UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549





FORM 10-Q





x
            
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the quarterly period ended
      March 31, 2010ORo
            
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the transition
period fromto





Commission file number:
333-99455




GEOS
COMMUNICATIONS, INC.


(Exact Name of Registrant as
Specified in its Charter)





Washington
            
            91-1426372(State of other jurisdiction of
      incorporation or organization)
            
            (I.R.S. Employer Identification
      No.)430
      North Carroll Avenue, Suite 120Southlake,
      Texas
            
            76092(Address of Principal Executive
      Offices)
            
            (Zip
  Code)





(817)
789-6000


(Registrant’s Telephone Number,
including Area Code)





Not Applicable


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





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


xYesoNo




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





Large accelerated
fileroAccelerated
fileroNon-accelerated
fileroSmaller
Reporting Companyx





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




Number of Common Shares
      outstanding at May 10, 2010:
            32,647,642










INDEXPage
  No.(s)PART I - FINANCIAL
      INFORMATIONItem 1.
            Financial
      StatementsCondensed Consolidated Balance
      Sheets as of March 31, 2010 (unaudited) and December 31,
      2009
            1Condensed Consolidated Statements
      of Operations for the three months ended March 31, 2010 and 2009
      (unaudited)
            2Condensed Consolidated Statements
      of Cash Flows for the three months ended March 31, 2010 and 2009
      (unaudited)
            3Notes to  Condensed
      Consolidated Financial Statements
            4Item 2.
            Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
            19Item 3.
            Quantitative and Qualitative
      Disclosures About Market Risk
            23Item 4.
            Controls and
      Procedures
            23PART II - OTHER
      INFORMATIONItem 1.
            Legal
      Proceedings
            23Item 1A.
            Risk
Factors
            24Item 2.
            Unregistered Sales of Equity
      Securities and Use of Proceeds
            33Item 3.
            Defaults Upon Senior
      Securities
            34Item 4.
            Reserved
            34Item 5.
            Other
      Information
            34Item 6.
            Exhibits
            34SIGNATURES
            36









PART I - FINANCIAL
INFORMATION





Item 1 - Financial
      Statements





NOTE: These consolidated financial
statements reflect the Company’s Condensed Consolidated Balance Sheets at March
31, 2010 (unaudited) and December 31, 2009, the unaudited Condensed Consolidated
Statements of Operations for the three months ended March 31, 2010 and 2009, and
unaudited condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2010 and 2009.





GEOS
COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Balance
Sheets





March 31,
              2010
            
            
            December 31,
              2009UnauditedASSETSCurrent
      Assets:Cash
      and Cash Equivalents
            
            $
            599,657
            
            
            $
            1,041,830Accounts
      Receivable
            
            
            39,358
            
            
            
            -Inventories
            
            
            76,734
            
            
            
            65,050Prepaid
      Expenses and Other Current Assets
            
            
            105,211
            
            
            
            17,826Total
      Current Assets
            
            
            820,960
            
            
            
            1,124,706Property
      and Equipment, Net
            
            
            1,891,323
            
            
            
            1,385,526Other
      Assets:Goodwill
            
            
            2,142,595
            
            
            
            -Other
      Intangible Assets, Net of Amortization
            
            
            3,393,694
            
            
            
            2,441,900Deposits
            
            
            83,489
            
            
            
            83,489Investment,
      at Cost
            
            
            -
            
            
            
            250,000Note
      Receivable
            
            
            -
            
            
            
            60,000Total
      Other Assets
            
            
            5,619,778
            
            
            
            2,835,389Total
      Assets
            
            $
            8,332,061
            
            
            $
            5,345,621LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      Liabilities:Accounts
      Payable
            
            $
            838,664
            
            
            $
            416,509Accrued
      Expenses
            
            
            1,258,209
            
            
            
            1,058,177Deferred
      Revenue
            
            
            33,374
            
            
            
            33,374Convertible
      Bonds
            
            
            50,000
            
            
            
            50,000Notes
      Payable
            
            
            9,000
            
            
            
            9,000Borrowing
      under Line of Credit
            
            
            1,300,000
            
            
            
            -Total
      Current Liabilities
            
            
            3,489,247
            
            
            
            1,567,060Series
      A–D, Preferred Shares
            
            
            8,391,824
            
            
            
            7,880,627Series
      G Preferred Shares
            
            
            3,570,728
            
            
            
            -Total
      Liabilities
            
            
            15,451,799
            
            
            
            9,447,687Series
      F Convertible Preferred Shares, 5,000,000 Shares Authorized, and 7,550shares
      Issued and Outstanding
            
            
            5,047,057
            
            
            
            5,047,057Commitments
      And ContingenciesStockholders’
      (Deficit):Common
      Stock,  No Par Value, 500,000,000 Shares
      Authorized  and  32,647,842shares
      Issued and Outstanding
            
            
            46,937,744
            
            
            
            46,705,124Accumulated
      Deficit
            
            
            (59,104,539
            )
            
            
            (55,854,247
            )Total
      Stockholders’ (Deficit)
            
            
            (12,166,795
            )
            
            
            (9,149,123
            )Total
      Liabilities and Stockholders’ (Deficit)
            
            $
            8,332,061
            
            
            $
            5,345,621





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




1




GEOS
COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Statements of
Operations


(Unaudited)




Three
      Months Ended
              March
      31,2010
            
            
            2009Net
      Revenue
            
            $
            112,478
            
            
            $
            132,142Cost
      of Revenue
            
            
            196,185
            
            
            
            126,051Gross
      Profit (Loss)
            
            
            (83,707
            )
            
            
            6,091General
      and Administrative Expenses
            
            
            2,447,522
            
            
            
            2,261,454Loss
      From Operations
            
            
            (2,531,229
            )
            
            
            (2,255,363
            )Other
      Income (Expense):Interest
      Income
            
            
            419
            
            
            
            -Interest
      Expense
            
            
            (605,942
            )
            
            
            (114,294
            )Total
      Other Income (Expense)
            
            
            (605,523
            )
            
            
            (114,294
            )Net
      Loss
            
            
            (3,136,752
            )
            
            
            (2,369,657
            )Dividends
      on Preferred Stock
            
            
            (113,538
            )
            
            
            -Net
      Loss attributable to Common Shareholders
            
            $
            (3,250,290
            )
            
            $
            (2,369,657
            )Weighted
      Average Common Shares Outstanding:Basic
      and Diluted
            
            
            32,647,842
            
            
            
            27,357,354Basic
      and Diluted Loss Per Common Share
            
            $
            (0.10
            )
            
            $
            (0.09
            )




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




2




GEOS
COMMUNICATIONS, INC. AND SUBSIDIARIES


Condensed Consolidated Statements of
Cash Flows


(Unaudited)





Three
      Months Ended
              March
      31,2010
            
            
            2009Cash
      Flows From Operations:Net
      Loss
            
            $
            (3,136,752
            )
            
            $
            (2,369,657
            )Adjustments
      to Reconcile Net Loss to NetCash
      Provided by (Used In) Operating Activities:Depreciation
            
            
            92,120
            
            
            
            188,208Amortization
            
            
            101,206
            
            
            
            95,694Warrants
      issued for services
            
            
            16,325
            
            
            
            726,553Stock
      Compensation
            
            
            216,295
            
            
            
            74,720Change
      in operating assets and liabilities, net ofeffect
      of acquisitions:Accounts
      Receivable
            
            
            (24,840
            )
            
            
            -Inventories
            
            
            (11,684
            )
            
            
            (736
            )Prepaid
      Expenses, net of prepaid loan fees
            
            
            (29,657
            )
            
            
            (49,067
            )Accounts
      Payable
            
            
            422,155
            
            
            
            -Accrued
      Expenses
            
            
            532,022
            
            
            
            227,033Net
      Cash Used In Operating Activities:
            
            
            (1,822,810
            )
            
            
            (1,107,252
            )Cash
      Flows From Investing Activities:Property
      and Equipment Purchases
            
            
            (42,971
            )
            
            
            (6,622
            )Acquisitions,
      net of cash acquired
            
            
            123,608
            
            
            
            -Net
      Cash Provided by (Used In) Investing  Activities
            
            
            (80,637
            )
            
            
            (6,622
            )Cash
      Flows From Financing Activities:Proceeds
      from notes
            
            
            -
            
            
            
            834,248Issuance
      of common stock
            
            
            -
            
            
            
            245,927Line
      of Credit proceeds
            
            
            1,300,000
            
            
            
            -Net
      Cash Provided By Financing Activities
            
            
            1,300,000
            
            
            
            1,080,175Increase
      (Decrease) in Cash and Cash Equivalents
            
            
            (442,173
            )
            
            
            (33,699
            )Balance,
      Beginning of period
            
            
            1,041,830
            
            
            
            2,645Balance,
      End of period
            
            $
            599,657
            
            
            $
            (31,054
            )Non-Cash
      Investing and Financing Activities:Acquisition
      of Shoot It! and D Mobile through the issuance of Series G preferred
      shares and warrants
            
            $
            3,486,340
            
            
            $
            -





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




3





GEOS
COMMUNICATIONS, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements




NOTE
1.   NATURE OF BUSINESS and MANAGEMENT’S PLANS




For
convenience in this quarterly report, “Geos,” “we,” “us,” and “the Company”
refer to Geos Communications, Inc. and our consolidated subsidiaries, taken as a
whole.




Through
our subsidiary Geos Communications, Inc., a Delaware corporation, (“Geos (DE)”),
we are a developer and distributor of mobile applications and
services.  We leverage our core competencies in Voice over Internet
Protocol (VoIP) and technology development to introduce solutions to the global
mobile community. Our services include MyGlobalTalk, a comprehensive solution
for reducing long distance calling worldwide.




The
Company, a Washington corporation, was incorporated as “Transit Information
Systems, Inc.” on October 17, 1988.  In March 2004, the Company
changed its name to “i2 Telecom International, Inc.”  In September
2009, the Company filed with the Secretary of State of the State of Washington
an amendment to its Articles of Incorporation reflecting the change of the
Company’s name from “i2 Telecom International, Inc.” to “Geos Communications,
Inc.”




The
Company’s management has focused historically upon VoIP as the Company’s primary
line of business.  The Company is a developer of mobile phone
applications and is constantly exploring various strategic alternatives,
including partnering with other telecommunication companies, both foreign and
domestic, and engaging in acquisitions of strategic competitors and/or
telecommunication service providers.




On
February 19, 2010, we acquired Shoot It!, LLC, which expands our product
portfolio applications and technologies for the global mobile communications
market.  Since the date of acquisition, we have included the financial
results for Shoot It! in our results of operations.  Revenues for the
quarter related to Shoot It! are not significant.




On March
1, 2010, we acquired D Mobile, Inc., which provides us with a platform for
mobile content distribution in China, the world’s largest mobile communications
market, and expands our global presence. D Mobile, which operates under the
brand name Duo Guo, is a retail channel for the discovery and download of
licensed mobile media content in China. We have included the results of
operations for D-Moblile since the date of acquisition in our results of
operations.  Revenues related to D-Mobile were not significant for the
quarter.





The
accompanying financial statements have been prepared assuming that Geos
Communications, Inc. and subsidiaries will continue as a going concern. Geos
Communications, Inc. and subsidiaries has not generated positive cash flows from
operations and has accumulated losses since inception, which raises substantial
doubt about its ability to continue as a going concern. Management’s plans
regarding those matters also are described below. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.




We
effected a 1:10 reverse split of our common stock effective May 14, 2009, and
all references to shares reflect the reverse stock split.





LIQUIDITY AND MANAGEMENTS
PLANS




As shown
in the accompanying consolidated financial statements, the Company incurred a
net loss of $3,136,752 during the three months ended March 31, 2010, the
Company’s current liabilities exceeded its current assets by $2,668,287 and its
total liabilities exceeded its total assets by $7,119,738 which includes the
Preferred Shares subject to mandatory redemption of $11,962,552.




The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern.  The Company has sustained substantial
operating losses since commencement of operations.  The Company has also
incurred negative cash flows from operating activities and the majority of the
Company’s assets are intangible assets, which were not considered impaired in
the current year.




4




In view
of these matters, realization of a major portion of the assets in the
accompanying consolidated balance sheet is dependent upon continued operations
of the Company, which is in turn dependent on the Company restructuring its
financing arrangements, and/or obtaining additional financing,  and
achieving a positive cash flows while maintaining adequate
liquidity.




The
Company has undertaken a number of specific steps to achieve positive cash flow
in the future.  These actions include the two acquisitions consummated in
thefirst
quarter of 2010 and draw down note described in footnote 7 along with the
economic cost associated with the integration, and debt restructuring and equity
placements which occurred at the same time as the acquisitions in the first
quarter of 2010. The Company has taken further action to reduce its ongoing
operating costs, and has been in discussions with the secured and unsecured
creditors regarding restructuring of commitments. Other actions include
continued increases in revenues by introducing new products and revenue streams,
reductions in the cost of revenues, continued expansion into new territories,
reviewing additional financing options, and accretive acquisitions. Management
believes that the actions undertaken as a whole provide the opportunity for the
Company to continue as a going concern, although this will be highly dependent
on the ability to restructure our financing arrangements.




The
Company has identified several new business strategies that may enable the
Company to reach its profitability goals.  First, the Company currently has
a detailed plan under which it will bring in new capital for both its short term
as well as its long term liquidity needs.  The Company is in negotiations
with several companies to enable the Company to ultimately expand the market and
revenues for its products and services.  Management believes that new
products it has in development, the potential for newly identified business
relationships coupled with new capital from sophisticated investors, should
allow the Company to achieve its goal of positive cash flow within the next
twelve months. There can be no assurances that such efforts will be successful.
The Company may finance these new business opportunities through a combination
of equity and/or debt. If the Company determines to finance these opportunities
by issuing additional equity, then such equity may have rights and preferences
superior to the outstanding Common Stock, and the issuance of such equity will
dilute the ownership percentage of the Company’s existing shareholders. If the
Company determines to finance these opportunities by incurring debt, then such
debt may not be available to the Company on favorable terms, if at
all.




NOTE
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




The
consolidated financial statements of Geos Communications, Inc. have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”).




Basis
of Consolidation




The
consolidated financial statements include the accounts of Geos Communications
(DE), Geos Communications IP Holdings, Inc.,  SuperCaller Community,
Inc. (“SuperCaller”), Shoot It!, Inc., and D-Mobile, Inc. all of which are,
directly or indirectly, wholly-owned subsidiaries of the Company.  All
significant intercompany accounts and transactions have been eliminated in
consolidation.




In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting
Principles). The FASB ASC became the single source of authoritative
nongovernmental U.S. generally accepted accounting principles (“GAAP”),
superseding existing FASB, American Institute of Certified Public Accountants
(“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting
literature. The new codification system organizes the thousands of GAAP
pronouncements into roughly 90 accounting topics and displays them using a
consistent structure. Also included is relevant SEC guidance organized using the
same topical structure in separate sections. This standard, which is now
considered FASB ASC Topic No.105, became effective for financial statements
issued for reporting periods that end after September 15, 2009.




Accordingly,
previous references to GAAP accounting standards are no longer used by the
Company in its disclosures including these notes to the consolidated financial
statements.  The codification does not affect the Company’s
consolidated balance sheet, cash flows or results of operations.




5





Interim
Condensed Financial Statements





The
condensed consolidated financial statements included herein have been prepared
by Geos Communications, Inc. and are unaudited, except for the condensed
consolidated balance sheet at December 31, 2009, which has been derived from
audited consolidated financial statements at that date on the basis of
accounting principles generally accepted in the United States (“GAAP”). The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure 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.
In the opinion of management, the unaudited condensed consolidated interim
financial statements include all normal recurring adjustments necessary for a
fair presentation of the financial position as of March 31, 2010, the results of
operations for each of the three months ended March 31, 2010 and 2009, and the
cash flows for the three months ended March 31, 2010 and 2009. In addition,
operating results for the three months ended March 31, 2010 is not necessarily
indicative of results that may be expected for the year ending December 31,
2010.





Although
management believes the unaudited interim related disclosures in these condensed
consolidated financial statements are adequate to make the information presented
not misleading, certain information and footnote disclosures normally included
in annual audited consolidated financial statements prepared in accordance with
GAAP have been condensed or omitted from pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, the condensed
consolidated financial statements included herein should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company’s 2009 Annual Report on Form 10-K.




Accounting
Estimates




Preparation
of the accompanying consolidated 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 disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period.




Revenue
Recognition




Our
revenues for 2010 have been derived primarily from our legacy Voicestick long
distance services and to a lesser extent from MyGlobalTalk services which
became market ready in the fourth quarter of 2009.  In addition, we
acquired two new companies who provide revenues from additional mobile media
applications. All revenues are due upon performance of services.




Revenue
is recognized in accordance with SEC Staff Accounting Bulletin (SAB) No. 104
“Revenue Recognition” (“SAB 104”), when persuasive evidence of an arrangement
exists, the fee is fixed or determinable, collectability is probable, delivery
of a product has occurred or services have been rendered and title and risk of
loss has transferred. Revenues include shipping and handling costs billed to the
customers.





Business
Combinations




Pursuant toASC 805,“Business
Combinations”(“ASC
805”), the Company has used
the acquisition method of accounting.The acquisition method of accounting is
used for all business combinations where the acquiror is identified for each
business combination. ASC 805 defines the acquirer as the entity that obtains
control of one or more businesses in the business combination and establishes
the acquisition date as the date that the acquirer achieves control.We will recognize separately from
goodwill, the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interests in an acquiree, generally at the acquisition date fair
value as defined by Topic 820,Fair Value Measurements. Goodwill as of the acquisition date is
measured as the excess of consideration transferred, which is also generally
measured at fair value, and the net of the acquisition date amounts of the
identifiable assets acquired and the liabilities assumed.


6




The acquisition method requires us to
use significant estimates and assumptions, including fair value estimates, as of
the business combination date and to refine those estimates, as necessary,
during the measurement period (defined as the period, not to exceed one year, in
which we may adjust the provisional amounts recognized for a business
combination) in a manner that is prescribed in Topic 805.





Fair
Value of Financial Instruments




The
Company calculates the fair value of its assets and liabilities which qualify as
financial instruments and includes this additional information in the notes to
consolidated financial statements when the fair value is different than the
carrying value of these financial instruments. The estimated fair value of
accounts receivable, accounts payable and accrued liabilities approximate their
carrying amounts due to the relatively short maturity of these instruments. The
carrying amounts and fair values for Convertible debt plus Preferred Stock
Series A-D, G and Series F are presented in Note 3, Note 7 and Note
8.




Concentrations
of Credit Risk




Financial
instruments which potentially subject us to concentration of credit risk consist
principally of cash and cash equivalents, and accounts receivable. We have
placed cash and cash equivalents with a single high credit-quality
institution.  The Company’s risk of loss is limited due to advance
billings to customers for long distance services and the ability to discontinue
these primary services on delinquent accounts.  We perform ongoing
credit evaluations of our customers and maintain an allowance for potential
credit losses.




Cash
and Cash Equivalents




For
purposes of the statement of cash flows, the Company considers all short-term
securities purchased with an original maturity of three months or less to be
cash equivalents.




Inventories




Inventories
consisting of purchased components available for resale are stated at lower of
cost or market.  Cost is determined on the first-in, first-out (FIFO)
basis.




Deferred
Financing Cost




Deferred
financing costs include underwriting, legal, accounting and other direct costs
incurred in connection with the issuance and amendments thereto, of the
Company’s debt. These costs are amortized over the terms of the related debt
using the straight-line method which approximates amortization using the
effective interest method. Initial purchasers’ discounts are accreted over the
terms of the related debt, utilizing the effective interest method. The
amortization expense of deferred financing costs and accretion of initial
purchasers’ discounts is included in interest expense as an overall cost of the
related financings.




Property
and Equipment and Related Depreciation




Property
and equipment are recorded at cost.  Depreciation is computed using
the straight-line method for financial and tax reporting purposes. Estimated
lives range from five to ten years.  When properties are disposed of,
the related costs and accumulated depreciation are removed from the respective
accounts and any gain or loss on disposition is recognized at that
time.  Maintenance and repairs which do not improve or extend the
lives of assets are expensed as incurred.




Intangible
Assets




The
Company has capitalized certain costs related to registering trademarks and
patent pending technology. In addition, the Company has acquired the trade
names of Shoot It! and Duo Guo, and noncompete agreements in the acquisition of
the two companies. In accordance with FASB ASC topic 350, the Company amortizes
its intangible assets with a finite life over periods ranging from 2 to 10 years
on a straight-line basis. Additionally, the Company tests its intangible assets
for impairment whenever circumstances indicate that their carrying value may not
be recoverable.




7





Goodwill





In determining the valuation of
goodwill, the Company is applying ASC 805,“Business
Combinations”. Goodwill as of the acquisition date is
measured as the excess of consideration transferred, which is also generally
measured at fair value, and the net of the acquisition date amounts of the
identifiable assets acquired and the liabilities
assumed.




ASC 805 requires an
entity:





●
            to
      record separately from the business combination the direct costs, where
      previously these costs were included in the total allocated cost of the
      acquisition.●
            to
      recognize the assets acquired, liabilities assumed, and any
      non-controlling interest in the acquired at the acquisition date, at their
      fair values as of that
date.


●
            to
      recognize as an asset or liability at fair value for certain
      contingencies, either contractual or non-contractual, if certain criteria
      are met.●
            to
      recognize contingent consideration at the date of acquisition based on the
      fair value at that
date.





Impairment
of Long-lived Assets




In
accordance with the FASB ASC topic 360 on impairment or disposal of long-lived
assets, the Company reviews its long-lived assets, including property and
equipment, and finite-life intangibles for impairment whenever events or changes
in circumstances indicate that the carrying amount of the assets may not be
fully recoverable.  To determine recoverability of its long-lived
assets, the Company compares the future undiscounted net cash flows, without
interest charges to the carrying amount of the assets, and if it exceeds cash
flow impairment is recorded to adjust the asset to its fair value (using
discounted cash flows). The Company had no impairment of assets during the three
months ended March 31, 2010.




Internal
Use Software




Expenditures
for internal use software, all of which have been obtained from third parties,
have been capitalized and are being amortized over five years. The Company
accounts for its internal use software in accordance with guidance in ASC Topic
No. 350, (formerly Statement of Position 98-1), Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.





Debt
Extinguishment




On July
1, 2009, we offered to certain of our existing note holders the opportunity to
exchange some or all of the principal, interest and loan fees under $6,328,212
of notes, which included all accrued interest and related fees, (the “Debt”) for
different series of preferred stock of Geos Communications IP Holdings, Inc.
This exchange was deemed to be debt extinguishment for the notes payable
according to the ASC Topic No.405- Liabilitiesand 470-50 –
Debt, Modifications and
Extinguishments.As a result of this exchange a loss on debt
extinguishment of $1,469,523 was recorded and is included in the Statement of
Operations for the year ended December 31, 2009.




ASC
470-50-40-10 (formerly EITF Issue 96-19) establishes the criteria for debt
extinguishment and modification. If the debt is substantially different, then
the debt is extinguished, and a gain or loss is calculated and recorded. We
determined that an extinguishment existed as the present value of the cash flows
under the terms of the new instrument, the different series of preferred stock,
was at least 10% different from the present value of the remaining cash flows
under the terms of the original notes.




Income
Taxes




The
Company files a consolidated federal income tax return with its wholly-owned
subsidiaries. The Company is a C-Corporation under the provisions of the
Internal Revenue Code. We utilize the asset and liability approach to measuring
deferred tax assets and liabilities based on temporary differences existing at
each balance sheet date using enacted tax rates expected to be in effect at when
the temporary differences reverse in accordance with ASC 740, Income Taxes(“ASC 740”). ASC
740 takes into account the differences between financial statement treatment and
tax treatment of certain transactions. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.




8





In
accordance with ASC 740, the Company recognizes the effect of uncertain income
tax positions only if those positions are more likely than not of being
sustained. Recognized income tax provisions for these uncertain tax positions
are measured at the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in the period in
which the change in judgment occurs. The Company considers both interest and
penalties related to uncertain tax positions as part of the income tax
provision.




Our
deferred tax calculation requires management to make certain estimates about
future operations. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The effect of a change
in tax rate is recognized as income or expense in the period that includes the
enactment date.




Net
operating losses (“NOLs”) may be limited and the company is in process of
determining if such a triggering event took place.  The Company is in
the process of determining if a change in control, for purposes of Internal
Revenue Code section 382, occurred during a testing period in
2009.  If it is determined there was a change in control, the net
operating losses will be subject to an annual limitation on their
utilization.  At this time, the annual limitation, if any, is not
readily determinable.





Net
Income (Loss) per Common Share




Basic
earnings (loss) per common share represent income available to common
shareholders divided by the weighted average number of shares outstanding during
the period.  Diluted earnings per common share reflect additional
common shares that would have been outstanding if dilutive potential common
shares had been issued, as well as any adjustment to income available to common
stockholders that would result from the assumed issuance. Options on shares of
common stock warrants, and certain bonds convertible into common shares were not
included in the computing of diluted loss per share because their effects were
anti-dilutive.




Comprehensive
Income or Loss




The
Company has no components of other comprehensive income or loss, and
accordingly, net loss equals comprehensive loss for all periods
presented.




Stock
Compensation




The
Company measures all share-based payments, including grants of employee stock
options to employees and warrants to service providers, using a fair-value based
method in accordance with the ASC Topic No. 505 and Topic No. 718 (formerly SFAS
No. 123R) Share-Based
Payments. The cost of services received in exchange for awards of equity
instruments is recognized in the consolidated statement of operations based on
the grant date fair value of those awards amortized over the requisite service
period.




Preferred
Shares




The
Company applies the guidance enumerated in ASC Topic No. 480 “Distinguishing
Liabilities from Equity,” and “Classification and Measurement of Redeemable
Securities,” when determining the classification and measurement of preferred
stock. Preferred shares subject to mandatory redemption are classified as
liability instruments and are measured initially at fair value and are accreted
to the mandatory redemption value using the effective interest
method.   Accretion and dividends are recorded as interest
expense in the Statement of Operations.  As of March 31, 2010, the
Company had recorded liabilities related to Series A-D Preferred Shares and
Series G Preferred Shares subject to mandatory redemption features, which
amounted to $8,391,824 and $3,570,728, respectively.




9





The
Company classifies conditionally redeemable convertible preferred shares, which
includes preferred shares subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control, as temporary equity. At all
other times, the Company classifies its preferred shares in stockholders’
equity. As of March 31, 2010, the Company had recorded as temporary equity
Series F Preferred Shares totaling $5,047,057.  Dividends on preferred
shares included in temporary equity and equity are recorded as Dividends on
Preferred Stock below Net Loss on the Statement of Operations.




The
Company evaluates the conversion option of the convertible preferred shares
under ASC Topic No. 470-20, “Debt with Conversion and Other Options,” (formerly
EITF Issues 98-5, Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios, and 00-27,
Application of Issue No. 98-5 to Certain Convertible Instruments).  A
convertible financial instrument includes a beneficial conversion feature if the
effective conversion price is less than the company’s market price of common
stock on the commitment date.




New Accounting
Pronouncements




Variable
Interest Entities




In June
2009, the Financial Accounting Standards Board (FASB) issued guidance that
changed the consolidation model for variable interest entities (VIEs). This
guidance requires companies to qualitatively assess the determination of the
primary beneficiary of a VIE based on whether a company (1) has the power to
direct matters that most significantly impact the activities of the VIE, and (2)
has the obligation to absorb losses or the right to receive benefits of the VIE
that could potentially be significant to the VIE. This standard is effective at
the beginning of 2010 and must be applied retrospectively. The adoption of this
guidance did not have any impact on our financial statements.




NOTE 3.  ACQUISITION OF
SHOOT IT! AND D MOBILE





Shoot It!
Acquisition





On
February 19, 2010, the Company entered into and closed an Agreement and Plan of
Merger (the “Shoot It! Merger Agreement)” with Shoot It!, LLC., an Arizona
limited liability company (“Shoot It!”), certain security holders of Shoot It!
and Shoot It! Acquisition, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company (“Shoot It! Merger Sub”).  Subject to the
terms and conditions of the Shoot It! Merger Agreement, Shoot It! was merged
with and into Shoot It! Merger Sub (the “Shoot It! Merger”) with Shoot It!
Merger Sub surviving as a wholly-owned subsidiary of the Company.




The
Company acquired 100% of the common stock of Shoot it via the issuance of 2,167
shares of Geos’ newly issued Series G Preferred Stock.  Shoot It has
developed a postcard messaging application that allows users to take a picture
with their smart phone, create a personal message and send it as a hard copy
postcard from anywhere in the world.  The purpose of the acquisition
was to create additional synergies with the applications of Geos.  The
condensed consolidated financial statements of the Company reflect the Shoot It
acquisition being accounted for as an Acquisition in accordance with ACS 805
Business Combinations topic.  Transactions cost associated with the
acquisition have been expensed and were not significant.  The acquired
goodwill is treated as non-deductible for income tax purposes.  The
results of operations of Shoot It! are included in the Company’s condensed
consolidated statement of operations from the date of
acquisition.  Goodwill consists of the excess of the fair value of any
consideration transferred plus the fair value of any non-controlling interest in
the acquiree at the acquisition date over the fair value of net identifiable
asset acquired, consisting of assets acquired less liabilities
assumed.





The
purchase price allocation is preliminary pending the completion of valuations of
assets acquired and liabilities assumed and certain other liabilities including,
but not limited to, deferred taxes.  As such, the allocation of the
purchase price presented below is preliminary and subject to change, the
allocation presented below reflects the estimated fair value of the individual
assets acquired and liabilities assumed as of the date of
acquisition.




10





Purchase
Price:





March
      31, 2010Fair
      value of original acquisition in 2009 previously presented on a cost
      basis
            
            $
            250,000Fair
      value of preferred stock Series G transferred
            
            
            1,358,322Total
      consideration
            
            $
            1,608,322





Purchase price
allocation:





March
      31, 2010Property
      and equipment
            
            $
            319,000Trade
      Name intangible
            
            
            345,000Non-Compete
      agreement
            
            
            22,000Goodwill
            
            
            922,322Total
      purchase price allocation
            
            $
            1,608,322





Including
the results of Shoot It! as if the acquisition occurred on January 1, 2010, the
proforma net loss, and net loss attributable to the common shareholders would
have been $3,241,891and $3,355,429, respectively for the three months ended
March 31, 2010. Shoot It! was incorporated on April 15, 2009, and as such the
proforma net loss, and net loss attributable to the common shareholders is the
same as previously reported for the three month periods ended March 31,2009. The
pro forma information is for informational purposes only and is not intended to
be indicative of the actual combined results that would have been reported had
the transactions occurred on the dates indicated nor does the information
represent a forecast of the combined financial results of the Company or Shoot
it for any future period.  The actual operating results of Shoot It
contained in the accompanying financial statements include net revenues of $
6,610.





D Mobile
Acquisition





On
February 12, 2010, the Company entered into an Agreement and Plan of Merger (the
“D Mobile Merger Agreement)” with D Mobile, Inc., a Delaware corporation (“D
Mobile”), Jonathan Serbin (“Serbin”) and D Mobile Acquisition, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company (“D Mobile Merger
Sub”).  Subject to the terms and conditions of the D Mobile Merger
Agreement, D Mobile was merged with and into D Mobile Merger Sub (the “D Mobile
Merger”) with D Mobile Merger Sub surviving as a wholly-owned subsidiary of the
Company. On March 1, 2010, the Company entered into a First Amendment to the D
Mobile Merger Agreement (the “   First Amendment”). Pursuant to
the First Amendment, the D Mobile Merger Agreement was amended to provide for
each D Mobile security-holder to have the option for ten days following the
closing of the Merger to elect (the “Cash Election”) to receive $49.68 in lieu
of each share of Series G Preferred Stock and each Parent Warrant to
purchase a share of Series G Preferred Stock that such security-holder would
have received in the D Mobile Merger.





At
Closing on March 1, 2010, the Company acquired 100% of the common stock of
D-Mobile via the issuance of 3,110.84 shares of Geos’ newly issued Series G
Preferred Stock, application of Note Receivable of $ 120,000 and cash of $
75,000.   D Mobile currently operates a retail channel for the
discovery and download of licensed mobile content under the brand name Duo Guo
in China.  The purpose of the acquisition was to obtain a retail
platform for the distribution of mobile content.  The condensed
consolidated financial statements of the Company reflect the D-Mobile
acquisition being accounted for as an Acquisition in accordance with ACS 805 in
the Broad Transactions-Business Combinations topic (formerly SFAS
141r).  Transactions cost associated with the acquisition have been
expensed and were not significant.  The acquired goodwill is treated
as non-deductible for income tax purposes.  The results of operations
of D-Mobile are included in the Company’s condensed consolidated statement of
operations from the date of acquisition.  Goodwill consists of the
excess of the fair value of any consideration transferred plus the fair value of
any non-controlling interest in the acquiree at the acquisition date over the
fair value of net identifiable asset acquired, consisting of assets acquired
less liabilities assumed.




11





The
purchase price allocation is preliminary pending the completion of valuations of
assets acquired and liabilities assumed and certain other liabilities including,
but not limited to, deferred taxes.  As such, the allocation of the
purchase price presented below is preliminary and subject to
change,  the allocation presented below reflects the estimated fair
value of the individual assets acquired and liabilities assumed as of the date
of acquisition.





Purchase
Price:





March
      31, 2010Fair
      value of cash paid to one Shareholder
            
            $
            75,000Fair
      value of loan from Geos to D-Mobile
            
            
            60,000Fair
      value of 2009 loan from Geos to D-Mobile
            
            
            60,000Fair
      value of preferred stock Series G transferred
            
            
            1,964,900Fair
      value of preferred stock Series G warrants issued
            
            
            163,118Total
      consideration
            
            $
            2,323,018





Purchase price
allocation:





March
      31, 2010Cash
      and cash equivalents
            
            $
            256,106Account
      Receivable
            
            
            11,848Prepaid
      and other assets
            
            
            58,349Property
      and equipment
            
            
            245,207Trade
      Name intangible
            
            
            626,000Non-Compete
      agreement
            
            
            60,000Trade
      payables
            
            
            (154,762
            )Goodwill
            
            
            1,220,270Total
      purchase price allocation
            
            $
            2,323,018





Including
the results of D-Mobile as if the acquisition occurred on January 1, 2010, the
proforma net loss, and net loss attributable to the common shareholders would
have been $3,262,158 and $3,375,696, respectively for the three month periods
ended March 31, 2010, and $2,591,027 and $2,591,027, respectively for the three
month period ended 2009. The proforma information is for informational purposes
only and is not intended to be indicative of the actual combined results that
would have been reported had the transactions occurred on the dates indicated
nor does the information represent a forecast of the combined financial results
of the Company or D-Mobile for any future period.  The actual
operating results of D-Mobile contained in the accompanying financial statements
include net revenues of $ 4,934 and net loss of $ 66,900 since the date of
acquisition.





The acquisitions combined as
of acquisition dates are as follows:





Combined Purchase
Price:





March
      31, 2010Fair
      value of original acquisition in 2009 previously presented on a cost
      basis
            
            $
            250,000Fair
      value of cash paid to one Shareholder
            
            
            75,000Fair
      value of loan from Geos to D-Mobile
            
            
            120,000Fair
      value of preferred stock Series G transferred
            
            
            3,323,222Fair
      value of preferred stock Series G warrants issued
            
            
            163,118Total
      consideration
            
            $
            3,931,340




12




Combined Purchase Price
Allocation:





March
      31, 2010Cash
      and cash equivalents
            
            $
            256,106Account
      Receivable
            
            
            11,848Prepaid
      and other assets
            
            
            58,349Property
      and equipment
            
            
            564,207Trade
      Name intangible
            
            
            971,000Non-Compete
      agreement
            
            
            82,000Trade
      payables
            
            
            (154,762
            )Goodwill
            
            
            2,142,592Total
      purchase price allocation
            
            $
            3,931,340





Including
the combined results of Shoot It! and D-Mobile as if the acquisition occurred on
January 1, 2010, the proforma net loss, and net loss attributable to the common
shareholders would have been $3,367,297 and $3,480,835, respectively for the
three month periods ended March 31, 2010, and $2,591,027 and $2,591,027,
respectively for the three month period ended 2009. The proforma information is
for informational purposes only and is not intended to be indicative of the
actual combined results that would have been reported had the transactions
occurred on the dates indicated nor does the information represent a forecast of
the combined financial results of the Company or D-Mobile for any future
period.  The actual combined operating results of Shoot It! and
D-Mobile contained in the accompanying financial statements include net revenues
of $11,544 and net loss of $ 66,900 since the date of acquisition.





SERIES G PREFERRED SHARES
MANDITORILY REEDEMABLE





The
Company authorized 20,000 shares of Series G Preferred Stock on February 12,
2010. Subsequently, approximately 5,278 shares were issued in connection with
the above acquisitions. The shares accrue dividends at 6%, all of which are due
and payable on the third anniversary from issuance. The dividends can be paid at
the option of the Company in either cash or common stock equivalents. Upon
certain milestones related to share pricing, the Series G preferred shares
automatically convert to common shares of the Company at $ .50 per
share.  The stated value of $1,000 per share, or a total of
$5,278,000, is mandatorily redeemable at the end of three years from the date of
issuance. In addition, for the D Mobile acquisition approximately 258 warrants
were issued which are convertible for three years after issuance date into
Series G Preferred Shares at $.50 per share.





The
number of shares of Common Stock issuable upon automatic conversion is
determined by dividing the stated value, or $1,000, by a conversion price of $
0.50.  Series G Preferred Shares will automatically convert if the
following milestones are met: (A) 180 days have passed from the applicable
Issuance Date; (B) the Common Stock underlying the applicable Series G Preferred
Share is available for sale under Rule 144 of the Securities Act of 1933, as
amended; (C) the Closing Bid Price of the Common Stock is greater than $1.00, as
adjusted for stock splits, stock dividends, recapitalizations, combinations,
reverse stock splits or other similar events) for a Twenty Day Period, as
determined in accordance with the Weighted Average Price; and (D) the total
volume of shares of Common Stock traded shall be in excess of 500,000 shares, as
adjusted for stock splits, stock dividends, recapitalizations, combinations,
reverse stock splits or other similar events) for a Twenty Day Period; provided
however, if condition (D) is not met, then the amount of Series G Preferred
Shares otherwise convertible shall be pro-rated to the percentage of 500,000
shares traded during the Twenty Day Period immediately prior to the Automatic
Conversion Date.





The
Company may not authorize or issue any additional class or series of equity
securities of the Company ranking senior to, or pari passu with, the Series G
Preferred Shares with respect to  dividends, distributions and
payments upon the liquidation, dissolution and winding up of the Company. The
holders of Series G Preferred Shares are entitled to the same voting rights as
common shareholders




The
Company applies the guidance enumerated in ASC Topic No. 480 “Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity,” and “Classification and Measurement of Redeemable Securities,” when
determining the classification and measurement of preferred stock. Preferred
shares subject to mandatory redemption are classified as liability instruments
and are measured initially at fair value with accretion of interest expense and
dividends related to the shares added to the mandatory redemption value using
the effective interest method.  The fair value at date of the acquisitions
was $3,323,222.  We have accredited interest of $54,289, and dividends
of $30,099, and have included the fair value of the warrants of $163,118,
resulting in a balance of $3,570,728 as of March 31, 2010.




13





NOTE
4.  PROPERTY AND EQUIPMENT




Estimated
lives range from five to ten years. Depreciation charged to operations was
$92,120 and $188,208 for the three months ended March 31, 2010 and 2009,
respectively.




The major
components of property and equipment at March 31, 2010 are as
follows:





March
      31, 2010
            
            
            December
      31, 2009Network
      Equipment
            
            $
            1,136,624
            
            
            $
            1,133,245Office
      Equipment
            
            
            372,812
            
            
            
            368,148Software
            
            
            1,078,165
            
            
            
            1,077,322Software
      Development
            
            
            886,119
            
            
            
            861,119Lab
      Equipment
            
            
            39,577
            
            
            
            39,577Furniture
      and Fixtures
            
            
            46,884
            
            
            
            46,884Purchased
      Technology
            
            
            564,031
            
            
            
            -4,124,212
            
            
            
            3,526,295Less:  Accumulated
      Depreciation and Amortization
            
            
            2,232,889
            
            
            
            2,140,769Net
      Property and Equipment
            
            $
            1,891,323
            
            
            $
            1,385,526





NOTE
5.  INTANGIBLE ASSETS




Intangible
assets at March 31, 2010 consisted of the following, at cost:





March
      31, 2010
            
            
            December
      31, 2009Patent
      Pending Technology
            
            $
            3,190,917
            
            
            $
            3,190,917Trademarks
            
            
            274,017
            
            
            
            274,017Non-Compete
            
            
            82,000
            
            
            
            -Trade
      Name  Shoot It!
            
            
            971,000
            
            
            
            -4,517,934
            
            
            
            3,464,934Accumulated
      Amortization
            
            
            1,123,240
            
            
            
            1,023,034Intangible
      Assets, net
            
            $
            3,394,694
            
            
            $
            2,441,900





The
Company has six patents which have been granted, and thirteen patent
applications pending.  The life of the technology and
trademarks is estimated to be ten years and is being amortized, beginning
January 1, 2007 over a ten year period. The life of the Non compete and Trade
Name are two and ten, respectively. As of March 31, 2010, the Company has
determined there is no impairment of the intangible assets.




Amortization
expense totaled $101,206 and $95,694 for the three months ended March 31, 2010
and 2009, respectively.




NOTE
6.   CONVERTIBLE BONDS




On
December 9, 2006, the Company sold $2,000,000 of 6% secured convertible
debentures pursuant to a Securities Purchase Agreement dated thereof. The
Company received $1,625,000 in December 2006 and remaining $375,000 in January
2007. The Debentures matured on May 9, 2007. The Debentures were convertible
from time to time into 28,571,429 pre-split shares of Common Stock of the
Company at the price of $.07 per share and 28,571,429 pre-split warrants
exercisable for three years at the price of $.07 per share, of which were only
partially converted in 2007, with the remaining warrants forfeited as of
December 31, 2009.




14




On
February 28, 2007, the Company sold $2,000,000 of 6% Senior Subordinated Secured
Convertible Notes convertible into 1,666,666  post- split shares of
the Company's common stock priced at $.24 each, and 833,000 post-split Warrants,
priced at $.24 each. For every two shares of Common Stock to be issued, the
investor(s) received one warrant which is exercisable into the Company's common
stock at $.24. These warrants mature three years from issuance and will expire
in February 2010, all of which 566,673  are outstanding as of
December 31, 2009. The Notes will automatically convert into the Company's
common stock if any of the following events occur: (i) the Shares become
registered and freely trading, or (ii) the financial closing by the Company of
$10,000,000 or more. The Notes are secured by all assets of the Company and its
subsidiaries. All future debt securities issued by the Company will be
subordinate in right of payment to the Notes; provided, however, that the
Company may raise up to $1.0 million of senior indebtedness that ranks pari
passu with the Notes in the future. During the year ended December 31, 2007, the
Company converted Convertible debt in the amount of $3,392,274, net of bond
discount of $557,419, in principal and accrued interest, to common stock. Total
shares issued in exchange for the debt were 40,851,517.




Due to
the late registration of shares received in conversion of the Convertible Debt,
penalty shares were awarded and issued to convertible note holders. The total
number of penalty shares issued was 6,320,476.




Convertible
bonds remaining at March 31, 2010 consisted of the following:




March
      31, 2010December
      2006 6% Convertible Bonds
            
            $
            50,000February
      2007 6% Convertible Bonds
            
            
            -0-$
            50,000




NOTE
7.   CONVERTIBLE BONDS, NOTES PAYABLE, BORROWINGS UNDER LINE OF
CREDIT, and SERIES A-D, PREFERRED SHARES (Series G Preferred Shares discussed in
Footnote Number 3 above)




On July
31, 2009, we offered to certain of our existing note holders and convertible
bond holders, the opportunity to exchange some or all of the principal, interest
and loan fees of all notes, including notes payable to related parties, which
included all accrued interest and related fees, (the “Debt”) for different
series of preferred stock of GEOS.The issuance
price of the preferred stock of IP Holdings was $1.00 for every $1.00 of each
note being exchanged.  The Company exchanged an aggregate of
$5,598,385 of the debts into IP Holdings Series A–D Preferred Stock, with a
majority of the remaining notes being repaid in cash. The outstanding balances
of convertible bonds and notes payable are $50,000 and $9,000, respectively, for
both periods ended March 31, 2010 and December 31, 2009.




With
assistance from an independent third party, the Company determined the
initial fair value of the Series A-D Preferred shares to be
$7,028,630.Subsequently, $344,424 and $574,041 has been accreted for interest as
of March 31, 2010 and December 31, 2009 respectively.  The final
mandatory redemption amount is $9,784,027 which encompasses additional charges
for each time period passing as follows:




July
      31, 2010
            
            $
            459,233July
      31, 2011
            
            $
            1,377,699




In
addition, dividends of $166,773 and $277,955 have been added to the liability
resulting in a balance of $8,391,824 and $7,880,627 as of March 31, 2010 and
December 31, 2009, respectively.





The
Series A-D Preferred Stock provides for an accruing dividend of 12% per annum,
and a special dividend for up to two years in the event that the Preferred Stock
has not been redeemed.




15





The
Company applies the guidance enumerated in ASC Topic No. 480 “Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity,” and “Classification and Measurement of Redeemable Securities,” when
determining the classification and measurement of preferred stock. Preferred
shares subject to mandatory redemption are classified as liability instruments
and are measured initially at fair value with accretion of interest expense and
dividends related to the shares added to the mandatory redemption value using
the effective interest method.  Redemption value approximates fair value at
December 31, 2009 due to the short period of time from issuance to the reporting
date.




This
exchange was also deemed to be debt extinguishment for the notes payable
according to the ASC Topic No.405- Liabilitiesand 470-50 –
Debt, Modifications and
ExtinguishmentsAs a result of this exchange a loss on debt
extinguishment of $1,469,523 was recorded and is included in the Consolidated
Statement of Operations for the year ended of December 31, 2009.




On
February 23, 2010, the Company issued a Drawdown Promissory Note (“Borrowing
under Line of Credit”) in an amount up to a maximum of $2,000,000 (the “Drawdown Note”). The
Drawdown loan accrues interest at a rate of 12% per annum and the principal and
interest thereon is due and payable on the earlier of (i) the closing on at
least $5,000,000 of subscriptions for newly created shares of Series H Preferred
Stock of the Company; or (ii) August 23, 2010 (the “Maturity
Date”).  The note holder may convert all or any portion of the
principal balance of and/or accrued but unpaid interest on the Drawdown Note
into the securities we anticipate offering in a private placement of equity in
the form of Series H Preferred Stock and warrants (the “Offering”), at a conversion
price equal to the purchase price paid for the Series H Preferred Stock and
warrants in the Offering. The Drawdown Note requires the issuance of a
warrant to purchase 10,000 shares of Common Stock for each $100,000
drawdown there under at a purchase price of $0.20 per share.  The term
of each warrant is three years from date of issuance. At March 31, 2010, $1.3
million was outstanding, and as of April 23, 2010, all amounts available under
the Drawdown Note had been accessed by the Company.





NOTE
8.  SERIES F CONVERTIBLE PREFERRED STOCK




In 2009,
the Company issued Series F Convertible Preferred Stock, no par value (the
“Series F Preferred
Shares”). Each share of the Series F Preferred Shares is convertible at
the option of the holder into shares of our Common Stock, no par value. The
number of shares of Common Stock issuable upon conversion is determined by
dividing the stated value, or $1,000, by a conversion price of $0.50, subject to
adjustment as provided in the Certificate of Designations.  In
addition, each share of Series F Preferred Shares will automatically convert (i)
if certain milestones provided in the Certificate of Designations are met, (ii)
if such share is outstanding on the third anniversary of the date that Series F
Preferred Shares are first issued or (iii) if the holders of more than fifty
percent of the outstanding Series F Preferred Shares so consent. Without the
express written consent of holders of at least fifty percent of the
then-outstanding Series F Preferred Shares (as well as any holders of more than
twenty percent of the then-outstanding Series F Preferred Shares) the Company
may not authorize or issue any additional class or series of equity securities
of the Company ranking senior to, or pari passu with, the Series F Preferred
Shares with respect to  dividends, distributions and payments upon the
liquidation, dissolution and winding up of the Company. The holders of Series F
Preferred Shares are entitled to elect one director to the Board of Directors,
but the Series F Preferred Shares otherwise carry no voting rights other than
those required by law.




The
Series F holders may convert, at their discretion (subject to a conversion
restriction prohibiting any conversion that would result in a Series F holder’s
beneficially owning more than 4.9% of the then-issued and outstanding Common
Stock), all or any of the shares into Common Shares at a conversion price of
$0.50, resulting in 15,100,000 shares of Common Stock.  There have
been no conversions as of March 31, 2010.




The
Company has the option to redeem all or a portion of the outstanding Series F
Preferred Shares at $2,000 per share, for a total redemption price of
$15,100,000. Holders of Series F Preferred Shares also have the option to
require the Company to redeem their Series F Preferred Shares if the Company
fails to pay required dividends to such holders or breaches any material
representation, warranty or covenant contained in the Certificate of
Designations or in any subscription agreement pursuant to which any Series F
Preferred Shares are issued, and such failure is not cured.




16




The
Company applies the guidance enumerated in ASC Topic No. 480 “Distinguishing
Liabilities from Equity” when determining the classification and measurement of
preferred stock. In addition, the Company classifies conditionally redeemable
preferred shares, which includes preferred shares that feature redemption rights
that are either within the control of the holder or subject to redemption upon
the occurrence of uncertain events not solely within the Company’s control, as
temporary equity.




In
connection with the multiple issuances of 7,550 shares of Preferred Series F
shares, 7,550,000 warrants were issued.  The proceeds of $7,410,000,
net of cost of $140,000, were allocated based on the relative fair values of the
underlying shares and warrants.  The value allocated to the shares was
$5,047,057 as of March 31, 2010 and December 31, 2009, and is shown as temporary
equity on the Consolidated Balance Sheets and is outside of stockholders’ equity
because such shares are contingently redeemable because payment of required
dividend is not within the control of the Company. The beneficial
conversion feature totaled $2,870,825, and was included in Common Stock, No Par,
as of December 31, 2009, and was recognized as a return on the Preferred Series
F in the period of issuance because the Preferred Stock was immediately
convertible.




The value
allocated to the warrants issued to investors, and warrants issued to pay
transaction costs was $2,502,943, and was included in Common Stock, no par, as
of December 31, 2009.  The warrants are exercisable at any time at
$.63, for a period of three years. As of March 31, 2010 there was no exercise of
warrants.




During
the three months ended March 31, 2010, and for the year ended December 31, 2009,
the Company  accrued dividends of 6% totaling of $113,538 and
$176,844, respectively which is due in six months and are included in accrued
expenses on the Consolidated Balance Sheets.




NOTE
9.  COMMON STOCK AND STOCK OPTIONS AND WARRANTS




On May
14, 2009, the Company and Board of Directors approved a ten for one reverse
stock split.  As such, all 2008 Common Stock share prices and amounts
have been adjusted accordingly.




During
2004, the Company’s board of directors approved a stock option plan for its
officers, directors and certain key employees.  Generally, the options
vest over a period of three years. Compensation expense is based upon
straight-line amortization of the grant-date fair value over the implicit
vesting period of the underlying stock option. In accordance with ASC Topic No.
718 and No. 505, the fair value of each stock option grant was estimated on the
date of the grant, using the Black-Scholes option-pricing model.




The
Company did not grant additional stock options during the three months ended
March 31, 2010.





The
Company issued 90,000 stock warrants during the three months ended March 31,
2010, to certain investors, which vest upon issuance, and are accordingly
expensed, with expiration dates of three years. The warrant fair value was
determined by using the Black-Scholes option pricing model. Variables used in
the Black-Scholes option-pricing model include (1) risk-free interest rate
of  .86%, (2) expected warrant life of 1.8 years, (3) expected
volatility of 212%, and (4) zero expected dividends.




Information
regarding stock options and warrants outstanding as of March 31, 2010 are
summarized below:




Number
      of
            
            
            Weighted
      AverageShares
            
            
            Exercise
      PriceOutstanding
      at December 31, 2009
            
            
            23,339,944
            
            
            $
            0.74Options
      Granted
            
            
            -
            
            
            
            -Warrants
      Granted
            
            
            90,000
            
            
            
            .30Canceled
            
            
            (1,809,482
            )
            
            
            (1.06
            )Exercised
            
            
            -
            
            
            
            -Outstanding
      at March 31, 2010
            
            
            21,620,462
            
            
            $
            .73Exercisable
      at March 31, 2010
            
            
            16,693,670
            
            
            $
            .77





17




The
exercise price for options outstanding and exercisable at March 31, 2010 was as
follows:




Shares
            
            Weighted
            
            Weighted
            
            Shares
            
            WeightedUnderlying
            
            Average
            
            Average
            
            Underlying
            
            AverageRange
      of
            
            Options
            
            Remaining
            
            Exercise
            
            Options
            
            ExerciseExercise Prices
            
            Outstanding
            
            Contractual
      Life (Years)
            
            Price
            
            Exercisable
            
            Price$
      .01-$2.00
            
            
            6,566,438
            
            
            2.84
            
            $
            0.67
            
            
            1,639,647
            
            $
            0.90




The
exercise price for warrants outstanding at March 31, 2010 was as
follows:




Shares
            
            Weighted
            
            Weighted
            
            Shares
            
            WeightedUnderlying
            
            Average
            
            Average
            
            Underlying
            
            AverageRange
      of
            
            Warrants
            
            Remaining
            
            Exercise
            
            Warrants
            
            ExerciseExercise Prices
            
            Outstanding
            
            Contractual
      Life (Years)
            
            Price
            
            Exercisable
            
            Price$
      .01-$1.00
            
            
            15,054,023
            
            
            2.23
            
            $
            0.76
            
            
            15,054,023
            
            $
            0.76




During
the three months ended March 31, 2010 and 2009 total compensation costs
recognized in income from stock options was $216,294 and $74,720, respectively,
and is included in general and administrative expenses on the Consolidated
Statement of Operations. As of March 31, 2010, there was unrecognized
compensation expense related to non-vested stock option agreements of
$4,926,791. The intrinsic value of options exercised during three months ended
March 31, 2010 is $0.





During
the three months ended March 31, 2010 and 2009 total compensation costs
recognized in income from warrants issued was $16,324 and $726,553,
respectively, and is included in general and administrative expenses on the
Consolidated Statement of Operations. As of March 31, 2010, there was not
unrecognized compensation expense related to non-vested
warrants.





NOTE
10.  INCOME TAXES





For the three months ended March 31,
2010 the Company had net losses of $3,136,752. No benefit or provision for
income taxes has been recorded due to the uncertainty of the realization of any
tax assets. At March 31, 2010, the Company has accumulated net operating losses
totaling approximately $59 million. The net operating loss carry forwards will
begin to expire in 2019 if not utilized. The Company has recorded net operating
loss carry forwards in each year since its inception and through March 31, 2010.
Based upon all available objective evidence, including the Company’s loss
history, management believes it is more likely than not that the net deferred
assets will not be fully realized. Therefore, the Company has provided a
valuation allowance against its deferred tax assets of approximately $21
million.





NOTE
11.  COMMITTMENTS AND CONTINGENCIES




The
Company leases its office facilities in Southlake, Texas and Shanghai, China
under an operating lease expiring in 2011 and 2012.  The Company also
leases space in Atlanta, Georgia for its network operations on a month to month
basis.




Total
rent expensed was $25,057 and $8,872 during the three months ended March 31,
2010 and 2009, respectively.





Future
minimum lease obligations under all operating leases for each year ended
December 31, are as follows:




Remainder
      of 2010
            
            $
            179,1762011
            
            $
            189,6142012
            
            $
            58,9472013
            
            $
            -0-2014
      and thereafter
            
            $
            -0-




On March
31, 2010, the Company entered into a purchase commitment for 15,000 software
licenses for a total commitment of $700,000, payable in 24 monthly installments
of approximately $30,000, beginning April 30, 2010.




18





NOTE
12. SEGMENT INFORMATION





During the quarter ended March 31, 2010,
the Company completed two acquisitions and is currently evaluating the effect of
these acquisitions on our segment identification and reporting. The Company may
identify segments based on product and service offering and geographic
regions.  Segments may include: MyGlobalTalk, Shoot It!, and Duo
Guo.  Information on segments and the reconciliation to earnings
before income taxes have not been included as revenues for the quarter related
to Shoot It! and Duo Guo were not significant.  See Note 3 for more
information on these acquisitions including the preliminary purchase price
allocation, revenues, and net loss.




NOTE
13.   SUBSEQUENT EVENTS





Effective
April 29, 2010, Geos Communications, Inc., a Washington corporation (the “ Company ”) filed a Certificate
of Designations of Rights and Preferences of Series H Convertible Preferred
Stock (the “ Certificate of
Designations ”) with the Secretary of State of the State of Washington,
designating 20,000 shares of Preferred Stock Series H, no par value (the “ Series H Preferred Shares ”).
The Series H Preferred Shares rank pari passu with shares of the Company’s
Series F Convertible Preferred Stock and Series G Convertible Preferred Stock,
but otherwise rank senior to shares of all other series of Common Stock and
Preferred Stock of the Company with respect to dividends, distributions, and
payments upon liquidation, dissolution, and winding up of the
Company.





Each of
the Series H Preferred Shares is convertible at the option of the holder into
shares of our Common Stock, no par value (“Common Stock ”). The number of
shares of Common Stock issuable upon conversion is determined by dividing the
stated value, or $1,000, by a conversion price of $0.20, subject to adjustment
as provided in the Certificate of Designations. Holders of Series H Preferred
Shares are entitled to vote on an as-converted basis with the holders of the
Common Stock, except as otherwise required by law or as specifically provided in
the Certificate of Designations. As further described in the Certificate of
Designations, the holders of Series H Preferred Shares are entitled to elect one
director to the Board of Directors.





The
Company has the option to redeem all or a portion of the outstanding Series H
Preferred Shares at $2,000 per share. Holders of Series H Preferred Shares also
have the option to require the Company to redeem their Series H Preferred Shares
if the Company fails to pay required dividends to such holders or breaches any
material representation, warranty or covenant contained in the Certificate of
Designations or in any subscription agreement pursuant to which any Series H
Preferred Shares are issued, and such failure or breach is not
cured.





Item 2 - Management’s Discussion and
Analysis of Financial Condition and Results of Operations




The following discussion should be read
in conjunction with the information contained in our consolidated financial
statements, including the notes thereto. Statements regarding future economic
performance, management’s plans and objectives, and any statements concerning
assumptions related to the foregoing contained in Management’s Discussion and
Analysis of Financial Condition and Results of Operations constitute
forward-looking statements. Certain factors, which may cause actual results to
vary materially from these forward-looking statements, accompany such statements
or appear in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009 filed with the Securities and Exchange Commission (the
“SEC”) on May 7, 2010 (the “Form 10-K”), including the factors
disclosed under “Item 1A. Risk Factors.”




Forward-Looking
Statements




This
Quarterly Report on Form 10-Q and the exhibits attached hereto contain certain
statements that constitute “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements concern our anticipated results and developments in our operations in
future periods, planned exploration and development of our properties, plans
related to our business and matters that may occur in the future. These
statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of
management. Any statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words or phrases
such as “expects” or “does not expect”, “is expected”, “anticipates” or “does
not anticipate”, “plans”, “estimates” or “intends”, or stating that certain
actions, events or results “may”, “could”, “would”, “might” or “will” be taken,
occur or be achieved) are not statements of historical fact and may be
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated
herein. The cautionary statements made in this report should be read as being
applicable to all related forward-looking statements wherever they appear in
this report.




19




Overview




We
repositioned our company in the fourth quarter of 2009 to support our strategic
plan of becoming a distributor of mobile applications solutions and services for
the global mobile community. These solutions, which we will license or own
ourselves, will include our MyGlobalTalk service. MyGlobalTalk leverages our
core competencies in VOIP and technology development. Our revenues for 2009 and
for the first quarter of 2010 have been derived primarily from our legacy
Voicestick solutions and to a lesser extent from MyGlobalTalk which became
market ready in the fourth quarter of 2009.  We expect revenues from
MyGlobalTalk to become more significant in 2010 as our marketing and sales
activities begin to yield results.  We currently offer calling plans
for residential and commercial use, varying in price from “pay as you go” to
specific plans with base charges up to $24.99 per month for combination
unlimited and most favorable per minute charges. The price of the plans varies
depending on the service provided (international long distance service to most
countries, long distance service throughout the United States and Canada and 400
minutes in long distance service throughout the United States and
Canada).




As
previously discussed in Note 3 to the consolidated financial statements, on
February 19, 2010, we acquired Shoot It!, LLC, which expands our product
portfolio applications and technologies for the global mobile communications
market.  Since the date of acquisition, we have included the financial
results for Shoot It! in our results of operations.  Revenues for the
quarter related to Shoot It! are not significant.




As
previously discussed in Note 3 to the consolidated financial statements, on
March 1, 2010, we acquired D Mobile, Inc., which provides us with a unique,
market-leading platform for mobile content distribution in China, the world’s
largest mobile communications market, and expands our global presence. D Mobile,
which operates under the brand name Duo Guo, is the primary, and we believe,
only legitimate retail channel for the discovery and download of licensed mobile
media content in China. D Mobile gives us a pervasive mobile applications and
content distribution platform to support our strategic plan. We have included
the results of operations for D Mobile since the date of acquisition in our
results of operations.  Revenues related to D Mobile were not
significant for the quarter.




Our
products allow our customers to improve the experience and usefulness of their
mobile phones.  Our corporate headquarters is based in Southlake,
Texas.  In addition, we have locations in Shanghai, China and we
maintain switching equipment in Atlanta, Georgia.




Our
products and services offer the end user the following benefits:




MyGlobalTalk




·
            A
      secure  network, designed for interoperability and scalability
      in an SAS-compliant environment;·
            Exceptional
      call quality using industry standard, SIP-based network architecture,
      producing minimal lag time, and coverage that works anywhere cellular
      service is available;


·
            Low
      cost/high quality internet telephony-based international telephone calls
      from a smartphone, cell phone, landline/desk phone or
      PC/notebook;·
            No
      international plan needed - no hidden fees - no contracts - no connection
      fees - no expiration dates;


·
            Consumer
      pre-pay (for individual users), designed for those who need flexibility or
      a pay-as-you-go solution; and,·
            A
      simple, intuitive mobile application for BlackBerry®, iPhoneTM, AndroidTM,
      SymbianTM and Windows® Mobile operating
systems.




20




Shoot
It!




·
            Allows
      users to take a picture with the smartphone, create a personal message,
      and mail as a postcard to recipient;·
            Delivery
      to any mailbox in North America, Western Europe, and
  Asia;


·
            Blends
      familiar postcard capability with new technology; and·
            Gives
      a tangible alternative to SMS or MMS
messaging.




Duo Guo




·
            Allows
      users to discover and download mobile applications and content through our
      retail kiosks;·
            Gives
      the user a simple and organized way to locate and purchase applications
      and content;




·
            Allows
      for expanded services for vendors in ticketing, couponing and advertising;
      and·
            We
      believe, currently, the only legitimate source for licensed, non-pirated
      content from many producers.




Our
management is focused upon executing our strategic plan of becoming a mobile
application, technology development and distribution company with global reach.
We are accomplishing this by relying on products that we have developed, which
are covered by our patent portfolio, and with products for which we have
negotiated distribution rights with strategic partners. The right strategic
partners and distribution networks are keys to our success as we look to expand
our reach and grow our business. We plan to continue to build on our product
portfolio by executing on an aggressive acquisition and partnering
strategy.  We will continue to introduce exciting and relevant device
and geographic agnostic products coupled with pervasive and strategic
distribution solutions which will position us to emerge as a leader in the
global mobile solutions and distribution market.




There can
be no assurances that such efforts will be successful. We may finance these new
business opportunities through a combination of equity and/or debt. If we
determine to finance these opportunities by issuing additional equity, then such
equity may have rights and preferences superior to the outstanding Common Stock,
and the issuance of such equity will dilute the ownership percentage of our
existing shareholders. If we determine to finance these opportunities by
incurring debt, then such debt may not be available to us on favorable terms, if
at all.





Critical Accounting
Policies




Our consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and
do not include all disclosures required under GAAP for complete financial
statements. Preparation of these statements requires management to make
judgments and estimates. Some accounting policies have a significant impact on
amounts reported in these financial statements. For a summary of significant
accounting policies and the means by which we develop estimates thereon, see
“Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our 2009 Annual Report on
Form 10-K.  During the quarter ended March 31, 2010 the following
were also identified as critical:





Business
Combinations


Pursuant toASC 805,“Business
Combinations”(“ASC
805”), the Company has used
the acquisition method of accounting.The acquisition method of accounting is
used for all business combinations where the acquiror is identified for each
business combination. ASC 805 defines the acquirer as the entity that obtains
control of one or more businesses in the business combination and establishes
the acquisition date as the date that the acquirer achieves control.We will recognize separately from
goodwill, the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interests in an acquiree, generally at the acquisition date fair
value as defined by Topic 820,Fair Value Measurements. Goodwill as of the acquisition date is
measured as the excess of consideration transferred, which is also generally
measured at fair value, and the net of the acquisition date amounts of the
identifiable assets acquired and the liabilities assumed.
  21


The acquisition method requires us to
use significant estimates and assumptions, including fair value estimates, as of
the business combination date and to refine those estimates, as necessary,
during the measurement period (defined as the period, not to exceed one year, in
which we may adjust the provisional amounts recognized for a business
combination) in a manner that is prescribed in Topic
805.





Information regarding other significant
accounting policies is included in the notes to our consolidated financial
statements in Item 8 of Part II of our Annual Report on Form 10-K for the year
ended December 31, 2009 and to the notes to the condensed consolidated financial
statements in this Quarterly Report on Form 10-Q.





Comparison of the three months ended
March 31, 2010 with the three months ended March 31, 2009:




For
      the Three Months EndedMarch
      31,2010
            
            
            2009
            
            
            Variance
            
            
            PercentageRevenue
            
            $
            112,478
            
            
            $
            132,142
            
            
            
            (19,664
            )
            
            
            (15
            %)Cost
      of Revenue
            
            
            196,185
            
            
            
            126,051
            
            
            
            70,134
            
            
            
            56
            %Gross
      Profit (Loss)
            
            
            (83,707
            )
            
            
            6,091
            
            
            
            (89,798
            )
            
            
            1475
            %Operating
      Expenses:General
      and Administrative Expenses
            
            
            2,447,522
            
            
            
            2,261,454
            
            
            
            186,068
            
            
            
            8
            %Other
      Income (Expense) Net
            
            
            (605,523
            )
            
            
            (114,294
            )
            
            
            (491,229
            )
            
            
            430
            %Net
      Profit (Loss)
            
            $
            (3,136,752
            )
            
            $
            (2,369,657
            )
            
            
            767,095
            
            
            
            33
            %





Revenues
decreased to $112,478 for the three months ended March 31, 2010 from $132,142
for the three months ended March 31, 2009. The decrease in revenues was due
primarily to the continued decline in our Voice stick product revenues which was
offset by our sales of MyGlobalTalk bundled services, and to a lesser extent by
the inclusion of revenue from the Shoot It! product since the date of
acquisition as well as consolidation of revenue from D-Mobile since the date of
acquisition.




Cost of
revenues increased to $196,185 for the three months ended March 31, 2010 from
$126,051 for the three months ended March 31, 2009. The increase in cost of
revenues was primarily attributable to higher cost related
to  MyGlobalTalk bundled offering and to a lesser extent to increased
cost of network infrastructure and operating costs.




Total
selling, general and administrative expenses increased to $ 2,447,522 for three
months ended March 31, 2010 from $2,261,454  for the three months
ended March 31, 2009. This increase was due primarily to increases in personnel
cost, and to a lesser extent increases in professional fees, travel and
marketing which were offset by decreases in stock compensation
expense.




Other
income/expenses were $605,523 in expenses in 2010 versus $114,294 in expenses in
2009. The increase in expenses is primarily related to the  interest
and dividend accretions related to the Preferred Shares Series A-D and Series G
Preferred Shares as well as interest expense on our Drawdown Note.





Liquidity





Cash used in operations was $1,822,810
for the three month period ended March 31, 2010 compared to cash used in
operations of $1,107,252 for the comparable period ended March 31, 2009. The
increase in use of cash is primarily related to the increase in expenses as
discussed above.





TheCompany obtained borrowing under a line
of credit with advances of up to $2,000,000.  As of March 31, 2010,
the advances totaled $1,300,000. In addition the Company acquired two entities
of which D Mobile acquisition provided cash at acquisition of
$256,108.




22





The
Company has suffered ongoing losses from operations since its inception. These
losses, as well as the uncertain conditions that the Company faces relative to
its ongoing debt and equity fund-raising efforts, raise substantial doubt about
the company’s ability to continue as a going concern. Please refer to Note 1
Liquidity and Management Plans for further discussion regarding management’s
plans for funding the company’s operations.





Off-Balance Sheet
Arrangements




We have no off-balance sheet
arrangements.




Contractual
Obligations




The Company has had no material changes
to its contractual obligations as disclosed in the Company’s Annual Report on
Form 10-K,as amended, for the year ended December
31, 2009.




Item 3 -
Quantitative and Qualitative Disclosures About Market
Risk.




Not Applicable.




Item 4 -Disclosure Controls and
Procedures




Disclosure Controls and
Procedures




At the
end of the period covered by this report an evaluation was carried out under the
supervision of and with the participation of the Company's management, including
the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the
effectiveness of the design and operations of the Company's disclosure controls
and procedures (as defined in Rule 13a - 15(e) and Rule 15d - 15(e) under the
Securities Exchange Act of 1934 (the “Exchange Act”)).  Based on that
evaluation the CEO and CFO have concluded that the Company's disclosure controls
and procedures are not adequately designed and were not effective in ensuring
that: (i) information required to be disclosed by the Company in reports that it
files or submits to the SEC under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in applicable rules
and forms and (ii) material information required to be disclosed in our reports
filed under the Exchange Act is accumulated and communicated to our management,
including our Interim CEO and Interim CFO, as appropriate, to allow for accurate
and timely decisions regarding required disclosure.




Our
management has identified a deficiency that constitutes a material weakness in
our technical accounting expertise necessary for an effective system of internal
control and timely financial reporting.  In an effort to mitigate these
material weaknesses, our management has hired additional staff with accounting
technical expertise. At any time, if it appears that any control can be
implemented to continue to mitigate such control deficiencies in a cost
effective manner, we will attempt to implement the control.




Changes
In Internal Control Over Financial Reporting




We have
implemented additional controls and procedures designed to ensure that the
disclosure provided by us meets the then current requirements of the applicable
filing made under the Exchange Act. To address our lack of sufficient accounting
technical expertise, we retained additional accounting technical expertise in
April 2010. Other than this there have been no changes in our internal control
over financial reporting during the first quarter ended March 31, 2010, that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.




PART II - OTHER
INFORMATION


Item 1 - Legal
Proceedings




Other
than as described below, we know of no material, existing or pending legal
proceedings against us, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial stockholder
of more than 5% of our voting securities, or any associate of such persons, is
an adverse party or has a material interest adverse to our company.




23




On
December 22, 2003, former stockholders of SuperCaller Community, Inc., a
Delaware corporation acquired by the Company in September 2002 (“SuperCaller”),
filed a lawsuit against the Company in the United States District Court for the
Northern District of California, San Francisco Division. The plaintiffs alleged
that i2Telecom (DE) (now known as Geos (DE) and certain of its affiliates and
representatives deceived the plaintiffs into selling SuperCaller to the Company,
among other things.  On March 27, 2006,  all federal claims
against the Company and related parties in the United States District Court in
San Francisco were “dismissed with prejudice” by Judge Vaughn Walker.  In
addition, the court declined to exercise supplemental jurisdiction over the
remaining state law claims which were all “dismissed” as well.  Therefore,
no loss or liability has been recorded in the Company’s consolidated financial
statements.  In March 2008, the federal claims against the Company and
related parties in the United States District Appellate Court in San Francisco
were “dismissed with prejudice”.




In April
2008, the same attorney representing the plaintiffs in the above matter filed an
action against the Company in the Superior Court of California, County of Santa
Clara (the “Superior Court”).  The plaintiffs alleged, among other
things, that i2Telecom (DE) (now known as Geos (DE)) and certain of its
affiliates and representatives deceived the plaintiffs into selling SuperCaller
to the Company.  Beginning on January 11, 2010, the case was heard by
a jury in the Superior Court.  On February 23, 2010, the court ruled
that the Company was entitled to judgment after receiving a jury verdict in
favor of the defendants on all claims in the litigation.  On March 5,
2010, the plaintiffs filed a motion for judgment notwithstanding the verdict or
in the alternative, judgment for constructive trust, or in further alternative,
motion for a new trial. Those motions were denied by the Court.  The
Plaintiffs have filed a notice of appeal.  The Company intends to
continue to vigorously defend the matter.




On May
11, 2009, we commenced litigation against defendants MagicJack, L.P., SJ Labs,
Inc., YMAX Corporation and Daniel Borislow (the “Federal Court
Litigation”).  On June 9, 2009, the defendant’s claims were dismissed
without prejudice.  Prior to the dismissal of the Federal Court
Litigation, and in response to the Federal Court Litigation, SJ Labs, Inc. filed
an action for declaratory judgment, damages and ancillary relief against the
Company in the Court of Common Pleas, Cuyahoga County, Ohio.  We
responded to the declaratory judgment action of SJ Labs by asserting the
defenses of (1) the action fails to state a claim; (2) the claims are barred
because a declaratory action would mot terminate the controversy between the
parties; (3) unclean hands; (4) breach of agreements; (5) conversion of
confidential information; (6) contributory negligence; (7) failure to mitigate
damages; (8) accord and satisfaction; (9) release; and (10) failure of condition
precedent.  Additionally, we responded to the declaratory judgment
action as a counterclaim-plaintiff alleging causes of action against MagicJack,
L.P., SJ Labs, Inc., YMAX Corporation and Daniel Borislow (collectively, the
“Defendants”).  We allege that the Defendants: (i) acquired our
intellectual property pursuant to contracts preserving its confidentiality;
(ii) have improperly used our intellectual property in violation of their
contractual commitments, as well as statutory and common law;
and (iii) in combination with one another, agreed to conspire to use,
convert, or misappropriate the Company’s trade secrets for their own
benefit.  As a result, we allege that the Defendants are jointly and
severally liable for actual, consequential, special, exemplary and
punitive damages.  We are also seeking a permanent injunction to
prevent Defendants from directly or indirectly using or misappropriating any of
our trade secrets.  The parties are now engaging in the discovery
process of the case





Item 1A - Risk
Factors





You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this report that are not historic facts are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements. If
any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.




Current
and future acquisitions and alliances may expose us to new risks, or cause us to
fail to perform as expected. Conversely, our failure to complete acquisitions,
enter into suitable alliances or integrate acquired companies may hinder our
growth and future profitability.




24




One of
our key strategies is to grow through acquisitions, joint ventures, and other
strategic alliances, particularly with respect to our retail operations and
attainment of applications for mobile users. Joint ventures and strategic
alliances may expose us to operational, regulatory, and market risk as well as
risks associated with additional capital requirements. In addition, we may not
be able to identify suitable future acquisition candidates or alliance
partners.  Even if we identify suitable candidates or partners, we may
be unable to complete and acquisition or alliance on commercially acceptable
terms. If we fail to identify appropriate candidates or complete desired
acquisitions, we may not be able to implement its growth strategies effectively
or efficiently. In addition, our acquisition and integration process may divert
management from operating our existing business, negatively affecting our
earnings and revenues.




In
addition, our ability to successfully integrate the acquired companies or their
operations may be adversely affected by a number of factors, including diversion
of management’s attention and difficulties in retaining clients of the acquired
companies. Furthermore, any acquired companies may not perform as expected for
various reasons, including legislative or regulatory changes or the loss of key
customers and personnel.  If we are not able to realize the benefits
envisioned from such acquisitions, joint ventures, or other strategic alliances,
‘our overall profitability and growth plans may be hindered.




Current
economic conditions may adversely affect our industry, business and results of
operations.




The
United States economy is currently undergoing a period of slowdown and very high
volatility and the future economic environment may continue to be less favorable
than that of recent years. A substantial portion of our revenues comes from
residential and small business customers whose spending patterns may be affected
by prevailing economic conditions. While we believe that the weakening economy
had a modest effect on our net subscriber additions during recent months, if
these economic conditions continue to deteriorate, the growth of our business
and results of operations may be affected. Reduced consumer spending may drive
us and our competitors to offer certain services at promotional prices, which
could have a negative impact on our operating results.





We
have a history of losses and negative cash flows from operations and we may not
be profitable in the future.




We had
losses and an accumulated deficit at March 31, 2010. Our ability to generate
positive cash flows from operations and net income is dependent, among other
things, on the acceptance of our products in the marketplace, market conditions,
cost control, and our ability to raise capital on acceptable terms. The
financial statements included elsewhere in this report do not include any
adjustments that might result from the outcome of these uncertainties.
Furthermore, developing and expanding our business will require significant
additional capital and other expenditures. Accordingly, if we are not able to
increase our revenue, then we may never achieve or sustain profitability and
might have to cease operations. Our independent auditors have added an
explanatory paragraph in their report expressing substantial doubt about the
Company’s ability to continue as a going concern.




We
have been able to meet our operating requirement by receiving net proceeds of
$7,410,000 related to our Series F Preferred financing and utilizing
the  $1.3 million of the $ 2.0 million Drawdown loan during the
quarter ended March 31, 2010.  We will need to receive additional
capital to continue our operations into 2010.




Until we
reach and maintain positive cash flow, which management believes will be in the
fourth quarter of 2010, we will be required to raise additional capital to fund
our operations. Financing may not be available to us on commercially reasonable
terms, if at all. There is no assurance that we will be successful in raising
additional capital or that the proceeds of any future financings will be
sufficient to meet our future capital needs. It is not likely that we will be
able to continue our business without additional financing.




The
price of our common stock has been volatile in the past and may continue to be
volatile.




The stock
market in general and the market for technology companies in particular, has
recently experienced extreme volatility that has often been unrelated to the
operating performance of particular companies. From January 1, 2009 to
March  31, 2010, the per share closing price of our common stock on
the Over-the-Counter Bulletin Board fluctuated from a high of $ 1.10 to a low of
$0.11 both on a post-split basis. We believe that the volatility of the price of
our common stock does not solely relate to our performance and is broadly
consistent with volatility experienced in our industry. Fluctuations may result
from, among other reasons, responses to operating results, announcements by
competitors, regulatory changes, economic changes, market valuation of
technology firms and general market conditions.




25




In
addition, in order to respond to competitive developments, we may from time to
time make pricing, service or marketing decisions that could harm our business.
Also, our operating results in one or more future quarters may fall below the
expectations of securities analysts and investors. In either case, the trading
price of our common stock would likely decline.




The
trading price of our common stock could continue to be subject to wide
fluctuations in response to these or other factors, many of which are beyond our
control. If the market price of our common stock decreases, then shareholders
may not be able to sell their shares of our common stock at a
profit.




Our
common stock are sporadically or “thinly-traded” on the OTCBB, meaning that the
number of persons interested in purchasing our common stock at or near ask
prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that we are a small
company and we are relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our common stock will
develop or be sustained, or that current trading levels will be sustained. As a
consequence, you may be unable to sell at or near ask prices or at all if you
need to sell your shares to raise money or otherwise desire to liquidate your
shares.




The
market price for our common stock is particularly volatile given our status as a
relatively unknown company with a small and thinly-traded public float and
limited operating history. The price at which you purchase our common stock may
not be indicative of the price that will prevail in the trading market. You may
be unable to sell your common stock at or above your purchase price, which may
result in substantial losses to you.




The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common stock are sporadically or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
stock are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or “risky” investment due to our
limited operating history and lack of profits to date, lack of capital to
execute our business plan, and uncertainty of future market acceptance for our
technologies. As a consequence of this enhanced risk, more risk-adverse
investors may, under the fear of losing all or most of their investment in the
event of negative news or lack of progress, be more inclined to sell their
shares on the market more quickly and at greater discounts than would be the
case with the stock of a seasoned issuer. The following factors may add to the
volatility in the price of our common shares: actual or anticipated variations
in our quarterly or annual operating results, market acceptance of our
government regulations, announcements of significant acquisitions, strategic
partnerships or joint ventures, our capital commitments, and additions or
departures of our key personnel. Many of these factors are beyond our control
and may decrease the market price of our common stock, regardless of our
operating performance. We cannot make any predictions or projections as to what
the prevailing market price for our common stock will be at any time, including
as to whether our common stock will sustain their current market prices, or as
to what effect, if any, that the sale of shares or the availability of common
stock for sale at any time will have on the prevailing market
price.




26




Volatility
in our common stock price may subject us to securities litigation.




As
discussed in the preceding risk factor, the market for our common stock is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and resources. The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.




As
long as the trading price of our common stock is below $5 per share, the
open-market trading of our common stock will be subject to the “penny stock”
rules. The “penny stock” rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their
spouse).




For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received the
purchaser’s written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the SEC relating to the penny stock market. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information on the
limited market in penny stocks. These additional burdens imposed on
broker-dealers may restrict the ability or decrease the willingness of
broker-dealers to sell the common stock, and may result in decreased liquidity
for our common stock and increased transaction costs for sales and purchases of
our common shares as compared to other securities.




Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities.




We
may not be able to successfully manage our growth.




Our
liability to manage the Company’s growth will require that we continue to
improve our operational, financial and management information systems, and to
motivate and effectively manage our employees. If our management is unable to
manage such growth effectively, then the quality of our services, our ability to
retain key personnel and our business, financial condition and results of
operations could be materially adversely affected.




Our
executive officers have been employed by the Company for a relatively short
period of time, and may not be able to implement our business strategy. The
failure to effectively implement our business strategy will have a material,
adverse effect on our business, financial condition and results of
operations.




Our Chief
Executive Officer took office on April 21, 2009, our President and Chief
Operating Officer took office August 10, 2008, our Chief Financial Officer took
office on August 24, 2009, our Senior Vice President of Worldwide Sales took
office on June 23, 2009 and our Chief Executive Officer of our Asia operations
took office on March 7, 2010 There can be no assurance that they will function
successfully as a management team to implement our business strategy. If they
are unable to do so, then our business, financial condition and results of
operations could be materially adversely affected.




27




Our
performance could be adversely affected if we are unable to attract and retain
qualified personnel in the fields of engineering, marketing and
finance.




Our
performance is dependent on the services of our management as well as on our
ability to recruit, retain and motivate other key employees in the fields of
engineering, marketing and finance. Competition for qualified personnel is
intense and there is a limited number of persons with knowledge of and
experience with VoIP. We cannot assure you that we will be able to attract and
retain key personnel, and the failure to do so could hinder our ability to
implement our business strategy and could cause harm to our
business.




The
general condition of the telecommunications market will affect our business.
Continued pricing declines may result in a decline in our operating
results.




We are
subject to market conditions in the telecommunications industry. Our operations
could be adversely affected if pricing continues to decline as it has in the
past few years. If pricing declines continue, then we may experience adverse
operating results.




Risk
Related to doing business in the Peoples Republic of China.




We
acquired D Mobile in March, 2010.  Mobile’s operations are primarily
located in the Peoples Republic of China (“PRC”). Accordingly, our
business, results of operations, financial condition and prospects are subject
to a significant degree to economic, political, and legal conditions in China.
China’s economy differs for the economies of developed countries in many
respects, including with respect to government regulation and control of foreign
exchange, the level of development, growth rate and the allocation of
resources.




While the
PRC economy has experienced significant growth in the past 20 years, growth has
been uneven across different regions and economic sectors. The PRC government
has implemented certain measures to encourage economic development and guide the
allocation of resources. While some of these measures benefit the PRC economy
generally, they may also negatively affect us. For example, our business,
financial condition and results of operations may be adversely affected by
government control over capital investments of changes in tax regulations
applicable to us.




The PRC
economy has been transitioning from a planned economy to a more market-oriented
economy. Although the PRC government has implemented measures since the late
1970’s emphasizing market-oriented reforms, the reduction of state ownership of
productive assets and improved corporate governance, the PRC government still
owns a substantial portion of the productive assets in China and continues to
play a significant role in regulating industrial development. In addition, the
PRC government exercises significant control over China’s economic growth by
controlling the allocation of resources and payment of foreign
currency-denominated obligations, setting monetary policy and giving
preferential treatment to particular industries or companies.




In late
2003, the PRC government implemented a number of measures, such as raising bank
reserves against deposit rates and placing additional limitation on the ability
of commercial banks to make loans and raise interest rates, in an attempt to
slow down specific segments of China’s economy that the government believed to
be overheating. In 2009, however, in response to the world economic crisis, the
PRC government cut interest rates and announced a stimulus plan in an attempt to
help sustain growth. These actions, as well as future actions and policies of
the PRC government, could materially affect our liquidity, access to capital,
financial results as well as our ability to operate our business.




Fluctuation
in the value of the Chinese Yuan (Renminbi ,or RMB) may have a material adverse
effect on the value of your investment.




We
acquired D Mobile in March, 2010.  D Mobiles operations are primarily
located in the PRC.  The value of the RMB against the U.S. Dollar and
other currencies may fluctuate and is affected by, among other things, changes
in political and economic conditions. On July 21, 2005 the PRC government
changed its decade-old policy of pegging the value of the RMB to the U.S.
dollar.  Under the current policy, the RMB has been permitted to
fluctuate within a narrow and managed band against a basket of foreign
currencies. The change in the policy has resulted in an approximate 18.8%
appreciation in the RMB against the U.S. dollar between July 21, 2005 and April
9, 2010. While the international reaction to the RMB revaluation has generally
been positive, there remains significant international pressure on the PRC
government to adopt an even more flexible currency policy, which could result in
a further and more significant appreciation of the RMB against the U.S.
dollar.




28




Substantially,
all of D- Mobile’s revenues and cost are denominated in the RMB, and a
significant portion of Mobile’s financial assets are also denominated in the
RMB. Any significant revaluation of the RMB could materially and adversely
affect Mobile’s cash flows, revenues, earnings and financial position. Any
fluctuations of the exchange rate between the RMB and U.S. dollar could also
result in foreign currency translation losses for financial reporting
purposes.




Uncertainties
with respect to the PRC legal system could adversely affect us.




We
conduct our business operations in China primarily through its D Mobile
subsidiary which operates under the Duo Guo brand. Our operations in China are
governed by the PRC laws and regulations. Our operating subsidiaries are
generally subject to laws and regulations applicable to wholly owned
foreign-owned enterprises. The PRC legal system is principally based on
statutes. Prior court decisions may be cited for reference but typically have
limited precedential value




Since
1979, PRC legislation and regulations have significantly enhanced the
protections afforded to foreign investments in China.  However, China
has not developed a fully integrated legal system, and recently enacted laws and
regulations may not sufficiently cover all aspects of economic activities in
China. In particular, because these laws and regulations are relatively new, and
because of the limited volume of published decisions (and the non binding nature
of such decisions), the interpretation and enforcement of these laws and
regulations raise uncertainties. In addition, the PRC legal system is based in
part of the government policies and internal rules (some of which are not
published on a timely basis or at all) that may have retroactive effect. As a
result, we may not be aware of its violation of these policies and rules until
after a violation occurs. In addition, any litigation in China may be protracted
and result in substantial cost and diversion of resources and management
attention.




Contract
drafting, interpretation and enforcement in China involve significant
uncertainty.




We,
through our D Mobile subsidiary, have entered into numerous contracts governed
by the PRC law, many of which are material to our business. Compared to
contracts in the United States, contracts governed by the PRC law tend to
contain less detail and are not as comprehensive in defining contracting
parties’ rights and obligations. As a result, contracts in China are more
vulnerable to disputes and legal challenges. In addition, contract
interpretation and enforcement in China are not as developed as in the United
States, and the result of any contract dispute is subject to significant
uncertainties. Therefore, we may be subject to disputes under its material
contracts, and if such disputes arise, we cannot assure you that we will
prevail. Due to the materially of certain contracts to our business, any
disputes involving such contracts, even without merit, may materially and
adversely affect our reputation and business.




Changes
in PRC laws and regulations on labor and employee benefits may adversely affect
our business and results of operations.




As a
result of the D Mobile acquisition, Geos will be conducting a significant
portion of its business in China, which will be subject to PRC laws and
regulations on labor and employee benefits. In recent years, the PRC government
has implemented policies to strengthen the protection of employees and obligate
employers to provide more benefits to their employees. In addition, an
employment contract law came into effect in China on January 1, 2008 and its
implementation regulation came into effect on September 18, 2008. The PRC
employment contract law and related legislation required more benefits to be
provided to employees, such as an increase in pay or compensation for
termination of employment contracts. As a result, employers incurred higher
labor cost.  If additional employment and labor laws are brought to
law, additional labor cost may be incurred and could have an adverse impact on
Geos’ business and results of operations.




29




The
VoIP telephony market is subject to rapid technological change. Newer technology
may render our technology obsolete which would have a material, adverse impact
on our business and results of operations.




VoIP
telephony is an emerging market that is characterized by rapid changes in
customer requirements, frequent introductions of new and enhanced products, and
continuing and rapid technological advancement. To compete successfully in this
emerging market, we must continue to design, develop, manufacture, and sell new
and enhanced VoIP telephony software products and services that provide
increasingly higher levels of performance and reliability at lower cost. Our
success in designing, developing, manufacturing, and selling such products and
services will depend on a variety of factors, including:




·
            the
      identification of market demand for new products;·
            the
      scalability of our VoIP telephony software
  products;


·
            product
      and feature selection;·
            timely
      implementation of product design and
  development;


·
            product
      performance;·
            cost-effectiveness
      of current products and services and products under
      development;


·
            our
      ability to successfully implement service features mandated by federal and
      state law;·
            effective
      manufacturing processes; and


·
            effectiveness
      of promotional efforts.




Additionally,
we may also be required to collaborate with third parties to develop our
products and may not be able to do so on a timely and cost-effective basis, if
at all. We have in the past experienced delays in the development of new
products and the enhancement of existing products, and such delays will likely
occur in the future. If we are unable, due to resource constraints or
technological or other reasons, to develop and introduce new or enhanced
products in a timely manner, if such new or enhanced products do not achieve
sufficient market acceptance, or if such new product introductions decrease
demand for existing products, our operating results would decline and our
business would not grow.




The
continued growth of the Internet as a medium for telephone services is
uncertain. If this growth does not continue, our business and financial
condition could be materially adversely affected.




The
continued market acceptance of the Internet as a medium for telephone services
is subject to a high level of uncertainty. Our future success will depend on our
ability to significantly increase revenues, which will require widespread
acceptance of the Internet as a medium for telephone communications. There can
be no assurance that the number of consumers using the Internet for telephone
communications will grow. If use of the Internet for telephone communications
does not continue to grow, our business and financial condition could be
materially adversely affected.




Our
business faces security risks. Our failure to adequately address these risks
could have an adverse effect on our business and reputation.




A party
who is able to circumvent our security measures could misappropriate proprietary
information or cause interruptions in our VoIP operations. We may be required to
expend significant capital and resources to protect against the threat of such
security breaches or to alleviate problems caused by such breaches. Consumer
concern over Internet security has been, and could continue to be, a barrier to
commercial activities requiring consumers to send their credit card information
over the Internet. Computer viruses, break-ins, or other security problems could
lead to misappropriation of proprietary information and interruptions, delays,
or cessation in service to our customers. Moreover, until more comprehensive
security technologies are developed, the security and privacy concerns of
existing and potential customers may inhibit the growth of the Internet as a
merchandising medium. Our failure to adequately address these risks could have
an adverse effect on our business and reputation.




Our
ability to do business depends, in part, on our ability to license certain
technology from third parties.




We rely
on certain technology licensed from third parties, and there can be no assurance
that these third party technology licenses will be available to us on acceptable
commercial terms or at all. If we cannot license the technology we need on
acceptable commercial terms, then our business, financial condition and results
of operations will be materially and adversely affected.




30





Products
and services like the ones we offer change rapidly and therefore, we must
continually improve them. However, our need to invest in research and
development may prevent us from ever being profitable.




Products
and services like the ones we offer are continually upgraded in an effort to
make them work faster, function easier for the user and provide more options.
Our industry is characterized by the need for continued investment in research
and development. If we fail to invest sufficiently in research and development,
then our products could become less attractive to potential customers, which
could have a material adverse effect on our results of operations and financial
condition. However, any investment in research and development and technological
innovation will cause our operating costs to increase. This could prevent us
from ever achieving profitability.




We
sell a service that allows our customers to make telephone calls over the
Internet. Intellectual property infringement claims brought against us, even
without merit, could require us to enter into costly licenses or deprive us of
the technology we need.




The
service we sell allows our users to make telephone calls over the Internet.
Third parties may claim that the technology we develop or license infringes
their proprietary rights. Any claims against us may affect our business, results
of operations and financial conditions. Any infringement claims, even those
without merit, could require that we pay damages or settlement amounts or could
require us to develop non-infringing technology or enter into costly royalty or
licensing agreements to avoid service implementation delays. Any litigation or
potential litigation could result in product delays, increased costs or both. In
addition, the cost of litigation and the resulting distraction of our management
resources could have a material adverse effect on our results of operations and
financial condition. If successful, a claim of product infringement could
completely deprive us of the technology we need.




We
have developed our underlying software and we try to protect it from being used
by others in our industry. Failure to protect our intellectual property rights
could have a material adverse effect on our business.




We rely
on copyright, trade secret and patent laws to protect our content and
proprietary technologies and information, including the software that underlies
our products and services. Additionally, we have taken steps that we believe
will be adequate to establish, protect and enforce our intellectual property
rights. There can be no assurance that such laws and steps will provide
sufficient protection to our intellectual property. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain rights to use our products or technologies.




We have
six issued patents and thirteen pending patent applications related to
embedded software technology and methods of use. There can be no assurance that
these pending patents will be issued, or what the scope of the allowed claims
will be issued. Even if the balance of patents pending are issued, the limited
legal protection afforded by patent, trademark, trade secret and copyright laws
may not be sufficient to protect our proprietary rights to the intellectual
property covered by these patents.




Furthermore,
the laws of many foreign countries in which we do business do not protect
intellectual property rights to the same extent or in the same manner as do the
laws of the United States. Although we have implemented and will continue to
implement protective measures in those countries, these efforts may also not be
successful. Additionally, even if our domestic and international efforts are
successful, our competitors may independently develop non-infringing
technologies that are substantially similar or superior to our
technologies.




If
our products contain defects, then our sales would be likely to suffer, and we
may even be exposed to legal claims. Defects in our products could have a
material adverse impact on our business and operating results.




Our
business strategy calls for the development of new products and product
enhancements which may from time to time contain defects or result in failures
that we did not detect or anticipate when introducing such products or
enhancements to the market. In addition, the markets in which our products are
used are characterized by a wide variety of standard and non-standard
configurations and by errors, failures and bugs in third-party platforms that
can impede proper operation of our products. Despite product testing, defects
may still be discovered in some new products or enhancements after the products
or enhancements are delivered to customers. The occurrence of these defects
could result in product returns, adverse publicity, loss of or delays in market
acceptance of our products, delays or cessation of service to our customers or
legal claims by customers against us. Any of these occurrences could have a
material adverse impact on our business and operating results.




31




Sales
to customers based outside the United States have recently accounted for a
significant portion of our revenues, which exposes the Company to risks inherent
in international operations.




Our
strategic plan includes increases in foreign sales in order to increase our
revenues.  However, international sales are subject to a number of
risks, including changes in foreign government regulations, laws, and
communications standards; export license requirements; currency fluctuations,
tariffs and taxes; other trade barriers; difficulty in collecting accounts
receivable; longer accounts receivable collection cycles; difficulty in managing
across disparate geographic areas; difficulties associated with enforcing
agreements and collecting receivables through foreign legal systems; expenses
associated with localizing products for foreign markets; and political and
economic instability, including disruptions of cash flow and normal business
operations that may result from terrorist attacks or armed
conflict.




If the
relative value of the U.S. dollar in comparison to the currency of our foreign
customers should increase, then the resulting effective price increase of our
products to these foreign customers could result in decreased sales. In
addition, to the extent that general economic downturns impact our customers,
the ability of these customers to purchase our products could be adversely
affected. Payment cycles for international customers are typically longer than
those for customers in the United States.




If we are
able to increase our foreign sales significantly, the occurrence of any of the
foregoing could have a material adverse impact on our results of
operations.




Doing
business over the Internet may become subject to governmental regulation. If
these regulations substantially increase the cost of doing business, they could
have a material adverse effect on our business, results of operations and
financial condition.




We are
not currently subject to direct federal, state, or local regulation, and laws or
regulations applicable to access to or commerce on the Internet, other than
regulations applicable to businesses generally. However, due to the increasing
popularity and use of the Internet and other VoIP services, it is possible that
a number of laws and regulations may be adopted with respect to the Internet or
other VoIP services covering issues such as user privacy, “indecent” materials,
freedom of expression, pricing content and quality of products and services,
taxation, advertising, intellectual property rights and information security.
The adoption of any such laws or regulations might also decrease the rate of
growth of Internet use, which in turn could decrease the demand for our products
and services or increase the cost of doing business or in some other manner have
a material adverse effect on our business, results of operations, and financial
condition.




We were
late in filing this Annual Report, and may be unable to timely file periodic
reports in the future.  We were unable to timely file this Annual Report,
and may continue to be unable to timely file our annual and quarterly periodic
reports with the SEC in the future.  Additional failures to timely
file periodic reports could impair our eligibility to have our shares listed on
the OTC Bulletin Board, as well as delay our eligibility to register our
securities on Form S-3.




We
may become subject to litigation.




We may be
subject to claims involving how we conduct our business or the market for or
issuance of the Common Stock or other securities. Any such claims against the
Company may affect our business, results of operations and financial conditions.
Such claims, including those without merit, could require us to pay damages or
settlement amounts and would require a substantial amount of time and attention
from our senior management as well as considerable legal expenses. Although we
do not anticipate that our activities would warrant such claims, there can be no
assurances that such claims will not be made.




32




We
depend on third-party vendors for key Internet operations including broadband
connectivity, termination capability and different operating systems. The loss
of any of our vendors could have a material adverse effect on our business,
results of operations and financial condition.




We rely
on our relationships with third party vendors of Internet development tools and
technologies including providers of switches, network termination and
operational and billing specialized operations. There can be no assurance that
the necessary cooperation from third parties will be available on acceptable
commercial terms or at all. Although there are a number of providers of these
services, if we are unable to develop and maintain satisfactory relationships
with such third parties on acceptable commercial terms, or if our competitors
are better able to leverage such relationships, then our business, results of
operations and financial condition will be materially adversely
affected.




We
may not be able to successfully compete with current or future
competitors.




The
market for telecom services is highly competitive, and rapidly changing. In
addition to intense competition from VoIP services providers, we also face
competition from traditional telephone systems integrators and
providers.




Our
competitors range from the large incumbents such as Verizon and AT&T to
newer, large VolP telephony providers such as Vonage and Skype. These companies
generally have longer operating histories, significantly greater financial,
technical and marketing resources, greater name recognition and larger existing
customer bases than we have. These competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements and
to devote greater resources to the development, promotion, and sale of their
products or services than we can. There can be no assurance that we will be able
to compete successfully against current or future competitors. If we cannot do
so, then our business, financial condition and results of operations will be
materially and adversely affected.




We
may not be able to comply with the FCC’s requirements to provide 911 services to
our customers. Our inability to comply with these requirements could have an
adverse effect on our business and results of operations.




On June
3, 2005 the Federal Communications Commission (“FCC”) issued the VoIP 911 Order
adopting rules that require interconnected VoIP providers to provide their new
and existing subscribers with 911 services no later than November 28, 2005. On
November 5, 2005, the FCC issued a public notice stating that VoIP providers who
failed to comply with the VoIP 911 Order by November 28, 2005 would not be
required to discontinue the provision of interconnected VoIP service to any
existing customers, but would be required to discontinue marketing VoIP service
and accepting new customers for VoIP service in all areas where the providers
are not transmitting 911 calls to the appropriate PSAP (public safety answering
point) in full compliance with the FCC’s rules. Because we have not fully
complied with the VoIP 911 Order, we are subject to this restriction. We cannot
be certain that we will be able to fully comply with this VoIP 911 Order.
Because it would prevent us from marketing and accepting new customers in
certain areas, our inability to comply with the VoIP 911 Order may have an
adverse effect on our business and results of operations.




Item 2 - Unregistered Sales of Equity
Securities and Use of Proceeds




In April 2010, we issued (i) 350 shares of Series H Convertible
Preferred Stock and (ii) warrants (the “Warrants”) to purchase 875,000
shares of Common Stock, for a total of $350,000 in cash pursuant to subscription
agreements entered into between Geos and two individual investors. The Warrants
have a term of three years and an exercise price of $0.25 per share, and provide
for cashless exercise.





The sales
of the Series H Preferred Stock and the Warrants were not registered under the
Securities Act of 1933, as amended (the “Act”), in reliance on the
private offering exemption from registration provided by Section 4(2) of the
Act.




33





Item 3 - Defaults Upon Senior
Securities




None




Item 4–Reserved




None




Item 5 - Other
Information




None




Item 6–Exhibits




Exhibit
      No.
            
            Exhibit
            
            Method
      of Filing2.1
            
            Agreement
      and Plan of Merger by and among Geos Communications, Inc., Duo Guo
      Acquisition, Inc., Jonathan Serbin and D Mobile, Inc.
            
            Incorporated
      by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
      filed on February 19, 20102.2
            
            Agreement
      and Plan of Merger dated as of February 19, 2010 by and among Geos
      Communications, Inc., Shoot It! Acquisition, Inc., Shoot It!, LLC and
      certain security holders of Shoot It!, LLC
            
            Incorporated
      by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
      filed on February 25, 20102.3
            
            First
      Amendment to Agreement and Plan of Merger by and among Geos
      Communications, Inc., Duo Guo Acquisition, Inc., Jonathan Serbin and D
      Mobile, Inc. dated as of March 1, 2010
            
            Incorporated
      by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
      filed on March 11, 20103.1
            
            Articles
      of Incorporation, as amended
            
            Incorporated
      by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 20033.2
            
            Bylaws
            
            Incorporated
      by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 20033.3
            
            Amendment
      to the Company’s Articles of Incorporation filed June 3,
    2004
            
            Incorporated
      by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended June 30, 20043.4
            
            Certificate
      of Designations of Rights and Preferences of Series D Preferred
      Stock
            
            Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
      filed August 13, 20043.5
            
            Certificate
      of Designations of Rights and Preferences of Series E Preferred
      Stock
            
            Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
      filed November 22, 20053.6
            
            Amendment
      to Certificate of Designations of Rights and Preferences of Series E
      Preferred Stock
            
            Incorporated
      by reference to Exhibit 3.1.8 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended March 31, 20063.7
            
            Amendment
      to the Company’s Articles of Incorporation filed July 13,
    2007
            
            Incorporated
      by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-Q
      for the quarter ended September 30,
2009




34




Exhibit
      No.
            
            Exhibit
            
            Method
      of Filing




3.8
            
            Certificate
      of Designations of Rights and Preferences of Series F Preferred
      Stock
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed April 30, 20093.9
            
            Amendment
      to the Company’s Articles of Incorporation filed May 11,
    2009
            
            Incorporated
      by reference to Exhibit 3.9 to the Company’s Quarterly Report on Form 10-Q
      for the quarter ended September 30, 20093.10
            
            Amendment
      to Certificate of Designations of Rights and Preferences of Series F
      Preferred Stock
            
            Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
      filed June 10, 20093.11
            
            Certificate
      of the Designations, Preferences, Rights and Limitations of Series A
      Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
      Series D Preferred Stock of i2 Telecom IP Holdings, Inc.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed July 1, 20093.12
            
            Amendment
      to the Company’s Articles of Incorporation filed September 10,
      2009
            
            Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
      filed September 10, 20093.13
            
            Certificate
      of Designations of Rights and Preferences of Series G Convertible
      Preferred Stock
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed on February 19, 20103.14
            
            Amendment
      to Bylaws, dated February 12, 2010
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
      filed on February 19, 20104.1
            
            Amended
      and Restated 2004 Stock Incentive Plan
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Post-Effective Amendment No.
      3 to Form S-8 Registration Statement filed June 25,
20094.2
            
            2009
      Omnibus Long Term Incentive Plan*
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Form S-8 Registration
      Statement filed January 8, 201031.1
            
            Rule
      13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive
      Officer
            
            Filed
      herewith31.2
            
            Rule
      13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial
      Officer
            
            Filed
      herewith32.1
            
            Section
      1350 Certification of the Company’s Principal Executive
      Officer
            
            Filed
      herewith32.2
            
            Section
      1350 Certification of the Company’s Principal Financial
      Officer
            
            Filed
      herewith




35





SIGNATURES





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




GEOS
      COMMUNICATIONS, INC.By:
            /s/
      Andrew L. BermanAndrew
      L. BermanChief
      Executive OfficerDate:
            May
      20, 2010





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