	20,000	—	*
Folkes, Marshall G. III		450,000	200,000	250,000	*
Galen, Richard A. & Susan C.		20,000	20,000	—	*
Gerrity, Daniel Michael		42,858	42,858	—	*
Gilbertson, Thomas F.		1,771,420	1,628,570	142,850	*
Haber, Maurice		30,000	30,000	—	*
Haddad, Charles, Jr.		1,414,260	1,414,260	—	*
Heninger, Spencer		50,000	50,000	—	*
Horberg Enterprises LP (2)	Howard T. Horberg	1,500,000	1,500,000	—	*
Ishani Limited Partnership	Parag A. Majmudar	142,857	142,857	—	*
J & S Parekh MD PA Defined Benefit Plan	Salene Parekh	785,700	785,700	—	*
John Martin Bloom Revocable Trust of February 21, 2003	John Martin Bloom	291,290	180,720	110,570	*
John W. Whearty, Trustee of the Anthony F. Hovey Living Trust dated 3-18-2008	John W. Whearty	8,929,638	5,000,000	3,929,638	2.2%
Jon M. Wickwire Trust	Jon M. Wickwire	462,494	75,000	387,494	*
JW Partners, LP	Jason Wild	21,000	21,000	—	*
Kohler, Steven L.		10,000	10,000	—	*
Krueger, Ross T.		1,921,420	1,478,570	442,850	*
Landry, Wilbert		550,000	500,000	50,000	*
Larios, Abigail		10,000	10,000	—	*
Lightman, Ezra (8)		25,000	25,000	—	*
Lin, Jen-Hsiang		428,571	428,571	—	*
Loewenstein, Mark A. & Kangping K.		974,840	857,140	117,700	*
Loucks, David Craig		571,428	571,428	—	*
Loulakis, Michael C.		100,000	100,000	—	*
Lowery Enterprises, LLC	Robert Goodman	13,771,418	3,071,420	10,699,998	6.1%
Manuel, E. Pat		4,714,280	4,714,280	—	*
Marcus, Richard		257,130	157,130	100,000	*
Merdinger, Stanley		392,857	357,143	35,714	*
Merriwether, Christopher		142,857	142,857	—	*
Morrison, William T.		785,700	714,280	71,420	*
Mountain Ranch Partners Inc.	Mark Salaman	1,100,000	1,000,000	100,000	*
Murdock Oper 2	Matt Wilson	150,000	150,000	—	*
Nicozisis, Louis		35,000	35,000	—	*
Ott, Spencer		392,850	357,140	35,710	*
Oxenreiter, Thomas R. & Emily J. (2, 3)		19,903,712	3,729,608	16,174,104	9.2%
Parekh, Selene & Zankhna		1,071,414	999,994	71,420	*
Porter, Todd Russell		510,000	10,000	500,000	*
Preston, Robert L.		50,000	50,000	—	*
Queyronze, Steven		392,850	392,850	—	*
Rahn, Jonathan		330,000	330,000	—	*
Raizman, Michael B.		200,000	200,000	—	*
Reduct NV	Peter Magnus	300,000	300,000	—	*
Ridge, Tom (4)		246,196	50,000	196,196	*
Ringer, Dennis		1,100,000	1,000,000	100,000	*
Robert B. Greene Revocable Trust UAD 6/2/06, Robert B. Greene Trustee	Robert B. Greene	235,714	235,714	—	*
Ross, Jeff		75,000	75,000	—	*
Rubin, Seymore		471,429	428,572	42,857	*
Rubin, Seymore & Mark		2,200,000	2,200,000	—	*
Rucks, Robert R., Sr.		257,130	242,850	14,280	*
Rucks, Robert R., Sr. & Jeanne C.		55,000	55,000	—	*
Rutland, David Jason		428,572	428,572	—	*

23 

Salaman, Steven		660,000	600,000	60,000	*
Schelich, Ardell J.		714,280	714,280	—	*
Shepard, Bret		2,865,360	2,604,880	260,480	*
Smith, Benjamin A.		3,146,067	3,146,067	—	*
Smith, Ian M.		3,346,067	3,146,067	200,000	*
Smith, Mark A. & Lesa A. (2, 5)		89,763,753	14,936,996	74,826,757	42.5%
Story, Joseph L.		1,000,000	1,000,000	—	*
Sunlight Properties, LLC	Gregory Davis	142,857	142,857	—	*
Susskind, Horst		417,850	417,850	—	*
Swanson, Kent L.		50,000	50,000	—	*
Taggart, Robert H., Jr. (6)		2,960,810	795,810	2,165,000	1.2%
Taggart, Troy G. (7)		16,138,305	1,074,330	15,063,975	8.5%
Tamminga, Philip J.		442,860	407,150	35,710	*
TDF, LLC Safe Harbor 401(k) Plan FBO Thomas D. Fertitta	Thomas D. Fertitta	17,000	17,000	—	*
The Bacher Trust dated November 2, 2012	Daniel S. Bacher	35,715	35,715	—	*
The Landmarks Financial Corporation	Matthew Ragan	400,000	400,000	—	*
The Valafar Living Trust	Denise Valafar	157,130	142,850	14,280	*
Thorsen, Brian James		207,130	207,130	—	*
Toro Negro SA	Rick Weiner	428,570	428,570	—	*
Truitt, David (2)		113,632,922	3,035,700	110,597,222	62.7%
Ubeda, Carlos		7,000	7,000	—	*
Ubeda, Hernan		10,000	10,000	—	*
Venture Source Inc.	Barry H. Freedman	25,000	25,000	—	*
Vesley, Scott		10,000	10,000	—	*
Ward, Linda M.		30,000	30,000	—	*
Werthan, Tom		30,000	30,000	—	*
Westerlund, Robert A.		28,571	28,571	—	*
Wilson, Lindsay Suzanne		142,858	142,858	—	*
Witz, Thomas		100,000	100,000	—	*
Wohlman Family Limited Partnership	Robert Wohlman	214,285	214,285	—	*
Wohlman, Douglas A.		157,142	157,142	—	*
Wu, Hao		731,750	731,750	—	*
Yulis, Ricardo		14,500	14,500	—	*

(1) Assumes all shares of common stock being offered by the selling stockholder are sold.

(2) Includes shares issuable upon exercise of warrants.

(3) Thomas R. Oxenreiter has served as Chief Financial Officer and Director of the Company since 2008.

(4) Tom Ridge served as a Director of the Company during 2012.

(5) Mark A. Smith has served as Chief Executive Officer and Director of the Company since 2006.

(6) Robert H. Taggart, Jr. provided services to the Company for a fee during the last three years.

(7) Troy G. Taggart provided services to the Company for a fee during the last three years, and has served as the Company’s President since 2013.

(8) Selling stockholder is an affiliate of a broker-dealer. The selling stockholder did not receive its securities as compensation for investment banking or similar services. At the time of purchase, the selling stockholder did not have any agreements or understandings, directly or indirectly, with any person to distribute the securities.

* Less than one percent.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of June 28, 2016, regarding beneficial ownership of our common stock to the extent known to us, by:

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

(ii) each Director;

(iii) each Named Executive Officer; and

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

We have determined beneficial ownership in accordance with the Rules of the SEC. Unless otherwise noted, we believe that each person named in the table has sole voting and investment power with respect to all shares of our common stock that he or she beneficially owns.

Applicable percentage ownership of common stock is based on 176,259,740 shares of common stock outstanding. For purposes of these tables, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from June 9, 2016 upon exercise of options, warrants and convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not those held by any other person) and that are exercisable within 60 days from the date hereof have been exercised. Unless otherwise indicated, the address of each 5% Stockholder, Director and Named Executive Officer is 229 Howes Run Road, Sarver, PA 16055. 

	Shares of Common Stock					Shares of Series C Convertible Preferred				Percentage of Voting Stock Beneficially
		Beneficially Owned					Stock Beneficially Owned				Owned
Name and Beneficial Owner		Shares		%			Shares	%			%
Named Executive Officers and Directors:
Mark A. Smith		88,586,753	(1)	38.9	%		783,912	17.6	%		23.0	%
Troy G. Taggart		16,138,305	(2)	8.7	%		—	—			2.6	%
Thomas R. Oxenreiter		19,903,712	(3)	10.6	%		25,000	0.6	%		3.5	%
All executive officers and directors as a group (3 persons) (4)		124,628,770	(4)	46.7	%		808,912	18.1	%		27.9	%
Other 5% Stockholders:
David M. Truitt (5)		113,632,922	(6)	39.3	%		2,750,000	61.7	%		49.1	%
Lesa Smith		59,367,835	(7)	30.9	%		—	—			19.6	%
Matthew F. Bensen (8)		19,330,730	(9)	9.9	%		899,076	20.2	%		14.6	%
Robert L. Goodman (10)		13,771,418	(11)	7.4	%		—	—			2.2	%
Delta Networks Limited SA (12)		9,300,000	(13)	5.3	%		—	—			1.5	%
John W. Whearty, Trustee of the Anthony F. Hovey Living Trust dated 3-18-2008 (14)		8,929,638	(15)	5.1	%		—	—			1.4	%

(1) Includes 37,112,595 shares of common stock jointly owned by Mr. Smith and his wife, Lesa A. Smith, 35,795,918 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants, and 15,678,240 shares of common stock issuable upon conversion of Series C Convertible Preferred Stock.

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(2) Includes 74,330 shares of common stock owned by a revocable trust controlled by Mr. Taggart, and 9,676,734 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants.

(3) Includes 9,053,896 shares of common stock jointly owned by Mr. Oxenreiter and his wife, Emily J. Oxenreiter, 10,349,816 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants, and 500,000 shares of common stock issuable upon conversion of Series C Convertible Preferred Stock.

(4) Includes 55,822,468 shares of common stock issuable upon exercise of outstanding options, stock appreciation rights, and warrants, and 16,178,240 shares of common stock issuable upon conversion of Series C Convertible Preferred Stock.

(5) The address for Mr. Truitt is 13241 Woodland Park Road, Suite 610, Herndon, VA 20171.

(6) Includes 27,000,000 shares of common stock issuable upon exercise of outstanding warrants, 30,597,222 shares of common stock issuable upon conversion of an outstanding convertible promissory note, and 55,000,000 shares of common stock issuable upon conversion of Series C Convertible Preferred Stock.

(7) Represents 35,795,918 shares of common stock owned jointly by Mrs. Smith and her husband, Mark A. Smith; 3,177,000 shares of common stock owned by the 2000 Irrevocable Trust FBO Benjamin Smith, of which Mrs. Smith is the trustee; and 3,200,000 shares of common stock owned by the 2000 Irrevocable Trust FBO Ian Smith, of which Mrs. Smith is the trustee.

(8) The address for Mr. Bensen is 20961, Nightshade Rd., Ashburn, VA 20147.

(9) Includes 725,750 shares of common stock issuable upon exercise of outstanding warrants, 623,460 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of Series B Stock and subsequent conversion of such shares of Series B Stock to common stock, and 17,981,520 shares of common stock issuable upon conversion of Series C Convertible Preferred Stock.

(10) The address for Mr. Goodman is 7490 SW Westgate Way, Portland, OR 97225.

(11) Includes 3,071,420 shares of common stock held by Lowery Enterprises, LLC. Mr. Goodman has voting and investment power over these securities. Also includes 10,000,000 shares of common stock issuable upon exercise of outstanding warrants, and 307,140 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of Series B Stock and subsequent conversion of such shares of Series B Stock to common stock.

(12) The address for Delta Networks Limited SA is Molenberglei 42, 2627 Scheibe, Belgium. Peter Magnus has voting and investment power over these securities.

(13) Includes 300,000 shares of common stock owned by a wholly-owned subsidiary of Delta Networks, Ltd., SA.

(14) The address for John W. Whearty, Trustee of the Anthony F. Hovey Living Trust dated 3/18/2008 is 9115 SW Oleson Road, Suite 100, Portland, OR 97223.

(15) Includes 500,000 shares of common stock issuable upon exercise of outstanding warrants to purchase shares of Series B Stock and subsequent conversion of such shares of Series B Stock to common stock.

DESCRIPTION OF CAPITAL STOCK

Common Stock

We are authorized to issue up to 350,000,000 shares of common stock, par value $0.001 per share.

Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters. Our bylaws provide that, in voting for election of directors, the persons receiving the greatest number of votes shall be elected as the directors. Stockholders do not have preemptive rights to purchase shares in any future issuance of our common stock.

Dividends, if any, will be contingent upon the Company’s revenues and earnings, if any, and the capital requirements and financial condition of the Company. The payment of dividends, if any, will be within the discretion of the Company’s Board of Directors. The Company presently intends to retain all earnings, if any, for use in its business operations and accordingly, the Board of Directors does not anticipate declaring any dividends.

In the event of our liquidation, dissolution or winding up, after payment of all our creditors and payment to the holders of Series B Stock of an amount equal to 150% of the original issue price of such shares of Series B Stock, holders of our common stock are entitled to receive, ratably with the holders of Series B Stock on an as- converted basis, our remaining net assets. All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common or preferred stock are issued, the relative interests of existing stockholders will be diluted.

Preferred Stock

The Company is authorized to issue up to 25,000,000 shares of preferred stock, $.001 par value. Any voting powers, designations, preferences, limitations, restrictions, relative rights and distinguishing designation of shares of the Company’s preferred stock are determined by the Board of Directors at issuance.

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On August 20, 2013, the Company filed a Certificate of Designation with the Secretary of State of Nevada to designate 5,000,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Stock”) for issuance by the Company. Each share of Series B Stock is convertible into ten shares of common stock at the option of the holder, or automatically 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, 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 $30,000,000 and the public offering price per share of which equals or exceeds $2.10, before deduction of underwriters’ discounts and commissions; and (ii)the Company’s receipt of the written consent of the holders of not less than a majority of the then outstanding shares of Series B Stock to the conversion of all then outstanding shares of Series B Stock.

The holders of Series B Stock have the same voting rights and dividend participation rights as holders of common stock in proportion to the number of shares of common stock the holders of Series B Stock would hold if those shares were converted to common stock. The holders of Series B Stock are entitled to a liquidation preference equal to 150% of the original issue price of such Series B Stock, after payment of which they participate in liquidation with the holders of common stock.

On March 16, 2016, the Company filed a Certificate of the Designations, Powers, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”) with the Nevada Secretary of State, designating 10,000,000 shares of the Company’s undesignated preferred stock, par value $0.001 per share, as Series C Convertible Preferred Stock (the “Series C Preferred Stock”).

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

After the Filing Date, each share of Series C Preferred Stock will automatically be converted into shares of Common Stock at the Conversion Ratio, upon the earlier of (i) the closing of a public or private offer and sale of Common Stock for the account of the Company in which the aggregate offering price (before deduction of underwriters’ discounts and commissions, if any) equals or exceeds $5,000,000 and the offering price per share of which equals or exceeds five (5x) times the Original Issue Price of the Series C Preferred Stock per share (before deduction of underwriters’ discounts and commissions, if any (such price per share of Common Stock subject to certain adjustments described in the Certificate of Designations)); or (ii) the written consent of the holders of not less than a majority of the then outstanding shares of Series C Preferred Stock to the conversion of all then outstanding Series C Preferred Stock.

The holders of the Series C Preferred Stock will be entitled, upon liquidation, winding up or dissolution, of the Company, to be paid out of the funds and assets of the Company that may be legally distributed to the Company’s shareholders prior and in preference to any payment or distribution to the holders of Common Stock or any shares of any other class or series of preferred stock subsequently created with a liquidation preference senior to the Common Stock, an amount equal to the Original Issue Price of the Series C Preferred Stock per share (as adjusted for stock splits, stock dividends and the like), plus all declared but unpaid dividends.

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

Except as described in the Certificate of Designations, holders of the Series C Preferred Stock will vote together with holders of the Company Common Stock on all matters and not as a separate class or series (subject to limited exceptions). Each holder of shares of Series C Preferred Stock shall be entitled to the number of votes equal to five times (5x) the number of those shares of Common Stock into which such shares of Series C Preferred Stock are convertible.

Warrants

Warrants to purchase 344,993 shares of our Series B Stock at an exercise price of $2.50 per share are outstanding. The warrants expire on September 11, 2018.

The following warrants to purchase our common stock are outstanding:

	Number of	Exercise		Expiration
Date issued	Shares		Price	Date
January 24, 2008	87,545	$	0.55	January 24, 2018
January 30, 2009	22,500	$	0.55	January 30, 2019
September 29, 2009	195,300	$	0.55	September 29, 2019
October 30, 2009	1,590,000	$	1.00	March 6, 2019
January 7, 2010	250,000	$	1.38	January 7, 2020
August 20, 2013	2,128,092	$	0.25	August 20, 2018
September 30, 2013	128,570	$	0.25	September 30, 2018
January 16, 2015	1,600,000	$	0.01	January 16, 2025
January 16, 2015	50,000	$	0.25	January 16, 2020
February 16, 2015	1,000,000	$	0.25	February 16, 2020
March 14, 2015	75,000	$	0.01	March 14, 2025
April 2, 2015	2,000,000	$	0.01	April 2, 2025
August 28, 2015	150,000	$	0.20	August 28, 2020
July 13, 2015	35,000	$	0.20	July 13, 2025
July 27, 2015	100,000	$	0.01	July 27, 2025
August 4, 2015	30,000	$	0.25	August 4, 2025
September 30, 2015	6,891	$	0.25	September 30, 2025
October 13, 2015	12,000	$	0.25	October 13, 2025
January 27, 2016	25,000,000	$	0.01	January 26, 2026
April 22, 2016	441,000	$	0.01	July 27, 2025
April 20, 2016	4,000,000	$	0.01	April 20, 2020
May 10, 2016	10,000,000	$	0.01	May 10, 2021
May 18, 2016	36,263,440	$	0.01	May 18, 2021

Options

On September 23, 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which up to 25,000,000 shares of the Company’s common stock are available for grants of awards, including incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards, and performance compensation awards to eligible employees, consultants, and directors, provided that no more than 15,000,000 shares of common stock may be granted as incentive stock options. The Board of Directors has reserved 25,000,000 shares of the Company’s common stock for issuance under the 2013 Plan. During the year ended December 31, 2014, the Company issued stock appreciation rights on 96,000 shares of common stock with exercise prices ranging from $0.35 to $0.70 per share. During the year ended December 31, 2015, the Company issued stock appreciation rights on 2,362,500 shares of common stock with exercise prices ranging from $0.15 to $0.25 per share.

In 2007, the Company adopted the 2007 Stock Option Plan (the “2007 Plan”), pursuant to which the Compensation Committee of the Board of Directors (the “Committee”) may award grants of options to purchase up to 15,000,000 shares of the Company’s common stock to eligible employees, directors, and consultants, subject to exercise prices and vesting requirements determined by the Committee. On September 23, 2013, the Company reduced the number of shares of the Company’s common stock that may be subject to awards under the 2007 Plan to 9,050,000. The Board of Directors has reserved 9,050,000 shares of the Company’s common stock for issuance under the 2007 Plan.

Transfer Agent

Our Transfer Agent is Interwest Transfer Co., Inc. located at 1981 East Murray Holladay Road, Suite 100, Salt Lake City, Utah 84107.

 27

SHARES ELIGIBLE FOR FUTURE SALE

As of June 28, 2016, we had outstanding 176,259,740 shares of common stock.

Shares Covered by This Prospectus

The securities being offered by this prospectus are 108,358,470 shares of the Company’s common stock owned by the selling stockholders. All of the shares of common stock being registered in this offering may be sold without restriction under the Securities Act, so long as the registration statement of which this prospectus is a part is, and remains, effective.

Other Shares Likely to Become Freely Tradable

Approximately 15,792,166 shares of our common stock are currently unrestricted and freely tradable on the OTCQB Venture Marketplace where the Company’s common stock trades. In addition, 108,358,470 shares of our common stock have been registered for sale pursuant to this prospectus upon the effectiveness of the related registration statement. Of our remaining outstanding shares, as of the date of this prospectus, some of such shares may be eligible for resale under Rule 144 under 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, and has been for a period of at least 90 days immediately before the sale, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, and the Company has filed all required Exchange Act reports and material during the preceding twelve months (or such shorter period that the Company was required to file such reports), 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.

PLAN OF DISTRIBUTION

The selling stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of the Company’s common stock at prevailing market or privately negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

· ordinary brokerage transactions and transactions in which the broker-dealer solicits investors;

· block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

· purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

· an exchange distribution in accordance with the rules of the applicable exchange;

· privately negotiated transactions;

· to cover short sales made after the date that the registration statement of which this prospectus is a part is declared effective by the Commission;

· through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

· broker-dealers may agree with the selling security holder to sell a specified number of such shares at a stipulated price per share;

· a combination of any such methods of sale; and

· any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares in transactions exempt from the registration requirements of the Securities Act, including under Rule 144 thereunder, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provisions of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

 28

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

Upon the Company being notified in writing by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling security holder and of the participating broker-dealer (s), (ii) the number of shares involved, (iii) the price at which such the shares of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a selling security holder that a donee or pledgee intends to sell shares of common stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of securities will be paid by the selling stockholders and/or the purchasers. Each selling security holder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such selling security holder’s business and, at the time of its purchase of such securities, such selling stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

The Company has advised each selling stockholder that it may not use shares registered on the registration statement of which this prospectus is a part to cover short sales of common stock made prior to the date on which the registration statement, of which this prospectus is a part, shall have been declared effective by the Commission. If a selling stockholder uses this prospectus for any sale of common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The selling stockholders will be responsible for complying with the applicable provisions of the Securities Act and the Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such selling stockholders in connection with resales of their respective shares under the registration statement of which this prospectus is a part.

The Company is required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the common stock registered under this prospectus.

We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration and without regard to any limitations by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 29

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our amended articles of incorporation provide that none of our directors and officers shall be personally liable to the Company or our stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer. Notwithstanding the foregoing, a director or officer shall be liable to the extent provided by applicable law, (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) for the payment of dividends in violation of applicable law. We indemnify our directors and officers to the maximum extent permitted by Nevada law for the costs and liabilities of acting or failing to act in an official capacity. We also have insurance in the aggregate amount of $5 million for our directors and officers against all of the costs of such indemnification or against liabilities arising from acts or omissions of the insured person in cases where we may not have power to indemnify the person against such liabilities.

There is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.

Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to provisions of the Certificate of Incorporation and Bylaws, or otherwise, we have been informed that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable.

LEGAL MATTERS

Certain legal matters have been passed upon on behalf of the Company by Sherrard, German & Kelly, P.C., Pittsburgh, Pennsylvania. Certain matters of Nevada Law are being passed upon by Woodburn and Wedge, Attorneys and Counselors at Law, Reno, Nevada.

EXPERTS

The consolidated balance sheets of Geospatial Corporation and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2015 have been audited by Goff Backa Alfera & Company, LLC, Certified Public Accountants, as stated in its report appearing herein and elsewhere in the registration statement. Such financial statements have been so included in reliance upon the report of such firm given upon its authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a Registration Statement on Form S-1 under the Securities Act with respect to the common stock offered in this offering. This prospectus does not contain all of the information set forth in the registration statement. For further information with respect to us and the Common Stock offered in this offering, we refer you to the registration statement and to the attached exhibits. With respect to each such documents filed as an exhibit to the registration statement, we refer you to the exhibit for a more complete description of the matters involved.

You may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. You may obtain copies of all or any part of our registration statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.

Our SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from the SEC’s website at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

As a result of the registration, we are subject to the full informational requirements of the Exchange Act and are required to file periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent public accounting firm.

 30

GEOSPATIAL CORPORATION

INDEX

Page

Financial Statements as of December 31, 2015 and 2014 (Audited) and for the Years Ended December 31, 2015 and 2014 (Audited)
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Changes in Stockholders’ Deficit	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statements as of March 31, 2016 and 2015 (Unaudited), and for the Three Months Ended March 31, 2016 and 2015 (Unaudited)
Consolidated Balance Sheets	F-32
Consolidated Statements of Operations	F-33
Consolidated Statements of Changes in Stockholders’ Deficit	F-34
Consolidated Statements of Cash Flows	F-35
Notes to Consolidated Financial Statements	F-36

F-1 

Report of Independent Registered Public Accounting Firm

To the Board of Directors and 

Stockholders of Geospatial Corporation

We have audited the accompanying consolidated balance sheets of Geospatial Corporation (a Nevada corporation) as of December 31, 2015 and 2014, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the entity’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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Geospatial Corporation as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company has incurred net losses since inception, operations and capital requirements since inception have been funded by sales of stock, short and long term loans and advances from its chief executive officer and current liabilities exceed current assets by $4,585,637. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Goff Backa Alfera and Company, LLC

Pittsburgh, Pennsylvania

April 13, 2016

 F-2

Geospatial Corporation and Subsidiaries 

Consolidated Balance Sheets 

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

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

F-3 

Geospatial Corporation and Subsidiaries 

Consolidated Statements of Operations 

	For the Years Ended
	December 31,
	2015			2014
Sales	$	89,700		$	286,951
Cost of sales		155,633			193,250
Gross profit (loss)		(65,933	)		93,701
Selling, general and administrative expenses		2,431,156			3,080,446
Net loss from operations		(2,497,089	)		(2,986,745	)
Other income (expense):
Interest expense		(456,174	)		(160,246	)
Gain on extinguishment of debt		299,225			383,184
Registration payment arrangements		1,857,760			—
Total other income (expense)		1,700,811			222,938
Net loss before income taxes		(796,278	)		(2,763,807	)
Provision for income taxes		—			—
Net loss	$	(796,278	)	$	(2,763,807	)
Basic and fully-diluted net loss per share of common stock	$	(0.01	)	$	(0.03	)

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

F-4 

Geospatial Corporation and Subsidiaries 

Consolidated Statements of Changes in Stockholders’ Deficit 

For the Years Ended December 31, 2015 and 2014

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

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

F-5 

Geospatial Corporation and Subsidiaries

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(796,278	)	$	(2,763,807	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		118,344			101,447
Amortization of deferred debt issue costs		53,250			—
Amortization of discount on Secured Promissory Note		250,000			—
Gain on extinguishment of debt		(299,225	)		(383,184	)
Accrued registration payment arrangement		(1,857,760	)		—
Issuance of common stock for services		—			82,500
Accrued interest payable		142,616			146,869
Changes in operating assets and liablities:
Accounts receivable		(11,300	)		231,950
Prepaid expenses and other current assets		68,762			(61,263	)
Accounts payable		263,988			205,676
Accrued expenses		489,884			350,653
Due to related parties		19,376			72,124
Other long-term liabilities		—			(19,887	)
Net cash used in operating activities		(1,558,343	)		(2,036,922	)
Cash flows from investing activities:
Purchase of property, plant and equipment		—			(197,188	)
Net cash used in investing activities		—			(197,188	)
Cash flows from financing activities:
Proceeds from issuance of notes payable		1,780,000			29,000
Proceeds from issuance of notes payable to related parties		18,891			—
Principal payments on notes payable		(641,491	)		(139,522	)
Principal payments on notes from related parties		(18,892	)		—
Principal payments on capital lease liabilities		(3,379	)		(3,283	)
Debt issuance costs paid		(53,250	)		—
Proceeds from sale of common stock, net of offering costs		475,703			2,429,826
Proceeds from exercise of warrants to purchase common stock, net of offering costs		—			5,332
Proceeds from exercise of warrants to purchase Series B Convertible Preferred Stock, net of offering costs		—			266,571
Repurchase of shares of common stock for cancellation		—			(1,114,688	)
Net cash provided by financing activities		1,557,582			1,473,236
Net change in cash and cash equivalents		(761	)		(760,874	)
Cash and cash equivalents at beginning of period		17,723			778,597
Cash and cash equivalents at end of period	$	16,962		$	17,723
Supplemental disclosures:
Cash paid during period for interest	$	10,307		$	13,377
Cash paid during period for income taxes		—			—
Non-cash transactions:
Issuance of common stock for services		—			82,500
Issuance of common stock in settlement of liabilities		1,605,614			50,000
Issuance of common stock for registration penalty		120,000			—

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

F-6 

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies 

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

Nature of Operations

The Company utilizes innovative technologies to acquire and manage data related to underground assets. The Company’s services include pipeline data acquisition and professional data management. The Company is located in Sarver, Pennsylvania, and provides services throughout the United States.

Consolidation

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

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.

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

· Estimated useful lives of property and equipment;

· Estimated costs to complete fixed-price contracts;

· Realization of deferred income tax assets;

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

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

 F-7

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Going Concern

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

Accounting Method

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

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 balance sheet net of estimated uncollectible amounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company had no allowance for doubtful accounts at December 31, 2015 and 2014.

 F-8

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

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 $118,344 and $101,447 for the years ended December 31, 2015 and 2014, respectively.

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

The Company leases equipment under leases with terms of 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, 2015, assets under capital leases and the related accumulated depreciation amounted to $16,870 and $10,544, respectively. At December 31, 2014, assets under capital leases and the related accumulated depreciation amounted to $16,870 and $7,170, respectively.

 F-9

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Revenue Recognition

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

· Persuasive evidence of an arrangement exists;

· Delivery has occurred or services have been rendered;

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

· Collectability is reasonably assured.

Substantially all of the Company’s 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, as defined in the contract, that is delivered to the client. Revenues for units of delivery contracts are recognized as each unit of service is completed.

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

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

Revenues are recorded net of sales taxes collected.

Deferred Debt Issuance Costs

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

 F-10

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Convertible Securities with Beneficial Conversion Features

During 2015, the Company issued a Secured Promissory Note of $1,000,000. The Secured Promissory Note is convertible at the lender’s option to the Company’s common stock at a price per share of 75% of the average bid price of the Company’s common stock for the ten trading days preceding the conversion. The Company recorded the Secured Promissory Note in accordance with FASB ASC 470-20, Debt with Conversion and Other Options. The Company determined that the discount to market price on the conversion feature was a beneficial conversion feature, and that the intrinsic value of the feature was $250,000. This amount was recognized as additional paid-in capital, and as a discount on the Secured Promissory Note that was completely amortized in 2015.

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.

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

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

Gains on Extinguishment of Debt

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

 F-11

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

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.

Registration Payment Arrangements 

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

Segment Reporting

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

Recent Accounting Pronouncements

The Company has reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. The Company believes that the following impending standards may have an impact on its future filings. The applicability of any standard will be evaluated by the Company and is still subject to review by the Company.

 F-12

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

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

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

 F-13

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 1 – Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

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

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

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

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

 F-14

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014

Note 2 – Capital Stock

The Company has authorized 350,000,000 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 25,000,000 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 August 20, 2013, the Company filed a Certificate of Designation to designate 5,000,000 shares of Series B Convertible Preferred Stock (“Series B Stock”) for issuance by the Company. Each share of Series B Stock is convertible to ten shares of common stock at the option of the holder, or automatically upon the occurrence of certain events. The holders of Series B Stock have the same voting rights and dividend participation rights as common stockholders in proportion to the number of shares of common stock the holders of Series B Stock would hold if those shares were converted to common stock. The holders of Series B stock are entitled to a liquidation preference of 150% of the original issue price, after payment of which they participate in liquidation with the holders of common stock.

The Company entered into a series of Subscription and Purchase Agreements with certain investors dated October 9, 2009 (the “October 2009 Subscription Agreement”) in connection with the sale of 2,000,000 shares of the Company’s common stock (the “October 2009 shares”). Pursuant to the October 2009 Subscription Agreement, the Company agreed to register the October 2009 shares under the Securities Act by March 1, 2010. The Company failed to register the October 2009 shares by March 1, 2010, and consequently each investor that invested pursuant to the October 2009 Subscription Agreement is entitled to receive an additional allocation of 2% of its portion of the October 2009 Shares for each 30-day period that elapses after March 1, 2010, subject to certain restrictions.

The Company entered into a series of Subscription and Purchase Agreements with certain investors dated December 14, 2009 (the “December 2009 Subscription Agreement”) in connection with the sale of 1,500,000 shares of the Company’s Series A Stock (the “December 2009 shares”). Each share of Series A Stock subsequently converted to 1.25 shares of the Company’s common stock. Pursuant to the December 2009 Subscription Agreement, the Company agreed to register the December 2009 shares under the Securities Act by March 1, 2010. The Company failed to register the December 2009 shares by March 1, 2010, and consequently each investor that invested pursuant to the December 2009 Subscription Agreement is entitled to receive an additional allocation of 2% of its portion of the December 2009 Shares for each 30-day period that elapses after March 1, 2010, subject to certain restrictions.

 F-15

Geospatial Corporation and Subsidiaries 

Notes to Consolidated Financial Statements

 December 31, 2015 and 2014 

Note 2 – Capital Stock (continued)

The Company entered into a series of Subscription and Purchase Agreements with certain investors dated March 19, 2010 (the “March 2010 Subscription Agreement”) in connection with the sale of 8,589,771 shares of the Company’s common stock (the “March 2010 shares”). Pursuant to the March 2010 Subscription Agreement, the Company agreed to register the March 2010 shares under the Securities Act by September 1, 2010. The Company failed to register the March 2010 shares by September 1, 2010, and consequently each investor that invested pursuant to the March 2010 Subscription Agreement is entitled to receive an additional allocation of 2% of its portion of the March 2010 Shares for each 30-day period that elapses after September 1, 2010, subject to certain restrictions.

The Company entered into a series of Subscription and Purchase Agreements with certain investors dated April 6, 2010 (the “April 2010 Subscription Agreement”) in connection with the sale of 112,000 shares of the Company’s common stock (the “April 2010 shares”). Pursuant to the April 2010 Subscription Agreement, the Company agreed to register the April 2010 shares under the Securities Act by September 1, 2010. The Company failed to register the April 2010 shares by September 1, 2010, and consequently each investor that invested pursuant to the April 2010 Subscription Agreement is entitled to receive an additional allocation of 2% of its portion of the April 2010 Shares for each 30-day period that elapses after September 1, 2010, subject to certain restrictions.

The Company has recorded a liability for its obligation to issue shares for failure to register shares pursuant to the October 2009 Subscription Agreement, the December 2009 Subscription Agreement, the March 2010 Subscription Agreement, and the April 2010 Subscription Agreement (collectively, the “Subscription Agreements”). There is no limitation to the maximum potential consideration to be paid for failure to register shares pursuant to the Subscription Agreements. The Company registered the shares as required by the Subscription Agreements during 2015. The liability for accrued registration payment arrangements was $547,315 and $2,525,075 at December 31, 2015 and 2014, respectively.

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

 F-16

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 3 – Accrued Expenses

Accrued expenses consisted of the following:

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

Note 4 – Related-Party Transactions

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

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

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

 F-17

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 4 – Related-Party Transactions (continued)

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

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

Note 5 – Senior Convertible Redeemable Notes

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

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

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

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

 F-18

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 6 – Notes Payable

Current notes payable consisted of the following:

	December 31, 2015		December 31, 2014
Secured Promissory Note, payable to an individual, bearing interest at 10% per annum, due July 26, 2016, secured by substantially all assets of the Company.  The note is convertible to common stock at 75% of the weighted average trading price, and is secured by substantially all the assets of the Company	$	1,075,833	$	—
Unsecured Promissory Note, payable to an individual, bearing interest at 10% per annum		67,817		—
Unsecured Convertible Promissory Notes, payable to individuals, bearing interest at 10% per annum, convertible to common stock at prices ranging from $0.20 to $0.25 per share		190,453		—
Current portion of long-term notes payable		154,645		232,892
Current notes payable	$	1,488,748	$	232,892

 F-19

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 6 – Notes Payable (continued)

Long-term notes payable consisted of the following:

	December 31, 2015			December 31, 2014
Notes payable under settlement agreements with former employees, payable monthly with terms of up to 39 months, with interest rates ranging from 0% to 20%	$	154,645		$	218,892
Notes payable under settlement agreements with vendors, payable monthly with terms of up to 60 months, with interest rates ranging from 0% to 32%		—			53,741
Total long-term notes payable		154,645			272,633
Less: current portion		(154,645	)		(232,892	)
Long-term notes payable, less current portion	$	—		$	39,741

Note 7 – Commitments and Contingencies

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.

Legal Matters

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

 F-20

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 8 – Income Taxes

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

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

 F-21

Geospatial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 8 – Income Taxes (continued)

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

	2015			2014
Federal statutory rate		35.0	%		35.0	%
State income taxes (net of federal benefit)		6.5			6.5
Valuation allowance		(41.5	)		(41.5	)
Effective rate		0.0	%		0.0	%

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

	December 31, 2015			December 31, 2014
Start-up costs	$	37,491		$	47,325
Depreciation		(37,759	)		(37,684	)
Accrued expenses		687,212			378,020
Net operating loss carryforward		15,669,422			14,973,562
Deferred income taxes		16,356,366			15,361,223
Less:  valuation allowance		(16,356,366	)		(15,361,223	)
Net deferred income taxes	$	—		$	—

At December 31, 2015, the Company had federal and state net operating loss carryforwards of approximately $36,391,000. The federal and state net operating loss carryforwards will expire beginning in 2021 and 2026, respectively. The amount of the state net operating loss carryforward that can be utilized each year to offset taxable income is limited by state law.

F-22

Geospatial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 9 – Net Loss Per Share of Common Stock

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

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

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

The following securities were not included in the computation of diluted net loss per share, as their effect would have been anti-dilutive for the years ended December 31:

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

F-23

Geospatial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 10 – Stock-Based Payments

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

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

Using the Black-Scholes option pricing model, management has determined that the stock appreciation rights granted in 2015 and 2014 had no value. Accordingly, no compensation cost or other expense was recorded for the stock appreciation rights. The current value of a share of the Company’s common stock used in the Black-Scholes option pricing model was determined by an independent valuation. The value per share as determined by the valuation was $0.0074 and $0.0096 per share as of December 31, 2015 and 2014, respectively.

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

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

F-24

Geospatial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 10 – Stock-Based Payments (continued)

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

							Weighted
							Average
			Weighted				Remaining
			Average		Aggregate		Contractual
	Total		Exercise		Fair		Term
	Options		Price		Value		(In Years)
Total options outstanding at January 1, 2014		24,950,000	$	0.23
Granted		96,000		0.46
Exercised		—		—
Lapsed and forfeited		—		—
Total options outstanding at December 31, 2014		25,046,000	$	0.23	$	—		6.7
Options vested and expected to vest at December 31, 2014		18,516,666	$	0.29	$	—		6.0
Options exercisable at December 31, 2014		18,516,666	$	0.29	$	—		6.0
Total options outstanding at January 1, 2015		25,046,000	$	0.23
Granted		2,362,500		0.18
Exercised		—		—
Lapsed and forfeited		—		—
Total options outstanding at December 31, 2015		27,408,500	$	0.23	$	—		6.0
Options vested and expected to vest at December 31, 2015		24,484,602	$	0.24	$	—		5.7
Options exercisable at December 31, 2015		24,484,602	$	0.24	$	—		5.7

F-25

Geospatial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 10 – Stock-Based Payments (continued)

The following is an analysis of nonvested options:

	Nonvested Options			Weighted Average Fair Value
Nonvested options at January 1, 2014	11,733,334		$	—
Granted	96,000			—
Vested	(5,300,000	)		—
Forfeited	—			—
Nonvested options at December 31, 2014	6,529,334			—
Granted	2,362,500			—
Vested	(4,867,936	)		—
Forfeited	—			—
Nonvested options at December 31, 2015	4,023,898		$	—

F-26

Geospatial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014

Note 10 – Stock-Based Payments (continued)

During 2015, the Company granted warrants to purchase 5,458,641 shares of common stock to investors and contractors, at prices ranging from $0.08 to $0.25 per share. The warrants were granted for periods ranging from five to ten years.

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 2015 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, 2015:

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

F-27

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 10 – 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, 2014		10,719,362		$	0.43
Granted		—			—
Exercised		(21,428	)		0.25
Lapsed and forfeited		(70,927	)		1.50
Total warrants outstanding at December 31, 2014		10,627,007		$	0.42	$	—		2.5
Warrants vested and expected to vest at December 31, 2014		10,627,007		$	0.42	$	—		2.5
Warrants exercisable at December 31, 2014		10,627,007		$	0.42	$	—		2.5
Total warrants outstanding at January 1, 2015		10,627,007		$	0.42
Granted		5,458,641			0.13
Exercised		—			—
Lapsed and forfeited		(3,225,000	)		0.48
Total warrants outstanding at December 31, 2015		12,860,648		$	0.29	$	—		4.7
Warrants vested and expected to vest at December 31, 2015		12,860,648		$	0.29	$	—		4.7
Warrants exercisable at December 31, 2015		12,860,648		$	0.29	$	—		4.7

 F-28

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 10 – Stock-Based Payments (continued)

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

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

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

 F-29

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 10 – Stock-Based Payments (continued)

On August 14, 2014, the Company issued 165,000 shares of the Company’s common stock as payment for services. The Company recorded expense of $82,500, the fair value of the services received.

Note 11 – Subsequent Events

Secured Promissory Note Agreement and Amendment

On January 27, 2016, the Company entered into an Agreement and Amendment (the “Amendment”) with David Truitt, the holder of a Secured Promissory Note issued by the Company dated April 2, 2015 (the “Existing Note”) in the principal amount of $1 million. Pursuant to the Amendment, Mr. Truitt extended an additional $250,000 loan to be added to the Existing Note under the same terms as the Existing Note, and extended the due date of the Existing Note to July 26, 2016. The Company granted Mr. Truitt a warrant to purchase 25,000,000 shares of the Company’s common stock at a price of $0.015 per share.

Series C Preferred Stock

On March 16, 2016, the Company filed a Certificate of the Designations, Powers, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”) with the Nevada Secretary of State, designating 10,000,000 shares of the Company’s undesignated preferred stock, par value $0.001 per share, as Series C Preferred Stock (the “Series C Preferred Stock”).

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

After the Filing Date, each share of Series C Convertible Preferred Stock will automatically be converted into shares of Common Stock at the Conversion Ratio, upon the earlier of (i) the closing of a public or private offer and sale of Common Stock for the account of the Company in which the aggregate offering price (before deduction of underwriters’ discounts and commissions, if any) equals or exceeds $5,000,000 and the offering price per share of which equals or exceeds five (5x) times the Original Issue Price of the Series C Preferred Stock per share (before deduction of underwriters’ discounts and commissions, if any (such price per share of Common Stock subject to certain adjustments described in the Certificate of Designations); or (ii) the written consent of the holders of not less than a majority of the then outstanding shares of Series C Preferred Stock to the conversion of all then outstanding Series C Preferred Stock.

 F-30

Geospatial Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2015 and 2014

Note 11 – Subsequent Events (continued)

The holders of the Series C Preferred Stock will be entitled, upon liquidation, winding up or dissolution, of the Company, to be paid out of the funds and assets of the Company that may be legally distributed to the Company’s shareholders prior and in preference to any payment or distribution to the holders of Common Stock or any shares of any other class or series of preferred stock subsequently created with a liquidation preference senior to the Common Stock, an amount equal to the Original Issue Price of the Series C Preferred Stock per share (as adjusted for stock splits, stock dividends and the like), plus all declared but unpaid dividends.

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

Except as described in the Certificate of Designations, holders of the Series C Preferred Stock will vote together with holders of the Company Common Stock on all matters and not as a separate class or series (subject to limited exceptions). Each holder of shares of Series C Preferred Stock shall be entitled to the number of votes equal to five times (5x) the number of those shares of Common Stock into which such shares of Series C Preferred Stock are convertible.

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

 F-31

Geospatial Corporation and Subsidiaries
Consolidated Balance Sheets
	March 31,			December 31,
	2016			2015
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	175,901		$	16,962
Accounts receivable		159,400			44,100
Prepaid expenses and other current assets		107,365			111,927
Total current assets		442,666			172,989
Property and equipment:
Field equipment		339,079			339,079
Field vehicles		43,285			43,285
Total property and equipment		382,364			382,364
Less:  accumulated depreciation		(272,310	)		(245,208	)
Net property and equipment		110,054			137,156
Total assets	$	552,720		$	310,145
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	412,827		$	533,578
Accrued expenses		2,099,273			2,028,220
Due to related parties		156,782			157,286
Current portion of capital lease liability to related party		3,504			3,479
Notes payable		1,721,369			1,488,748
Accrued registration payment arrangement		54,732			547,315
Total current liabilities		4,448,487			4,758,626
Non-current liabilities:
Capital lease liability to related party		2,393			3,278
Total non-current liabilities		2,393			3,278
Total liabilities		4,450,880			4,761,904
Stockholders’ deficit:
Preferred stock:
Undesignated, $0.001 par value;  10,000,000 and 20,000,000 shares authorized at March 31, 2016 and December 31, 2015, respectively; no shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively		—			—
Series B Convertible Preferred Stock, $0.001 par value;  5,000,000 shares authorized at March 31, 2016 and December 31, 2015;  no shares issued and outstanding at March 31, 2016 and December 31, 2015		—			—
Series C Convertible Preferred Stock, $0.001 par value;  10,000,000 and 0 shares authorized at March 31, 2016 and December 31, 2016; 1,250,000 and 0 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively		1,250			—
Common stock, $.001 par value; 350,000,000 shares authorized at March 31, 2016 and December 31, 2015; 143,336,073 shares issued and outstanding at March 31, 2016 and December 31, 2015		143,336			143,336
Additional paid-in capital		36,335,779			36,031,156
Accumulated deficit		(40,378,525	)		(40,626,251	)
Total stockholders’ deficit		(3,898,160	)		(4,451,759	)
Total liabilities and stockholders’ deficit	$	552,720		$	310,145

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

 F-32

Geospatial Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
	For the Three Months Ended
	March 31,
	2016			2015
Sales	$	181,200		$	—
Cost of sales		57,933			37,593
Gross profit (loss)		123,267			(37,593	)
Selling, general and administrative expenses		379,823			666,642
Net loss from operations		(256,556	)		(704,235	)
Other income (expense):
Interest expense		(63,219	)		(84,142	)
Gain on extinguishment of debt		74,918			73,181
Registration payment arrangements		492,583			721,450
Total other income (expense)		504,282			710,489
Net income before income taxes		247,726			6,254
Provision for income taxes		—			—
Net income	$	247,726		$	6,254
Basic and fully-diluted net income per share of common stock	$	—		$	—

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

 F-33

Geospatial Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Deficit
For the Three Months Ended March 31, 2016
(Unaudited)
	Preferred Stock				Common Stock				Additional Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance, December 31, 2015		—	$	—		143,336,073	$	143,336	$	36,031,156	$	(40,626,251	)	$	(4,451,759	)
Sale of Series C Convertible Preferred Stock, net of issuance costs		1,250,000		1,250		—		—		242,123		—			243,373
Issuance of convertible securities with beneficial conversion features		—		—		—		—		62,500		—			62,500
Net income for the three months ended March 31, 2016		—		—		—		—		—		247,726			247,726
Balance, March 31, 2016		1,250,000	$	1,250		143,336,073	$	143,336	$	36,335,779	$	(40,378,525	)	$	(3,898,160	)

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

 F-34

Geospatial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
	For the Three Months Ended
	March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	247,726		$	6,254
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		27,102			30,420
Amortization of deferred debt issue costs		—			37,349
Amortization of discount on notes payable		21,941			—
Gain on extinguishment of debt		(74,918	)		(73,181	)
Accrued registration payment arrangement		(492,583	)		(721,450	)
Accrued interest payable		33,164			44,377
Changes in operating assets and liablities:
Accounts receivable		(115,300	)		32,800
Prepaid expenses and other current assets		4,562			(39,921	)
Accounts payable		(62,148	)		36,624
Accrued expenses		120,250			137,043
Due to related parties		(504	)		26,481
Net cash used in operating activities		(290,708	)		(483,204	)
Cash flows from financing activities:
Proceeds from issuance of notes payable		250,000			550,000
Principal payments on notes payable		(42,866	)		(66,585	)
Principal payments on capital lease liabilities		(860	)		(835	)
Debt issuance costs paid		—			(40,835	)
Proceeds from sale of common stock, net of offering costs		—			29,940
Proceeds from sale of Series C Convertible Preferred Stock, net of offering costs		243,373			—
Net cash provided by financing activities		449,647			471,685
Net change in cash and cash equivalents		158,939			(11,519	)
Cash and cash equivalents at beginning of period		16,962			17,723
Cash and cash equivalents at end of period	$	175,901		$	6,204
Supplemental disclosures:
Cash paid during period for interest	$	8,114		$	2,416
Cash paid during period for income taxes		—			—
Non-cash transactions:
Issuance of common stock in settlement of liabilities		—			1,569,029

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

 F-35

Geospatial Corporation and Subsidiaries 

Notes to Unaudited Consolidated Financial Statements
March 31, 2016

Note 1 – Basis of Presentation

The Unaudited Consolidated Financial Statements included herein have been prepared by Geospatial Corporation (the “Company”) in accordance with generally accepted accounting principles for interim financial information and regulations contained in the Securities Exchange Act of 1934, as amended. Accordingly, the accompanying Unaudited Consolidated Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying Unaudited Consolidated Financial Statements as of and for the three months ended March 31, 2016 should be read in conjunction with the Company’s Financial Statements as of and for the year ended December 31, 2015. In the opinion of the Company’s management, all adjustments considered necessary for a fair statement of the accompanying Unaudited Consolidated Financial Statements have been included, and all adjustments, unless otherwise discussed in the Notes to the Unaudited Condensed Consolidated Financial Statements, are of a normal and recurring nature. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016, or any other interim periods, or any future year or period.

The use of accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, Geospatial Mapping Systems, Inc. and Utility Services and Consulting Corporation, which ceased operations in 2011. All intercompany accounts and transactions have been eliminated. 

Note 2 – Accrued Expenses

Accrued expenses consisted of the following: 

	March 31,		December 31,
	2016		2015
Payroll and taxes	$	1,925,769	$	1,832,937
Accounting		39,712		50,737
Insurance		22,738		34,014
Contractors and subcontractors		10,227		20,227
Interest		4,918		7,800
Other		95,909		82,505
Accrued expenses	$	2,099,273	$	2,028,220

 F-36

Geospatial Corporation and Subsidiaries 

Notes to Unaudited Consolidated Financial Statements 

March 31, 2016 

Note 3 – 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, technical, and operations staff. The Company incurred $19,500 of lease expense during the three months ended March 31, 2016 and 2015. The lease is cancellable by either party upon 30 days’ notice.

On November 9, 2012, the Company and Mr. Smith entered into a Lease Agreement, pursuant to which the Company leases a field vehicle from Mr. Smith. The lease is for 60 months, and is for substantially the same terms for which Mr. Smith leases the vehicle from the manufacturer. Interest on the lease amounted to $47 and $71, respectively, for the three months ended March 31, 2016 and 2015, respectively. The lease is recorded as a capital lease. At March 31, 2016, gross assets recorded under the lease and associated accumulated depreciation were $16,870 and $11,387, respectively. Future minimum payments under the capital lease are as follows as of September 30, 2015: 

Balance of 2016	$	2,721
Year ending December 31, 2017		3,326
Thereafter		—
Total minimum payments		6,047
Less:  minimum interest payments		(151	)
Minimum principal payments	$	5,896

 F-37

Geospatial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2016 

Note 4 – Notes Payable

Current notes payable consisted of the following:

	March 31, 2016		December 31, 2015
Secured Promissory Note, payable to an individual, bearing interest at 10% per annum, due July 31, 2016, secured by substantially all assets of the Company.  The note is convertible to common stock at 75% of the weighted average trading price, and is secured by substantially all the assets of the Company, net of discount	$	1,315,136	$	1,075,833
Unsecured Promissory Note, payable to an individual, bearing interest at 10% per annum		69,460		67,817
Unsecured Convertible Promissory Notes, payable to individuals, bearing interest at 10% per annum, convertible to common stock at prices ranging from $0.20 to $0.25 per share		194,994		190,453
Notes payable under settlement agreements with former employees, payable monthly with terms of up to twelve months, with interest rates ranging from 0% to 20%		141,779		154,645
Current notes payable	$	1,721,369	$	1,488,748

 F-38

Geospatial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2016

Note 5 – Income Taxes

The Company’s provision for (benefit from) income taxes is summarized below:

	Three Months Ended March 31, 2016			Three Months Ended March 31, 2015
Current:
Federal	$	—		$	—
State		—			—
		—			—
Deferred:
Federal		(76,770	)		(224,743	)
State		(24,371	)		(71,347	)
		(101,141	)		(296,090	)
Total income taxes		(101,141	)		(296,090	)
Less:  valuation allowance		101,141			296,090
Net income taxes	$	—		$	—

The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:

	Three Months Ended March 31, 2016			Three Months Ended March 31, 2015
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	%

 F-39

Geospatial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2016 

Note 5 – Income Taxes (continued) 

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

	March 31, 2016			December 31, 2015
Start-up costs	$	35,033		$	37,491
Depreciation		(37,423	)		(37,759	)
Accrued expenses		745,103			687,212
Net operating loss carryforward		15,714,795			15,669,422
Deferred income taxes		16,457,508			15,356,366
Less:  valuation allowance		(16,457,508	)		(15,356,366	)
Net deferred income taxes	$	—		$	—

At March 31, 2016, the Company had federal and state net operating loss carryforwards of approximately $37,867,000. The federal and state net operating loss carryforwards will expire beginning in 2021 and 2026, respectively. The amount of the state net operating loss carryforward that can be utilized each year to offset taxable income is limited by state law.

 F-40

Geospatial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2016

Note 6 – Net Income Per Share of Common Stock

Basic net income 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 net income per share reflects per share amounts that would have resulted if dilutive potential common stock had been converted to common stock. Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all warrants and options are used to repurchase common stock at market value. The number of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities.

The following reconciles amounts reported in the financial statements:

	Three Months Ended March 31, 2016		Three Months Ended March 31, 2015
Net income	$	247,726	$	6,254
Weighted average number of shares of common stock outstanding		143,336,073		132,139,637
Dilutive potential shares of common stock		143,336,073		132,139,637
Net income per share of common stock:
Basic	$	0.00	$	0.00
Diluted	$	0.00	$	0.00

 F-41

Geospatial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2016

Note 6 – Net Loss Per Share of Common Stock (continued)

The following securities were not included in the computation of diluted net loss per share, as their effect would have been anti-dilutive:

	Three Months Ended March 31, 2016		Three Months Ended March 31, 2015
Series B Convertible Preferred Stock		—		2,650,245
Series C Convertible Preferred Stock		4,395,604		—
Options and warrants to purchase common stock		20,020,000		13,853,902
Warrants to purchase Series B Convertible Preferred Stock		—		2,258,690
Secured Promissory Note		18,014,815		—
Senior Convertible Redeemable Notes		—		2,898,048
Total		42,430,419		19,596,749

 F-42

Geospatial Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2016

Note 7 – Stock-Based Payments

During the three months ended March 31, 2016, stock appreciation rights on 3,896,000 shares of the Company’s common stock issued to eligible employees and consultants pursuant to the Company’s 2013 Equity Incentive Plan were forfeited.

During the three months ended March 31, 2016, the Company granted warrants to purchase 25,182,000 shares of the Company’s common stock to lenders in connection with loans to the Company

Note 8 – Gains on Extinguishment of Debt

Due to significant cash flow problems, the Company has negotiated concessions on the amounts of certain liabilities and extensions of payment terms. The Company accounts for such concessions in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 470-60, Troubled Debt Restructurings by Debtors, and ASC 405-20, Extinguishment of Liabilities, and recognizes gains to the extent that the carrying value of the liability exceeds the fair value of the restructured payment plan. Such gains are included as “Gains on extinguishment of debt” in “Other income and expenses” on the Company’s Consolidated Statement of Operations. In addition, the Company has accounts payable that have aged or are expected to age beyond the statute of limitations. The Company is amortizing those liabilities over the remaining term of the statute of limitations. Gains on extinguishment of debt amounted to $74,918 and $73,181 during the three months ended March 31, 2016 and 2015, respectively.

Note 9 – Registration Payment Arrangements

The Company is contractually obligated to issue shares of its common stock to certain investors for failure to register shares of its common stock under the Securities Act of 1933, as amended (the “Securities Act”). The Company has recorded a liability for the estimated number of shares to be issued at the fair value of the stock to be issued. The Company measures fair value by the price of its common stock at its most recent sale. The Company reviews its estimate of the number of shares to be issued and the fair value of the stock to be issued quarterly. The liability is included on the Consolidated Balance Sheet under the heading “accrued registration payment arrangement,” and amounted to $54,732 at March 31, 2016, and $547,315 at December 31, 2015. Gains or losses resulting from changes in the carrying amount of the liability are included in the Consolidated Statement of Operations in other income and expense under the heading “registration payment arrangements” which amounted to gains of $492,583 and $721,450 during the three months ended March 31, 2016 and 2015, respectively.

 F-43

PART II—INFORMATION NOT REQUIRED IN PROSPECTUS 

Item 13. Other Expenses of Issuance and Distribution

The estimated expenses payable by the Company in connection with the offering of the securities being registered are as follows: 

SEC Registration and Filing Fee	$	5,338.28
Legal Fees and Expenses*	$	50,000.00
Accounting Fees and Expenses*	$	5,000.00
Financial Printing*	$	5,000.00
Transfer Agent Fees*	$	500.00
Miscellaneous*	$	500.00
TOTAL*	$	66,338.28

* Estimated

Item 14. Indemnification of Directors and Officers.

Our amended articles of incorporation provide that none of our directors and officers shall be personally liable to the Company or our stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer. Notwithstanding the foregoing, a director or officer shall be liable to the extent provided by applicable law, (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) for the payment of dividends in violation of applicable law. We indemnify our directors and officers to the maximum extent permitted by Nevada law for the costs and liabilities of acting or failing to act in an official capacity. We also have insurance in the aggregate amount of $5 million for our directors and officers against all of the costs of such indemnification or against liabilities arising from acts or omissions of the insured person in cases where we may not have power to indemnify the person against such liabilities.

Item 15. Recent Sales of Unregistered Securities.

From July 13, 2013 through August 20, 2013, the Company sold to various investors 4,517,572 shares of its Series B Convertible Preferred Stock (“Series B Stock”) and warrants to purchase 451,738 shares of Series B Stock at an exercise price of price of $2.50 per share, for a purchase price of $0.70 per share of Series B Stock purchased, or an aggregate purchase price of $3,162,311. The sales of the Series B Stock and warrants took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchasers are accredited investors, and the Company conducted the private placement without any general solicitation or advertisement and with a restriction on resale.

On August 20, 2013, the Company issued to Mark A. Smith, the Company’s Chief Executive Officer and Chairman of the Board of Directors, 17,909,203 shares of the Company’s common stock, and warrants to purchase 1,790,920 shares of the Company’s common stock at an exercise price of $0.25 per share, in conversion of $1,253,644 of outstanding indebtedness of the Company owed to Mr. Smith. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Smith is an accredited investor, and the Company issued the common stock and warrants without any general solicitation or advertisement and with a restriction on resale.

 II-1

On August 20, 2013, the Company issued to Thomas R. Oxenreiter, the Company’s Chief Financial Officer and Director, 3,371,719 shares of the Company’s common stock, and warrants to purchase 337,172 shares of the Company’s common stock at an exercise price of $0.25 per share, in conversion of $236,020 of outstanding indebtedness owed by the Company to Mr. Oxenreiter. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Oxenreiter is an accredited investor, and the Company issued the common stock and warrants without any general solicitation or advertisement and with a restriction on resale.

On September 30, 2013, the Company sold 1,500,002 shares of its common stock, and issued warrants to purchase 149,998 shares of its common stock at an exercise price of $0.25 per share, to five investors at a sales price of $0.07 per share, for an aggregate sales price of $105,000. The sales took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchasers are accredited investors, and the Company conducted the private placements without any general solicitation or advertisement, and with a restriction on resale.

On October 22, 2013, pursuant to a Mutual Release and Settlement Agreement, the Company issued 9,000,000 shares of common stock to Delta Networks, S.A. to settle contractual obligations. In addition, the Company issued warrants to purchase 3,000,000 shares of its common stock at an exercise price of $0.50 per share. The shares and warrants were issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act. The recipient of the warrants is an accredited investor, and we issued the shares and warrants without any general solicitation or advertisement and with a restriction on resale.

From November 27, 2013 through October 22, 2014, the Company sold 10,569,607 shares of its common stock at $0.35 per share to several investors, for an aggregate sales price of $3,699,482. 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 provided by Section 4(2) and/or 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. No commission or other remuneration was paid or given directly or indirectly for soliciting the conversion.

From October 31, 2013 through July 31, 2014, the Company issued 39,875,220 shares of common stock to certain holders of its Series B Stock upon conversion of 3,987,522 shares of Series B Stock. Such shares were issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4 (2) and/or Section 3(a)(9) of the Securities Act and/or Regulation D. The converting holders of Series B stock are accredited investors, and the Company issued the shares without any general solicitation or advertisement, and with a restriction on resale.

From May 22, 2014 through June 25, 2014, the Company issued 106,745 shares of Series B Stock to certain investors upon exercise of warrants to purchase Series B Stock, for an aggregate sales price of $266,571. 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 provided by Section 4(2) and/or 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. No commission or other remuneration was paid or given directly or indirectly for soliciting the exercise.

On June 11, 2014, the Company issued 21,428 shares of common stock to an investor upon exercise of warrants to purchase common stock, for a sales price of $5,332. The sale and issuance took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale. No commission or other remuneration was paid or given directly or indirectly for soliciting the exercise.

During 2013, the Company issued 996,120 shares of common stock to settle contractual obligations. The shares were issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act. The recipients are accredited investors, and the Company issued the shares without any general solicitation or advertisement, and with a restriction on resale.

During 2014, the Company issued 265,000 shares of common stock to an investor for services and to settle contractual obligations. The shares were issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act. The recipient is an accredited investor, and the Company issued the shares without any general solicitation or advertisement, and with a restriction on resale.

 II-2

On January 16, 2015, the Company issued to a lender a Senior Secured Promissory Note in the principal amount of $500,000, which is convertible into shares of common stock upon certain conditions if not repaid at maturity, and warrants to purchase 1,500,000 shares of its common stock at an exercise price of $0.25 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

On January 16, 2015, the Company issued warrants to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.25 per share to a consultant. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the warrants without any general solicitation or advertisement and with a restriction on resale.

On January 16, 2015, the Company issued warrants to purchase 50,000 shares of the Company’s common stock at an exercise price of $0.25 per share to a consultant. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the warrants without any general solicitation or advertisement and with a restriction on resale.

On February 16, 2015, the Company issued warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share to a consultant. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the warrants without any general solicitation or advertisement and with a restriction on resale.

On February 24, 2015, the Company sold 120,000 shares of its common stock at $0.25 per share to an investor for a sales price of $30,000. The sale and issuance took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale. No commission or other remuneration was paid or given directly or indirectly for soliciting the conversion.

On February 26, 2015, the Company issued 6,150,587 shares of its common stock to the holder of the Company’s Senior Secured Redeemable Note upon the conversion of the principal amount of, and accrued interest on, such Note aggregating $1,569,030. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) and/or Regulation D. The recipient is an accredited investor, and the Company issued the shares of common stock without any general solicitation or advertisement and with a restriction on resale.

On March 14, 2015, the Company issued to a lender an Unsecured Convertible Promissory Note in the principal amount of $50,000, which is convertible into shares of common stock at the option of the holder, and warrants to purchase 75,000 shares of its common stock at an exercise price of $0.25 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

On April 2, 2015, the Company issued to a lender a Secured Promissory Note in the principal amount of $1,000,000, which is convertible into shares of common stock at the option of the holder, and warrants to purchase 2,000,000 shares of its common stock at an exercise price of $0.25 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

On June 16, 2015, the Company issued warrants to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.20 per share to a consultant. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the warrants without any general solicitation or advertisement and with a restriction on resale.

On June 17, 2015, the Company issued to a lender an Unsecured Convertible Promissory Note in the principal amount of $50,000, which is convertible into shares of common stock at the option of the holder, and warrants to purchase 75,000 shares of its common stock at an exercise price of $0.20 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

Between July 9, 2015 and September 14, 2015, the Company sold 650,000 shares of its common stock to five investors at a sales price of $0.20 per share, for an aggregate sales price of $130,000. The sales took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchasers are accredited investors, and the Company conducted the private placements without any general solicitation or advertisement, and with a restriction on resale.

Between October 27, 2015 and November 10, 2015, the Company sold 652,500 shares of its common stock to four investors at a sales price of $0.10 per share, for an aggregate sales price of $261,000. The sales took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchasers are accredited investors, and the Company conducted the private placements without any general solicitation or advertisement, and with a restriction on resale.

Between July 8, 2015 and July 29, 2015, the Company issued Unsecured Convertible Promissory Notes to three lenders in the aggregate principal amount of $150,000, which is convertible into shares of common stock at the option of the holders, and warrants to purchase 210,000 shares of its common stock at an exercise price of $0.20 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipients are accredited investors, and the Company issued the Unsecured Convertible Promissory Notes and the warrants without any general solicitation or advertisement and with a restriction on resale.

On August 13, 2015, the Company issued an Unsecured Convertible Promissory Note to a lender in the principal amount of $30,000, which is convertible into shares of common stock at the option of the holder, and warrants to purchase 3,000 shares of its common stock at an exercise price of $0.25 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the Unsecured Convertible Promissory Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

On September 30, 2015, the Company issued to Thomas R. Oxenreiter, the Company’s Chief Financial Officer and Director, an Unsecured Convertible Promissory Note in the principal amount of $6,891, which is convertible into shares of the Company’s common stock at the option of the holder, and warrants to purchase 6,891 shares of the Company’s common stock at an exercise price of $0.20 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Oxenreiter is an accredited investor, and the Company issued the common stock and warrants without any general solicitation or advertisement and with a restriction on resale.

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On October 13, 2015, the Company issued to Thomas R. Oxenreiter, the Company’s Chief Financial Officer and Director, an Unsecured Convertible Promissory Note in the principal amount of $12,000, which is convertible into shares of the Company’s common stock at the option of the holder, and warrants to purchase 12,000 shares of the Company’s common stock at an exercise price of $0.15 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Oxenreiter is an accredited investor, and the Company issued the common stock and warrants without any general solicitation or advertisement and with a restriction on resale.

On December 8, 2015, the Company sold 1,200,000 shares of its common stock to an investor at a price of $0.10 per share, for $120,000. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On December 22, 2015, the Company sold 312,500 shares of its common stock to an investor at a price of $0.08 per share, for $25,000. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On December 22, 2015, the Company converted a note payable of $36,585 due to an investor to 457,309 shares of its common stock at a price of $0.08 per share. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On January 26, 2016, the Company issued to a lender a Secured Promissory Note in the principal amount of $250,000, which is convertible into shares of common stock at the option of the holder, and warrants to purchase 25,000,000 shares of its common stock at an exercise price of $0.015 per share. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The recipient is an accredited investor, and the Company issued the Note and the warrants without any general solicitation or advertisement and with a restriction on resale.

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

On April 22, 2016, the Company converted notes payable totaling $179,815 due to an investor to 899,076 shares of the Company’s Series C Convertible Preferred Stock at a price of $0.20 per share. In connection with the conversion, the Company adjusted the exercise price of warrants to purchase 725,250 shares of the Company’s common stock to $0.01 per share. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On April 26, 2016, the Company converted notes payable totaling 17,133 due to two investors to 85,666 shares of the Company’s Series C Convertible Preferred Stock at a price of $0.20 per share. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On May 10, 2016, the Company converted a note payable of $54,278 due to an investor, and warrants to purchase 3,075,000 shares of the Company’s common stock, to warrants to purchase 10,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale.

On May 12, 2016, the Company sold 1,500,000 shares of its Series C Convertible Preferred Stock to an investor at a price of $0.20 per share, for consideration of $300,000. The sale took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. The purchaser is an accredited investor, and the Company conducted the private placement without any general solicitation or advertisement, and with a restriction on resale. 

On May 18, 2016, the Company issued to Mark A. Smith, the Company’s Chief Executive Officer and Director, 19,170,831 shares of the Company’s common stock, and warrants to purchase 23,004,998 shares of the Company’s common stock at an exercise price of $0.04 per share, in conversion of $766,833 of accrued salary owed by the Company to Mr. Smith. The Company also issued to Mr. Smith 783,912 shares of the Company’s Series C Convertible Preferred stock in conversion of $156,782 of unreimbursed business expenses and unpaid rent for the Company’s offices owed by the Company to Mr. Smith. The issuances were made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Smith is an accredited investor, and the Company issued the common stock, warrants, and Series C Convertible Preferred Stock without any general solicitation or advertisement and with a restriction on resale.

On May 18, 2016, the Company issued to Troy G. Taggart, the Company’s President, 5,387,241 shares of the Company’s common stock, and warrants to purchase 6,464,689 shares of the Company’s common stock at an exercise price of $0.04 per share, in conversion of $215,490 of unpaid salary owed by the Company to Mr. Taggart. The issuance was made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Taggart is an accredited investor, and the Company issued the common stock and warrants without any general solicitation or advertisement and with a restriction on resale.

On May 18, 2016, the Company issued to Thomas R. Oxenreiter, the Company’s Chief Financial Officer and Director, 5,661,460 shares of the Company’s common stock, and warrants to purchase 6,793,753 shares of the Company’s common stock at an exercise price of $0.04 per share, in conversion of $226,458 of unpaid salary owed by the Company to Mr. Oxenreiter. The Company also issued to Mr. Oxenreiter 25,000 shares of the Company’s Series C Convertible Preferred stock in conversion of $5,000 of unreimbursed business expenses owed by the Company to Mr. Oxenreiter. The issuances were made pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation D. Mr. Oxenreiter is an accredited investor, and the Company issued the common stock, warrants, and Series C Convertible Preferred Stock without any general solicitation or advertisement and with a restriction on resale.

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The recipients of the securities in each of these transaction described above represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us.

Item 16. Exhibits and Financial Statement Schedules.

Exhibit            Document

3.1 Amended Articles of Incorporation of Geospatial Corporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

3.2 Bylaws of Geospatial Corporation (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

4.1 Certificate of Designations of the Series B Convertible Preferred Stock of Geospatial Holdings, Inc. dated as of August 20, 2013 (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

4.2 Common Stock Specimen Certificate (incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

4.3 Series B Convertible Preferred Stock Specimen Certificate (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

4.4 Certificate of Designations, Powers, Preferences and Rights of Series C Convertible Preferred Stock dated March 16, 2016 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated as of March 16, 2016)

5.1 Opinion of Woodburn & Wedge, Attorneys at Law, Reno, Nevada *

10.1 Lease Agreement dated May 1, 2006 between Mark A. Smith and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.2 Geospatial Holdings, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.3 Geospatial Mapping Systems, Inc. 2007 Stock Option Plan (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.4 Employment Agreement dated December 1, 2007 between Mark A. Smith and Geospatial Mapping Systems, Inc. (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.5 Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Mark A. Smith dated effective December 1, 2007 (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.6 Agreement Not to Compete between Mark A. Smith and Geospatial Mapping Systems, Inc. dated effective December 1, 2007 (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.7 Conversion Agreement dated August 20, 2013 by and among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc. and Mark A. Smith (incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.8 Employment Agreement dated October 18, 2013 by and between Geospatial Corporation and Mark A. Smith (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.9 Stock Appreciation Rights Agreement dated October 18, 2013 between Geospatial Corporation and Mark A. Smith (incorporated by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

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10.10 Stock Appreciation Rights Agreement dated October 18, 2013 between Geospatial Corporation and Troy Taggart (incorporated by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.11 Nonqualified Stock Option Agreement between Geospatial Mapping Systems, Inc. and Thomas R. Oxenreiter dated effective March 13, 2008 (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.12 Agreement Not to Compete between Thomas R. Oxenreiter and Geospatial Mapping Systems, Inc. dated effective March 13, 2008 (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.13 Conversion Agreement dated August 20, 2013 by and among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc. and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.14 Employment Agreement dated October 18, 2013 by and between Geospatial Corporation and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.15 Stock Appreciation Rights Agreement dated October 18, 2013 between Geospatial Corporation and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.15 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.16 Mutual Termination and Release Agreement dated February 28, 2013 by and among Geospatial Holdings, Inc., Timothy F. Sutherland, Thomas J. Ridge, Pace Global Energy Services, LLC, Pace Financial Services, LLC and Ridge Global, LLC (incorporated by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.17 Mutual Release and Settlement Agreement dated May 10, 2013 by and among Geospatial Holdings, Inc., Geospatial Mapping Systems, Inc., Reduct N.V., and Delta Networks, S.A. (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.18 Geospatial Holdings, Inc. Promissory Note dated November 21, 2012 in favor of Matthew F. Bensen (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.19 Settlement Agreement dated May 25, 2012 among Joseph Timothy Nippes, Daniel A. Bradley, Christina Sherwood, Joseph A. Lane, Ronald Peterson, Timothy Story, Linda Ward, Geospatial Mapping Systems, Inc., Geospatial Holdings, Inc., Mark A. Smith, Thomas R. Oxenreiter, Timothy F. Sutherland and Thomas Ridge (incorporated by reference to Exhibit 10.19 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

10.20 Settlement Agreement dated June 22, 2014 by and among Brad Brooks, et al., Geospatial Corporation, Mark A. Smith, and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.20 of the Company’s Amendment No. 1 to Registration Statement on Form S-1 dated November 14, 2014)

10.21 Asset Purchase Agreement dated as of September 17, 2014 among Geospatial Corporation, Select Analytics LLC, and Edward R. Camp, Jr. (incorporated by reference to Exhibit 10.21 of the Company’s Amendment No. 1 to Registration Statement on Form S-1 dated November 14, 2014)

10.22 Employment and Noncompetition Agreement dated September 17, 2014 between Geospatial Corporation and Edward R. Camp, Jr. (incorporated by reference to Exhibit 10.22 of the Company’s Amendment No. 1 to Registration Statement on Form S-1 dated November 14, 2014)

10.23 Note and Warrant Purchase Agreement dated as of January 16, 2015 by and between Geospatial Corporation and Horberg Enterprises LP. (incorporated by reference to Exhibit 10.23 of the Company’s Amendment No. 2 to Registration Statement on Form S-1 dated March 9, 2015)

10.24 Note and Warrant Purchase Agreement dated as of April 2, 2015 by and between Geospatial Corporation and David Truitt (incorporated by reference to Exhibit 10.24 of the Company’s Amendment No. 3 to Registration Statement on Form S-1 dated May 19, 2014)

10.25 Preferred Stock Purchase Agreement dated March 16, 2016 by and between Geospatial Corporation and David Truitt (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated as of March 16, 2016)

10.26 Agreement and Amendment dated January 27, 2016 by and between Geospatial Corporation and David Truitt (incorporated by reference to Exhibit 10.26 of the Company’s Annual Report on Form 10-K dated April 14, 2016)

10.27 Settlement Agreement, General Release and Waiver of Claims dated February 24, 2016 by and among Edward R. Camp, Jr., Select Analytics LLC, and Geospatial Corporation (incorporated by reference to Exhibit 10.27 of the Company’s Annual Report on Form 10-K dated April 14, 2016)

10.28 Stock Appreciation Rights Agreement by and between Geospatial Corporation and Troy G. Taggart dated October 23, 2015 (incorporated by reference to Exhibit 10.28 of the Company’s Annual Report on Form 10-K dated April 14, 2016)

10.29 Stock Appreciation Rights Agreement by and between Geospatial Corporation and Thomas R. Oxenreiter dated October 23, 2015 (incorporated by reference to Exhibit 10.29 of the Company’s Annual Report on Form 10-K dated April 14, 2016)

10.30 Convertible Note and Warrant Purchase Agreement by and between Geospatial Corporation and Thomas R. Oxenreiter dated September 30, 2015 (incorporated by reference to Exhibit 10.30 of the Company’s Annual Report on Form 10-K dated April 14, 2016)

10.31 Convertible Note and Warrant Purchase Agreement by and between Geospatial Corporation and Thomas R. Oxenreiter dated October 15, 2015 (incorporated by reference to Exhibit 10.31 of the Company’s Annual Report on Form 10-K dated April 14, 2016)

10.32 Conversion Agreement dated April 22, 2016, by and between Geospatial Corporation and Matthew F. Bensen (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q dated May 20, 2016)

10.33 Conversion Agreement dated May 10, 2016, by and among Geospatial Corporation, Lowery Enterprises, LLC, and Rob Goodman (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q dated May 20, 2016)

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10.34 Conversion Agreement dated May 18, 2016 by and among Geospatial Corporation, Geospatial Mapping Systems, Inc., and Mark A. Smith (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q dated May 20, 2016)

10.35 Conversion Agreement dated May 18, 2016 by and among Geospatial Corporation, Geospatial Mapping Systems, Inc., and Troy G. Taggart (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q dated May 20, 2016)

10.35 Conversion Agreement dated May 18, 2016 by and among Geospatial Corporation, Geospatial Mapping Systems, Inc., and Thomas R. Oxenreiter (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q dated May 20, 2016)

21.1 List of Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Company’s Registration Statement on Form S-1 dated March 26, 2014)

23.1 Consent of Goff, Backa, Alfera & Co., LLC

23.2 Consent of Woodburn & Wedge (contained in Exhibit 5.1) *

* Previously filed.

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Item 17. Undertakings.

The registrant undertakes:

(1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or most recent post-effective amendment thereto) which, individually or in the aggregate, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) To include material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Buffalo, Commonwealth of Pennsylvania on July 8, 2016.

Geospatial Corporation
By:	/s/ MARK A. SMITH
Name:	Mark A. Smith
Title:	Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on the dates indicated:

Signature	Title	Date
/s/ MARK A. SMITH	President and Chief Executive Officer and Director	July 8, 2016
Mark A. Smith	(principal executive officer)
/s/ THOMAS R. OXENREITER	Chief Financial Officer and Director	July 8, 2016
Thomas R. Oxenreiter	(principal financial and accounting officer)

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