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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 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2010

OR



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

COMMISSION FILE NUMBER: 333-04066





GEOSPATIAL
HOLDINGS, INC.

(Exact name of registrant as specified in its charter)







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

229 Howes Run Road, Sarver, PA 16055

(Address of principal executive offices)

(724) 353-3400

(Registrants telephone number, including area code)



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







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Check whether the issuer (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 such filing requirements for the past 90
days.    YES  x    NO   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files):    YES   ̈    NO   ̈

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act):    YES   ̈    NO  x

The number of $.001 par value common shares outstanding at May 10, 2010: 41,379,687.









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FORWARD-LOOKING STATEMENT NOTICE

When used in this report, the words may, will, expect, anticipate, continue,
estimate, project, intend, and similar expressions, which are not historical, constitute Forward Looking Statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies for the future. We intend that such Forward-Looking Statements regarding events, conditions, and
financial trends that may affect the Companys future plans of operations, business strategy, operating results, and financial position be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Persons
reviewing this report are cautioned that any Forward-Looking Statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the Forward-Looking
Statements as a result of various factors. Such factors include general economic factors and conditions that may directly or indirectly impact the Companys financial condition or results of operations. Readers are cautioned not to place undue
reliance on these Forward-Looking Statements that speak only as of the date the statement was made.

TABLE
OF CONTENTS



|                                                                                             |  |   
|-------------------------------------------------------------------------------------------- |  | --
|PART I - FINANCIAL INFORMATION                                                               |  | 3 
|                                                                                             | 
|ITEM 1. FINANCIAL STATEMENTS                                                                 |  | 3 
|                                                                                             | 
|ITEM 2. MANAGEMENTS DISCUSSION 
& ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 16
|                                                                                             | 
|ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                             |  | 19
|                                                                                             | 
|ITEM 4. CONTROLS AND PROCEDURES.                                                             |  | 19
|                                                                                             | 
|PART II - OTHER INFORMATION                                                                  |  | 20
|                                                                                             | 
|ITEM 1. LEGAL PROCEEDINGS                                                                    |  | 20
|                                                                                             | 
|ITEM 2. SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS                          |  | 20
|                                                                                             | 
|ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      |  | 20
|                                                                                             | 
|ITEM 4. REMOVED AND RESERVED                                                                 |  | 20
|                                                                                             | 
|ITEM 5. OTHER INFORMATION                                                                    |  | 20
|                                                                                             | 
|ITEM 6. EXHIBITS.                                                                            |  | 20



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PART I - FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

GEOSPATIAL HOLDINGS, INC.

INDEX



|                                                                                                                       |  |     
|---------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                       |  | Page
|FINANCIAL STATEMENTS AS OF MARCH 31, 2010 AND DECEMBER 31, 2009 AND FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009 |  |     
|                                                                                                                       | 
|Condensed Consolidated Balance Sheets (Unaudited)                                                                      |  | 4   
|                                                                                                                       | 
|Condensed Consolidated Statements of Operations (Unaudited)                                                            |  | 5   
|                                                                                                                       | 
|Condensed Consolidated Statements of Changes in Stockholders Equity (Deficit) (Unaudited)                             |  | 6   
|                                                                                                                       | 
|Condensed Consolidated Statements of Cash Flows (Unaudited)                                                            |  | 7   
|                                                                                                                       | 
|Notes to Unaudited Condensed Consolidated Financial Statements                                                         |  | 8   



3



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Geospatial Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                                                             |  | March 31,2010 |             |   | December 31,2009* |  
|                                                                                                                                                                                            
|ASSETS                                                                                                                                                                                       | 
|                                                                                                                                                                                             |  |              
|Current assets:                                                                                                                                                                              |  |               |             |   |                   |   |             |  
|Cash and cash equivalents                                                                                                                                                                    |  | $             | 3,464,386   |   |                   | $ | 481,536     |  
|Accounts receivable, net of allowance for doubtful accounts of $10,000 at March 31, 2010 and December 31,
2009                                                                               |  |               | 612,049     |   |                   |   | 263,653     |  
|Costs and estimated earnings in excess of billings on uncompleted contracts                                                                                                                  |  |               | 23,747      |   |                   |   | 61,624      |  
|Notes receivable                                                                                                                                                                             |  |               | 435,322     |   |                   |   | 397,373     |  
|Prepaid expenses                                                                                                                                                                             |  |               | 487,160     |   |                   |   | 371,772     |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total current assets                                                                                                                                                                         |  |               | 5,022,664   |   |                   |   | 1,575,958   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Property and equipment:                                                                                                                                                                      |  |               |             |   |                   |   |             |  
|Field equipment                                                                                                                                                                              |  |               | 1,105,016   |   |                   |   | 1,090,205   |  
|Office equipment                                                                                                                                                                             |  |               | 107,610     |   |                   |   | 106,832     |  
|Vehicles                                                                                                                                                                                     |  |               | 977,491     |   |                   |   | 920,853     |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total property and equipment                                                                                                                                                                 |  |               | 2,190,117   |   |                   |   | 2,117,890   |  
|Less: accumulated depreciation                                                                                                                                                               |  |               | (614,064    | ) |                   |   | (514,105    | )
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Net property and equipment                                                                                                                                                                   |  |               | 1,576,053   |   |                   |   | 1,603,785   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Other assets:                                                                                                                                                                                |  |               |             |   |                   |   |             |  
|License fees, net of amortization                                                                                                                                                            |  |               | 1,338,521   |   |                   |   | 1,367,000   |  
|Deposits on equipment                                                                                                                                                                        |  |               | 3,032,747   |   |                   |   | 500,000     |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total other assets                                                                                                                                                                           |  |               | 4,371,268   |   |                   |   | 1,867,000   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total assets                                                                                                                                                                                 |  | $             | 10,969,985  |   |                   | $ | 5,046,743   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                            
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                               | 
|                                                                                                                                                                                             |  |              
|Current liabilities:                                                                                                                                                                         |  |               |             |   |                   |   |             |  
|Accounts payable                                                                                                                                                                             |  | $             | 455,292     |   |                   | $ | 1,391,488   |  
|Accrued expenses                                                                                                                                                                             |  |               | 3,612,871   |   |                   |   | 3,670,337   |  
|Billings in excess of costs and estimated earnings on uncompleted contracts                                                                                                                  |  |               | 81,326      |   |                   |   |            |  
|Current portion of capital lease liabilities                                                                                                                                                 |  |               | 232,009     |   |                   |   | 210,645     |  
|Due to stockholder                                                                                                                                                                           |  |               | 27,425      |   |                   |   | 26,000      |  
|Notes payable to stockholders                                                                                                                                                                |  |               | 273,764     |   |                   |   | 140,071     |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total current liabilities                                                                                                                                                                    |  |               | 4,682,687   |   |                   |   | 5,438,541   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Non-current liabilities:                                                                                                                                                                     |  |               |             |   |                   |   |             |  
|Capital lease liabilities                                                                                                                                                                    |  |               | 430,224     |   |                   |   | 458,167     |  
|Convertible note payable to stockholder                                                                                                                                                      |  |               | 31,144      |   |                   |   | 1,013,637   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total non-current liabilities                                                                                                                                                                |  |               | 461,368     |   |                   |   | 1,471,804   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total liabilities                                                                                                                                                                            |  |               | 5,144,055   |   |                   |   | 6,910,345   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Stockholders equity (deficit):                                                                                                                                                              |  |               |             |   |                   |   |             |  
|Preferred stock, $.001 par value; 5,000,000 shares authorized at March 31, 2010 and 2009; 1,575,000 and 0 shares issued and
outstanding at March 31, 2010 and 2009, respectively             |  |               | 1,575       |   |                   |   | 1,575       |  
|Common stock, $.001 par value; 100,000,000 shares authorized at March 31, 2010 and 2009; 41,339,373 and 24,114,444 shares
issued and outstanding at December 31, 2009 and 2008, respectively |  |               | 41,339      |   |                   |   | 31,124      |  
|Additional paid-in capital                                                                                                                                                                   |  |               | 22,643,822  |   |                   |   | 13,473,089  |  
|Stock subscriptions receivable                                                                                                                                                               |  |               | (100,000    | ) |                   |   |            |  
|Accumulated deficit                                                                                                                                                                          |  |               | (16,760,806 | ) |                   |   | (15,369,390 | )
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total stockholders equity (deficit)                                                                                                                                                         |  |               | 5,825,930   |   |                   |   | (1,863,602  | )
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  
|                                                                                                                                                                                             |  |              
|Total liabilities and stockholders equity (deficit)                                                                                                                                         |  | $             | 10,969,985  |   |                   | $ | 5,046,743   |  
|                                                                                                                                                                                             |  |               |             |   |                   |   |             |  



|* | Condensed from audited financial statements.
|- | --------------------------------------------

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



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Geospatial Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations



|                                                           |  |                                     |            |   |      |   |          |  
|---------------------------------------------------------- |  | ----------------------------------- | ---------- | - | ---- | - | -------- | -
|                                                           |  | For the Three MonthsEnded March 31, |           
|                                                           |  | 2010                                |            |   | 2009 |  
|                                                           |  |                                    
|Sales                                                      |  | $                                   | 917,966    |   |      | $ | 70,193   |  
|Cost of sales                                              |  |                                     | 719,837    |   |      |   | 107,057  |  
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Gross profit                                               |  |                                     | 198,129    |   |      |   | (36,864  | )
|                                                           |  |                                    
|Selling, general and administrative expenses               |  |                                     | 1,547,123  |   |      |   | 914,512  |  
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Net loss from operations                                   |  |                                     | (1,348,994 | ) |      |   | (951,376 | )
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Other income (expense):                                    |  |                                     |            |   |      |   |          |  
|Interest income                                            |  |                                     | 7,950      |   |      |   | 7,448    |  
|Interest expense                                           |  |                                     | (50,372    | ) |      |   | (46,446  | )
|Other income                                               |  |                                     |           |   |      |   | 1,283    |  
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Total other income and expenses                            |  |                                     | (42,422    | ) |      |   | (37,715  | )
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Net loss before income taxes                               |  |                                     | (1,391,416 | ) |      |   | (989,091 | )
|                                                           |  |                                    
|Provision for (benefit from) income taxes                  |  |                                     |           |   |      |   |         |  
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Net loss                                                   |  | $                                   | (1,391,416 | ) |      | $ | (989,091 | )
|                                                           |  |                                     |            |   |      |   |          |  
|                                                           |  |                                    
|Basic and fully-diluted net loss per share of common stock |  | $                                   | (0.04      | ) |      | $ | (0.04    | )
|                                                           |  |                                     |            |   |      |   |          |  

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



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Geospatial Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders Equity (Deficit)

For the Three Months Ended March 31, 2010



|                                                                          |  |                 |  |              |       |                          |            |                              |   |        |                    |   |            |       |   |          |   |  |   |             |   |  |   |            |  
|------------------------------------------------------------------------- |  | --------------- |  | ------------ | ----- | ------------------------ | ---------- | ---------------------------- | - | ------ | ------------------ | - | ---------- | ----- | - | -------- | - |  | - | ----------- | - |  | - | ---------- | -
|                                                                          |  | Preferred Stock |  | Common Stock |       | AdditionalPaid-InCapital |            | StockSubscriptionsReceivable |   |        | AccumulatedDeficit |   |            | Total |  
|                                                                          |  | Shares          |  | Amount       |       | Shares                   |            | Amount                       |   |        |                    |  
|                                                                          |  |                 |  |              |       |                          |            |                             
|Balance, December 31, 2009                                                |  | 1,575,000       |  | $            | 1,575 |                          | 31,124,369 |                              | $ | 31,124 |                    | $ | 13,473,089 |       | $ |         |   |  | $ | (15,369,390 | ) |  | $ | (1,863,602 | )
|                                                                          |  |                 |  |              |       |                          |            |                             
|Issuance of common stock for cash at $1.00 per share, less offering costs |  |                |  |              |      |                          | 9,013,233  |                              |   | 9,013  |                    |   | 7,970,164  |       |   | (100,000 | ) |  |   |            |   |  |   | 7,879,177  |  
|                                                                          |  |                 |  |              |       |                          |            |                             
|Issuance of common stock in settlement of liabilities at $1.00 per share  |  |                |  |              |      |                          | 1,051,771  |                              |   | 1,052  |                    |   | 1,050,719  |       |   |         |   |  |   |            |   |  |   | 1,051,771  |  
|                                                                          |  |                 |  |              |       |                          |            |                             
|Issuance of common stock for services at $1.00 per share                  |  |                |  |              |      |                          | 150,000    |                              |   | 150    |                    |   | 149,850    |       |   |         |   |  |   |            |   |  |   | 150,000    |  
|                                                                          |  |                 |  |              |       |                          |            |                             
|Net loss for the three months ended March 31, 2010                        |  |                |  |              |      |                          |           |                              |   |       |                    |   |           |       |   |         |   |  |   | (1,391,416  | ) |  |   | (1,391,416 | )
|                                                                          |  |                 |  |              |       |                          |            |                              |   |        |                    |   |            |       |   |          |   |  |   |             |   |  |   |            |  
|                                                                          |  |                 |  |              |       |                          |            |                             
|Balance, March 31, 2010                                                   |  | 1,575,000       |  | $            | 1,575 |                          | 41,339,373 |                              | $ | 41,339 |                    | $ | 22,643,822 |       | $ | (100,000 | ) |  | $ | (16,760,806 | ) |  | $ | 5,825,930  |  
|                                                                          |  |                 |  |              |       |                          |            |                              |   |        |                    |   |            |       |   |          |   |  |   |             |   |  |   |            |  

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



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Geospatial Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows



|                                                                            |  |                                     |            |   |      |   |          |  
|--------------------------------------------------------------------------- |  | ----------------------------------- | ---------- | - | ---- | - | -------- | -
|                                                                            |  | For the Three MonthsEnded March 31, |           
|                                                                            |  | 2010                                |            |   | 2009 |  
|                                                                            |  |                                    
|Cash flows from operating activities:                                       |  |                                     |            |   |      |   |          |  
|Net loss                                                                    |  | $                                   | (1,391,416 | ) |      | $ | (989,091 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                     |            |   |      |   |          |  
|Depreciation and amortization                                               |  |                                     | 128,438    |   |      |   | 38,066   |  
|Accrued interest receivable                                                 |  |                                     | (7,949     | ) |      |   | (7,421   | )
|Accrued interest payable                                                    |  |                                     | 21,200     |   |      |   | 45,780   |  
|Issuance of common stock for services                                       |  |                                     | 150,000    |   |      |   |         |  
|Rent expensed through increase in due to stockholder                        |  |                                     |           |   |      |   | 19,500   |  
|Changes in operating assets and liabilities:                                |  |                                     |            |   |      |   |          |  
|Accounts receivable                                                         |  |                                     | (348,396   | ) |      |   | 8,345    |  
|Costs and estimated earnings in excess of billings on uncompleted contracts |  |                                     | 37,877     |   |      |   | (969     | )
|Prepaid expenses                                                            |  |                                     | (115,388   | ) |      |   | 62,497   |  
|Accounts payable                                                            |  |                                     | (936,196   | ) |      |   | 62,989   |  
|Accrued expenses                                                            |  |                                     | (5,695     | ) |      |   | 101,004  |  
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |                                     | 81,326     |   |      |   | (7,607   | )
|Due to stockholder                                                          |  |                                     | 1,425      |   |      |   |         |  
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Net cash used in operating activities                                       |  |                                     | (2,384,774 | ) |      |   | (666,907 | )
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Cash flows from investing activities:                                       |  |                                     |            |   |      |   |          |  
|Purchase of property, plant and equipment                                   |  |                                     | (25,871    | ) |      |   | (3,486   | )
|Deposit on equipment                                                        |  |                                     | (2,532,747 | ) |      |   |         |  
|Notes receivable issued                                                     |  |                                     | (30,000    | ) |      |   |         |  
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Net cash used in investing activities                                       |  |                                     | (2,588,618 | ) |      |   | (3,486   | )
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Cash flows from financing activities:                                       |  |                                     |            |   |      |   |          |  
|Proceeds from sale of common stock, net of offering costs                   |  |                                     | 7,879,177  |   |      |   | 250,000  |  
|Net borrowings from stockholders                                            |  |                                     | 130,000    |   |      |   | 390,000  |  
|Principal payments on capital lease liabilities                             |  |                                     | (52,935    | ) |      |   |         |  
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Net cash provided by financing activities                                   |  |                                     | 7,956,242  |   |      |   | 640,000  |  
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Net change in cash and cash equivalents                                     |  |                                     | 2,982,850  |   |      |   | (30,393  | )
|                                                                            |  |                                    
|Cash and cash equivalents at beginning of period                            |  |                                     | 481,536    |   |      |   | 42,793   |  
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Cash and cash equivalents at end of period                                  |  | $                                   | 3,464,386  |   |      | $ | 12,400   |  
|                                                                            |  |                                     |            |   |      |   |          |  
|                                                                            |  |                                    
|Supplemental disclosures:                                                   |  |                                     |            |   |      |   |          |  
|Cash paid during period for interest                                        |  | $                                   | 29,172     |   |      | $ | 666      |  
|Cash paid during period for income taxes                                    |  |                                     |           |   |      |   |         |  
|Non-cash transactions:                                                      |  |                                     |            |   |      |   |          |  
|Issuance of common stock in settlement of liabilities                       |  |                                     | 1,051,771  |   |      |   | 104,639  |  
|Issuance of common stock for services                                       |  |                                     | 150,000    |   |      |   |         |  
|Capital lease liabilities incurred                                          |  |                                     | 46,356     |   |      |   |         |  
|Reclassification of due to stockholder to note payable to stockholder       |  |                                     |           |   |      |   | 52,000   |  

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



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010

Note 1  Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements included herein have been prepared by Geospatial Holdings, Inc. (the Company) in
accordance with generally accepted accounting principles for interim financial information and regulations contained in the Securities Exchange Act of 1934, as amended. Accordingly, the accompanying Unaudited Condensed Consolidated Financial
Statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying Unaudited Condensed Consolidated Financial Statements
as of and for the three months ended March 31, 2010 should be read in conjunction with the Companys Financial Statements as of and for the year ended December 31, 2009. In the opinion of the Companys management, all adjustments
considered necessary for a fair statement of the accompanying Unaudited Condensed Consolidated Financial Statements have been included, and all adjustments, unless otherwise discussed in the Notes to the Unaudited Condensed Consolidated Financial
Statements, are of a normal and recurring nature. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

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

The Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries, Geospatial Mapping
Systems, Inc., Utility Services and Consulting Corporation, and Geospatial Pipeline Services, LLC. All intercompany accounts and transactions have been eliminated.



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 2  Accounts Receivable

Accounts receivable consisted of the following at March 31, 2010:



|                                      |  |   |         |  
|------------------------------------- |  | - | ------- | -
|Billed:                               |  |   |         |  
|Fixed-price contracts:                |  |   |         |  
|Completed contracts                   |  | $ | 110,275 |  
|Contracts in progress                 |  |   | 17,461  |  
|Time-and-materials contracts          |  |   | 47,247  |  
|Units of delivery contracts           |  |   | 320,000 |  
|                                      | 
|Retainage                             |  |   | 2,981   |  
|                                      | 
|Unbilled                              |  |   | 124,085 |  
|                                      | 
|Less: allowance for doubtful accounts |  |   | (10,000 | )
|                                      |  |   |         |  
|                                      | 
|                                      |  | $ | 612,049 |  
|                                      |  |   |         |  

Note 3  Uncompleted Contracts

Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows at March 31, 2010:



|                                        |  |   |          |  
|--------------------------------------- |  | - | -------- | -
|Costs incurred on uncompleted contracts |  | $ | 134,068  |  
|Estimated earnings                      |  |   | 74,702   |  
|                                        |  |   |          |  
|                                        |  |   | 208,770  |  
|                                        | 
|Billings to date                        |  |   | (266,350 | )
|                                        |  |   |          |  
|                                        | 
|                                        |  | $ | (57,579  | )
|                                        |  |   |          |  

Included in the accompanying balance sheet under the following captions:



|                                                                            |  |   |         |  
|--------------------------------------------------------------------------- |  | - | ------- | -
|Costs and estimated earnings in excess of billings on uncompleted contracts |  | $ | 23,747  |  
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |   | (81,326 | )
|                                                                            |  |   |         |  
|                                                                            | 
|                                                                            |  | $ | (57,579 | )
|                                                                            |  |   |         |  



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 4  Backlog

The following schedule summarizes changes in backlog on fixed-price contracts during the three months ended March 31, 2010. Backlog represents the
amount of revenue the Company expects to realize from work to be performed on uncompleted contracts in progress at quarter end, and from contractual agreements on which work has not yet begun. Backlog does not include any amounts from signed units
of delivery or time-and-materials contracts.



|                                                |  |                                 |          |  
|----------------------------------------------- |  | ------------------------------- | -------- | -
|                                                |  | Three MonthsEndedMarch 31, 2010 |         
|                                                | 
|Backlog balance at beginning of the period      |  | $                               | 280,650  |  
|New fixed-price contracts awarded during period |  |                                 | 210,250  |  
|Fixed-price contract adjustments                |  |                                 | (1 ,900  | )
|                                                |  |                                 |          |  
|                                                |  |                                 | 489,000  |  
|                                                | 
|Less: contract revenue earned during the period |  |                                 | (189,937 | )
|                                                |  |                                 |          |  
|                                                | 
|Backlog balance at March 31, 2010               |  | $                               | 299,063  |  
|                                                |  |                                 |          |  



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 5  Related Party Transactions

The Company leases its headquarters building from Mark A. Smith, the Companys Chairman and Chief Executive Officer. The building has approximately
3,200 square feet of office space, and is used by the Companys corporate and engineering/operations staff. The Company incurred $19,500 of lease expense for this building during each of the periods ended March 31, 2010 and 2009.

During 2009, Mr. Smith and the Company entered into a Note Conversion Agreement, pursuant to which, the Company issued to Mr. Smith
a $1,000,000, 8% Unsecured Convertible Promissory Note (the Smith Convertible Note) and a $128,263, 8% Unsecured Promissory Note (the Smith Demand Note).

The Smith Convertible Note bears interest at 8% per annum, compounded monthly. The Smith Convertible Note is payable on the earlier of the
Companys closing of a round of convertible preferred or common stock financing of at least $10,000,000 or December 31, 2011. At any time prior to December 31, 2011, Mr. Smith may convert the outstanding principal balance of the
Smith Convertible Note to the Companys common stock at a conversion price of $1.00 per share. During the three months ended March 31, 2010, Mr. Smith converted $1,000,000 of the Smith Demand Note to 1,000,000 shares of the
Companys common stock. Interest on the Smith Convertible Note was $17,508 for the three months ended March 31, 2010. The balance due on the Smith Convertible Note, including accrued interest, was $31,134 at March 31, 2010.

The Smith Demand Note bears interest at 8% per annum, compounded monthly, and is payable upon demand. Interest on the Smith Demand Note
was $2,582 for the year ended March 31, 2010. At March 31, 2010, the balance due on the Smith Demand Note was $132,593.

At
December 31, 2009, the Company owed Mr. Smith $10,059 for other notes payable. During the three months ended March 31, 2010, Mr. Smith advanced the Company $130,000. Interest on other notes for the three months ended
March 31, 2010 was $1,112. At March 31, 2010, the balance due on other notes payable was $141,171.



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 6  Income Taxes

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



|                          |  |                                     |          |   |      |   |          |  
|------------------------- |  | ----------------------------------- | -------- | - | ---- | - | -------- | -
|                          |  | For the Three MonthsEnded March 31, |         
|                          |  | 2010                                |          |   | 2009 |  
|                          |  |                                    
|Current:                  |  |                                     |          |   |      |   |          |  
|                          |  |                                    
|Federal                   |  | $                                   |         |   |      | $ |         |  
|                          |  |                                    
|State                     |  |                                     |         |   |      |   |         |  
|                          |  |                                     |          |   |      |   |          |  
|                          |  |                                    
|                          |  |                                     |         |   |      |   |         |  
|                          |  |                                     |          |   |      |   |          |  
|Deferred:                 |  |                                     |          |   |      |   |          |  
|                          |  |                                    
|Federal                   |  |                                     | 434,153  |   |      |   | 310,364  |  
|                          |  |                                    
|State                     |  |                                     | 137,826  |   |      |   | 98,528   |  
|                          |  |                                     |          |   |      |   |          |  
|                          |  |                                    
|                          |  |                                     | 571,979  |   |      |   | 408,892  |  
|                          |  |                                     |          |   |      |   |          |  
|                          |  |                                    
|Total income taxes        |  |                                     | 571,979  |   |      |   | 408,892  |  
|                          |  |                                    
|Less: valuation allowance |  |                                     | (571,979 | ) |      |   | (408,892 | )
|                          |  |                                     |          |   |      |   |          |  
|                          |  |                                    
|Net income taxes          |  | $                                   |         |   |      | $ |         |  
|                          |  |                                     |          |   |      |   |          |  

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



|                                            |  |                                     |   |  |       |  
|------------------------------------------- |  | ----------------------------------- | - |  | ----- | -
|                                            |  | For the Three MonthsEnded March 31, |  
|                                            |  | 2010                                |   |  | 2009  |  
|Federal statutory rate                      |  | 35.0                                | % |  | 35.0  | %
|State income taxes (net of federal benefit) |  | 6.5                                 |   |  | 6.5   |  
|Valuation allowance                         |  | (41.5                               | ) |  | (41.5 | )
|                                            |  |                                     |   |  |       |  
|                                            |  |                                    
|Effective rate                              |  | 0.0                                 | % |  | 0.0   | %
|                                            |  |                                     |   |  |       |  



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 6  Income Taxes (continued)

Significant components of the Companys deferred tax assets and liabilities are summarized below as of March 31, 2010 and 2009. A valuation
allowance has been established as realization of such assets has not met the more-likely-than-not threshold requirement under Statement of Financial Accounting Standards Board Accounting Standards Codification 740, Income Taxes.



|                                |  |                 |            |   |      |   |            |  
|------------------------------- |  | --------------- | ---------- | - | ---- | - | ---------- | -
|                                |  | As of March 31, |           
|                                |  | 2010            |            |   | 2009 |  
|                                |  |                
|Start-up costs                  |  | $               | 94,033     |   |      | $ | 103,867    |  
|License fees                    |  |                 | (85,884    | ) |      |   | (59,882    | )
|Depreciation                    |  |                 | (110,414   | ) |      |   | (86,449    | )
|Allowance for doubtful accounts |  |                 | 4,150      |   |      |   | 4,150      |  
|                                |  |                
|Accrued expenses                |  |                 | 1,402,060  |   |      |   |           |  
|Uncompleted contracts           |  |                 | (61,471    | ) |      |   | (21,179    | )
|Net operating loss carryforward |  |                 | 5,557,921  |   |      |   | 3,469,192  |  
|                                |  |                 |            |   |      |   |            |  
|                                |  |                
|Deferred income taxes           |  |                 | 6,800,395  |   |      |   | 3,409,699  |  
|                                |  |                
|Less: valuation allowance       |  |                 | (6,800,395 | ) |      |   | (3,409,699 | )
|                                |  |                 |            |   |      |   |            |  
|                                |  |                
|Net deferred income taxes       |  | $               |           |   |      | $ |           |  
|                                |  |                 |            |   |      |   |            |  

At March 31, 2010, the Company had federal and state net operating loss carryforwards of approximately $13,393,000. The
federal and state net operating loss carryforwards expire beginning in 2021 and 2026, respectively. The amount of the state net operating loss carryforward that can be utilized each year to offset taxable income is limited by state law.



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 7  Commitments and Contingencies

On January 29, 2010, the Company and Reduct, NV (Reduct) entered into the First Amendment to the Amended and Restated
Exclusive License and Distribution Agreement, which extended the date for payment of the Companys advance payment for Smart Probe equipment of $4,950,000 under the Amended and Restated Exclusive License and Distribution Agreement dated
December 15, 2009 (the Amended Reduct License Agreement) from January 31, 2010 to March 31, 2010 in consideration for a payment by the Company of $100,000. On March 12, 2010, the Company and Reduct entered into the
Second Amendment to the Amended and Restated Exclusive License and Distribution Agreement, which extended the date for payment of the Companys advance payment for Smart
Probe equipment of $4,950,000 under the Amended Reduct License Agreement from March 31, 2010 to
$2,500,000 by March 17, 2010, and $2,450,000 by April 30, 2010. The Company paid Reduct $2,500,000 on March 12, 2010 and $2,450,000 on April 30, 2010. The Amended Reduct License Agreement is now effective.

Note 8  Stock-Based Payments

During the three months ended March 31, 2010, the Company granted options to purchase 30,000 shares of common stock to an eligible employee under the
2007 Stock Option Plan.

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

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

On March 2, 2010, the Company entered into a
Strategic Advisory Agreement (the Strategic Advisory Agreement) with Pace Global Energy Services, LLC (Pace) and Ridge Global, LLC (Ridge) to provide the Company with certain strategic advisory and other support
services. Pursuant to the Strategic Advisory Agreement, the Company issued Pace Global Energy Services, LLC and Ridge Global, LLC warrants to purchase 1,600,000 and 2,400,000 shares, respectively, of the Companys common stock at an exercise
price of $1.00 per share. The warrants expire on March 2, 2012. Further, pursuant to the Strategic Advisory Agreement, the Company agreed to expand the number of members of the Companys board of directors from three to five, and to
appoint Timothy F. Sutherland, Chairman and Chief Executive Officer of Pace, and Thomas J. Ridge, President and Chief Executive Officer of Ridge, as members of the Companys board of directors to fill the newly-created vacancies.



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2010



Note 9  Net Loss Per Share of Common Stock

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



|                                           |  |                                  |            |   |                                  |    |            |  
|------------------------------------------ |  | -------------------------------- | ---------- | - | -------------------------------- | -- | ---------- | -
|                                           |  | Three Months EndedMarch 31, 2010 |            |   | Three Months EndedMarch 31, 2009 |   
|                                           |  |                                 
|Net loss                                   |  | $                                | (1,391,416 | ) |                                  | $  | (989,091   | )
|                                           |  |                                 
|Divided by:                                |  |                                  |            |   |                                  |    |            |  
|Weighted average shares outstanding        |  |                                  | 32,471,436 |   |                                  |    | 23,962,555 |  
|                                           |  |                                  |            |   |                                  |    |            |  
|                                           |  |                                 
|Basic and fully-diluted net loss per share |  | ($                               | 0.04       | ) |                                  | ($ | 0.04       | )
|                                           |  |                                  |            |   |                                  |    |            |  

At March 31, 2010, the shares of Series A Preferred Stock were convertible into 1,968,750 shares of the Companys
common stock. The effect of the potential conversion of the shares of Series A Preferred Stock was not included in the computation of diluted earnings per share for the three months ended March 31, 2010 because the effect of their conversion
would be antidilutive.

The effect of the potential conversion of the Smith Convertible Note to 31,134 shares of common stock was not included
in the computation of diluted earnings per share for the year ended December 31, 2009 because the effect of its conversion would be antidilutive.

The effects of options to purchase 12,225,000 shares of common stock, and warrants to purchase 9,866,272 shares of common stock were not included in the
computation of diluted earnings per share for the three months ended March 31, 2010 because the effect of their conversion would be antidilutive.

Note 10  Subsequent Events

On April 30, 2010, the Company paid Reduct an advance payment on equipment of $2,450,000. Upon this payment, the Amended Reduct License Agreement
became effective.



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##### Table of Contents

|ITEM 2: | MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -----------------------------------------------------------------------------------

Overview

You
should read the following Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) together with our financial statements and notes thereto as of and for the year ended December 31, 2009,
filed with our Annual Report on Form 10-K on April 16, 2010, and our financial statements and notes thereto as of and for the three months ended March 31, 2010, which appear elsewhere in this Quarterly Report on Form 10-Q.

On April 25, 2008, Kayenta Kreations, Inc. (Kayenta) acquired all the outstanding Common Stock of Geospatial Mapping
Systems, Inc. (GMSI) pursuant to an Agreement and Plan of Merger (the Merger Agreement) dated March 25, 2008. Upon consummation of the Merger Agreement, GMSI became a fully-owned subsidiary of Kayenta, which was
subsequently renamed Geospatial Holdings, Inc. (the Company). Because GMSIs stockholders owned the majority of the Company upon consummation of the Merger Agreement, GMSI was deemed to be the acquiring entity.
Accordingly, all historical financial information prior to the consummation of the Merger Agreement contained in this MD&A, and in our financial statements and notes thereto, is that of GMSI.

Prior to the Merger, Kayenta was a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended
(the Exchange Act). Upon consummation of the Merger Agreement, the Company adopted GMSIs business, and ceased to be a shell company as defined in the Exchange Act. The Companys services include pipeline data acquisition,
professional data management, and pipeline field services.

Liquidity and Capital Resources

At March 31, 2010, we had current assets of $5,022,664, and current liabilities of $4,682,687.

Our business depends largely on patent pending Smart
Probe technology that we license from Reduct NV (Reduct), the developer of the technology. We are
the exclusive licensee of the Smart Probe technology in North America, South America, and Australia pursuant
to the Amended and Restated Exclusive License and Distribution Agreement dated December 15, 2009 (as amended, the Amended Reduct License Agreement) which became effective on April 30, 2010, upon the Companys second
installment payment of $2,450,000 for the purchase of SmartProbe equipment which, together with the
Companys first installment payment of $2,500,000 in March, 2010, totals the $4,950,000 Advance Payment previously due by April 30, 2010.

We are obligated to make various payments and minimum purchases under the Amended Reduct License Agreement in order to satisfy our
obligations thereunder. Under the Amended Reduct License Agreement, we must make a license payment of $3,000,000 by December 31, 2010. In addition, we must make minimum quarterly payments totaling $6,000,000, $11,750,000, and $6,612,500 in
2010, 2011, and 2012, respectively. The first payment is due on June 30, 2010. If the Amended Reduct License Agreement is renewed, this minimum purchase requirement will increase by 15% annually over the prior year beginning in 2013. If we fail to
make any of these payments or if Reduct believes that we have failed to meet any of our other obligations under the Amended Reduct License Agreement, Reduct could seek to limit or terminate our license rights, which could lead to costly and
time-consuming litigation and potentially, a loss of our exclusive license rights. During the period of any such litigation, our ability to carry out the development of client relationships and provide pipeline management services could be
significantly and adversely affected.

Our Company has incurred net losses since inception. Our operations and capital
requirements have been funded by sales of our common stock and advances from our chief executive officer. At December 31, 2009, current liabilities exceeded current assets by $3,862,583. Those factors as well as our commitments under the
Amended Reduct License Agreement raise doubts about our ability to continue as a going concern.



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##### Table of Contents

Management is continuing efforts to secure funds through financing and operations. The
Company retained Convertible Capital as its financial advisor, and in March 2010, entered into a Strategic Advisory Agreement with Ridge Global, LLC (Ridge) and Pace Global Energy Services, LLC, (Pace) pursuant to which Pace
and Ridge agreed to provide strategic advisory services to the Company, including assisting the Company and Convertible Capital in raising capital and assisting the Company in its business development efforts. The Company closed financing through
sales of convertible preferred stock and common stock in the aggregate amount of $6.2 million in 2009, including conversion of $2.0 million of indebtedness to our Chief Executive Officer into common stock, and conversion of approximately $105,000 of
other debt into common stock, and common stock issued for services totaling approximately $215,000. In March, 2010, the Company completed a sale of common stock with an aggregate sale price of approximately $9.7 million, including the conversion of
$1.0 million of indebtedness to our Chief Executive Officer into common stock. The proceeds of the stock offering will be used to fund general working capital needs.

Furthermore, the Company is expanding into new marketing and sales channels. The Company has entered into the utility locating market,
has entered into a joint marketing agreement with a strategic partner, and is exploring relationships with additional strategic partners to increase capital from operations. The Company has begun to market probes to third-parties to meet our minimum
purchase requirements under the Amended Reduct License Agreement. The Company is also investigating diversifying operations by identifying potential acquisitions of technology to supplement the Reduct Smart Probe technology.

We believe that our actions and planned actions will enable us to finance our operations beyond December 31, 2010.

Results of Operations

Sales were $917,966 for the three months ended March 31, 2010, compared to $70,193 for the three months ended March 31, 2009.
Cost of sales was $719,837 for the three months ended March 31, 2010, compared to $107,057 for the three months ended March 31, 2009. Our sales and cost of sales increased in 2010 due to improved economic conditions and the commencement of
our utility locating business. We expect sales and cost of sales to fluctuate as our business reaches maturity.

Selling,
general and administrative (SG&A) expenses include all costs that are not directly associated with our revenue-generating activities. SG&A expenses include payroll costs for sales, administrative, and technical personnel, sales
and marketing costs, corporate costs, and facilities costs. SG&A expenses were $1,547,123 for the three months ended March 31, 2010, compared to $914,512 for the three months ended March 31, 2009. The increase in SG&A costs for the
three months ended March 31, 2010 compared to the three months ended March 31, 2009 was due to increased expenses resulting from the expansion of our sales and administrative staff and facilities in 2010, and increased professional fees
due to increased legal, financial advisory, government relations, and investor relations fees. In addition, we incurred a fee of $100,000 associated with an extension of payments due under the Amended Reduct License Agreement. These increases in
SG&A expenses were partially offset by a reduction in marketing costs associated with an advertising campaign in 2009.

Other income and expenses include interest income, interest expense, and non-business income and expenses. Other income and expense for
the three months ended March 31, 2010 was a net expense of $42,422, which included interest income of $7,950, and interest expense of $50,372. Other income and expense for the three months ended March 31, 2009 was a net expense of $37,715,
which included interest income of $7,448, interest expense of $46,446, and other income of $1,283. The increase in interest expense in 2010 is due to interest on capital leases, partially offset by a reduction in interest on notes payable to
stockholders, due to the conversion of notes payable to stockholders to common stock.

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

Off-Balance Sheet Arrangements



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##### Table of Contents

The Company had no off-balance sheet arrangements as of March 31, 2010.

Application of Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, which
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Estimates and assumptions which, in our opinion, are significant to the underlying amounts included in the financial statements and for which it would be reasonably
possible that future events or information could change those estimates include:

Impairment
Assessment of Intangible Assets. Intangible assets consist of exclusive license rights to the patent pending DuctRunner Smart
Probe technology. We licensed the technology under the Exclusive License and Distribution Agreement dated
August 3, 2006 (the Original Reduct License Agreement). On December 15, 2009, we entered into the Amended Reduct License Agreement, which restructured the payment obligations and other terms of the Original Reduct License
Agreement. The Amended Reduct License Agreement became effective on April 30, 2010. The Amended Reduct License Agreement provides us with exclusive control rights to the DuctRunner Smart
Probe technology throughout the continents of North America, South America, and Australia. We recorded an
intangible asset of $1,367,000 upon use of the license under the Original Reduct License Agreement. In addition to the license fees, we are required to make minimum purchases of Smart Probes. If we are unable to satisfy minimum purchase
requirements required pursuant to the Amended Reduct License Agreement, Reduct may terminate the license agreement, and our investment in the license rights would be impaired.

Under the Original Reduct License Agreement, the license rights had an indefinite useful life. Accordingly, the license rights were not
amortized under accounting principles generally accepted in the United States of America. Upon the execution of the Amended Reduct License Agreement on December 15, 2009, we determined that the license rights have a finite life. We estimate the
useful life of the license rights under the Amended Reduct License Agreement to be twelve years. Accordingly, we are amortizing the investment in the license rights over a twelve-year period beginning January 1, 2010. We test the carrying value
of the license rights annually for impairment, and review their useful life. Should the license rights be determined to be impaired, the value of the asset will be written down, and a loss recognized in the period in which the assets recorded
value exceeds its fair value. In our test for impairment, we determine the fair value of the license rights based on a five-year projection of future cash flows, which is updated annually based on managements projections.

Estimated Costs to Complete Fixed-Price Contracts. We record revenues for fixed-price contracts under the
percentage-of-completion method of accounting, whereby revenues are recognized ratably as those contracts are completed. This rate is based primarily on the proportion of contract costs incurred to date to total contract costs projected to be
incurred for the entire project, or the proportion of measurable output completed to date to total output anticipated for the entire project. We review our estimates of costs to complete each contract quarterly, and make adjustments if necessary. At
March 31, 2010, we do not believe that material changes to contract cost estimates at completion for any of our open contracts are reasonably likely to occur.

Realization of Deferred Income Tax Assets. We provide a net deferred tax asset or liability equal to the expected
future tax benefit or expense of temporary reporting differences between financial reporting and tax accounting methods and any available operating loss or tax credit carryovers. At March 31, 2010, we had a deferred tax asset resulting
principally from our net operating loss deduction carryforward available for tax purposes in future years. This deferred tax asset is completely offset by a valuation allowance due to the uncertainty of realization. We evaluate the necessity of the
valuation allowance quarterly.



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##### Table of Contents

|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

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

Foreign Currency RiskOur functional currency is the United States dollar. We transact business in foreign currencies. At the date a
foreign currency transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and recorded in United States dollars using the exchange rate in effect at that time. At each balance sheet
date, balances that will be settled in foreign currencies are adjusted to reflect the current exchange rate. Any gain or loss resulting from changes in foreign currency exchange rates is included in net income in the period in which the exchange
rate changes.

Under the Original Reduct License Agreement, most of our transactions with Reduct were denominated in Euros.
Under the Amended Reduct License Agreement, most future transactions with Reduct will be denominated in United States dollars. At March 31, 2010, other than the existing obligations under the Original Reduct License Agreement, which were
superseded by the Amended Reduct License Agreement upon its effectiveness on April 30, 2010, we had no liabilities denominated in Euros.

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



|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------

Disclosure
Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the United States Securities and
Exchange Commissions rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of Company management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures
pursuant to the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) and 15d-15(e). Based upon, and as of the date of this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the
Companys disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II - OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

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



|ITEM 2. | SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

On March 19, 2010, the Company entered into a series of subscription agreements (collectively, the March 2010 Subscription Agreement)
with various investors in connection with the sale of 8,589,771 shares of our common stock at $1.00 per share for an aggregate offering price of $8,589,771. Pursuant to Section 7.1 of the March 2010 Subscription Agreement, the Company agreed to
register the March 2009 Shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register the March 2010 Shares each investor would be entitled to receive an additional allocation of 2% of its portion of
the March 2010 Shares for each 30 day period that elapsed after September 1, 2010. Also, on March 19, 2010, Mark A. Smith, the Companys Chief Executive Officer and the Chairman of the Board of Directors, acquired 1,000,000 shares of
the Companys common stock in exchange for the cancellation of $1,000,000 of indebtedness owed to Mr. Smith by the Company. The Company also issued 513,233 shares of its common stock to Convertible Capital as a financing fee on the sale.
The sales and issuances took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Regulation D. The purchasers are accredited
investors, and the Company conducted the private placements without any general solicitation or advertisement and with a restriction on resale.

On April 6, 2010, the Company entered into a series of subscription agreements (collectively, the April 2010 Subscription Agreement)
with various investors in connection with the sale of 112,000 shares of our common stock at $1.00 per share for an aggregate offering price of $112,000. Pursuant to Section 7.1 of the April 2010 Subscription Agreement, the Company agreed to
register the April 2009 Shares under the Securities Act by September 1, 2010. In the event that the Company fails to so register the April 2010 Shares each investor would be entitled to receive an additional allocation of 2% of its portion of
the April 2010 Shares for each 30 day period that elapsed after September 1, 2010. The sales and issuances took place in a series of private placement transactions pursuant to the exemption from the registration requirements of the Securities
Act of 1933, as amended, provided by Regulation D. The purchasers are accredited investors, and the Company conducted the private placements without any general solicitation or advertisement and with a restriction on resale.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | REMOVED AND RESERVED
|------- | --------------------



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS
|------- | --------



|        |  |                                                      
|------- |  | -----------------------------------------------------
|Exhibit |  | Description                                          
|        | 
|31.1    |  | Rule 13a-14(a) Certification of Mark A. Smith        
|        | 
|31.2    |  | Rule 13a-14(a) Certification of Thomas R. Oxenreiter 
|        | 
|32.1    |  | Section 1350 Certification of Chief Executive Officer
|        | 
|32.2    |  | Section 1350 Certification of Chief Financial Officer



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.



|                   |  |                           |  |                            
|------------------ |  | ------------------------- |  | ---------------------------
|                   |  | Geospatial Holdings, Inc.
|                   |  | (Registrant)             
|                   |  |                          
|Date: May 17, 2010 |  | By:                       |  | /S/    MARK A.
SMITH       
|                   |  | Name:                     |  | Mark A. Smith              
|                   |  | Title:                    |  | Chief Executive Officer    
|                   |  |                          
|                   |  | By:                       |  | /S/    THOMAS R.
OXENREITER
|                   |  | Name:                     |  | Thomas R. Oxenreiter       
|                   |  | Title:                    |  | Chief Financial Officer    



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