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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: SEPTEMBER 30, 2009

OR



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

COMMISSION FILE NUMBER: 333-04066





GEOSPATIAL
HOLDINGS, INC.

(Exact name of registrant as specified in its charter)







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

229 Howes Run Road, Sarver, PA 16055

(Address of principal executive offices)

(724) 353-3400

(Registrants telephone number, including area code)



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









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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 November 13, 2009: 29,124,369.









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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 |  | 19
|                                                                                             | 
|ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                             |  | 22
|                                                                                             | 
|ITEM 4. CONTROLS AND PROCEDURES.                                                             |  | 22
|                                                                                             | 
|PART II - OTHER INFORMATION                                                                  |  | 23
|                                                                                             | 
|ITEM 1. LEGAL PROCEEDINGS                                                                    |  | 23
|                                                                                             | 
|ITEM 2. SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS                          |  | 23
|                                                                                             | 
|ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      |  | 23
|                                                                                             | 
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  |  | 23
|                                                                                             | 
|ITEM 5. OTHER INFORMATION                                                                    |  | 23
|                                                                                             | 
|ITEM 6. EXHIBITS.                                                                            |  | 23



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PART I - FINANCIAL INFORMATION



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

GEOSPATIAL HOLDINGS, INC.

INDEX



|                                                                                     |  |     
|------------------------------------------------------------------------------------ |  | ----
|                                                                                     |  | Page
|FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 |  |     
|                                                                                     | 
|Condensed Consolidated Balance Sheets (Unaudited)                                    |  | 4   
|                                                                                     | 
|Condensed Consolidated Statements of Operations (Unaudited)                          |  | 5   
|                                                                                     | 
|Condensed Consolidated Statements of Changes in Stockholders Equity (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



|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                                                                            |  | September 30,2009 |             |   | December 31,2008* |  
|                                                                                                                                                                                                                            |  | (Unaudited)       |             |   |                   |  
|ASSETS                                                                                                                                                                                                                      |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Current assets:                                                                                                                                                                                                             |  |                   |             |   |                   |   |            |  
|Cash and cash equivalents                                                                                                                                                                                                   |  | $                 | 51,255      |   |                   | $ | 42,793     |  
|Accounts receivable, net of allowance for doubtful accounts of $10,000 at September 30, 2009 and December 31,
2008                                                                                                          |  |                   | 195,583     |   |                   |   | 51,271     |  
|Unbilled accounts receivable                                                                                                                                                                                                |  |                   | 11,064      |   |                   |   |           |  
|Costs and estimated earnings in excess of billings on uncompleted contracts                                                                                                                                                 |  |                   | 58,843      |   |                   |   | 11,479     |  
|Notes receivable                                                                                                                                                                                                            |  |                   | 389,466     |   |                   |   | 361,612    |  
|Prepaid expenses                                                                                                                                                                                                            |  |                   | 167,624     |   |                   |   | 188,358    |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total current assets                                                                                                                                                                                                        |  |                   | 873,835     |   |                   |   | 655,513    |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Property and equipment:                                                                                                                                                                                                     |  |                   |             |   |                   |   |            |  
|Field equipment                                                                                                                                                                                                             |  |                   | 924,786     |   |                   |   | 905,635    |  
|Office equipment                                                                                                                                                                                                            |  |                   | 103,102     |   |                   |   | 99,616     |  
|Vehicles                                                                                                                                                                                                                    |  |                   | 17,530      |   |                   |   | 17,530     |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total property and equipment                                                                                                                                                                                                |  |                   | 1,045,418   |   |                   |   | 1,022,781  |  
|Less: accumulated depreciation                                                                                                                                                                                              |  |                   | (445,420    | ) |                   |   | (330,209   | )
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Net property and equipment                                                                                                                                                                                                  |  |                   | 599,998     |   |                   |   | 692,572    |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Other assets:                                                                                                                                                                                                               |  |                   |             |   |                   |   |            |  
|License fees                                                                                                                                                                                                                |  |                   | 1,367,000   |   |                   |   | 1,367,000  |  
|Deposit on equipment                                                                                                                                                                                                        |  |                   | 300,000     |   |                   |   |           |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total other assets                                                                                                                                                                                                          |  |                   | 1,667,000   |   |                   |   | 1,367,000  |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total assets                                                                                                                                                                                                                |  | $                 | 3,140,833   |   |                   | $ | 2,715,085  |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                                       |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Current liabilities:                                                                                                                                                                                                        |  |                   |             |   |                   |   |            |  
|Accounts payable                                                                                                                                                                                                            |  | $                 | 1,258,577   |   |                   | $ | 710,493    |  
|Accrued expenses                                                                                                                                                                                                            |  |                   | 473,111     |   |                   |   | 105,168    |  
|Billings in excess of costs and estimated earnings on uncompleted contracts                                                                                                                                                 |  |                   | 19,117      |   |                   |   | 25,159     |  
|Due to stockholder                                                                                                                                                                                                          |  |                   | 26,000      |   |                   |   | 32,500     |  
|Notes payable to stockholders                                                                                                                                                                                               |  |                   | 3,108,505   |   |                   |   | 2,118,808  |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total current liabilities                                                                                                                                                                                                   |  |                   | 4,885,310   |   |                   |   | 2,992,128  |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Stockholders deficit:                                                                                                                                                                                                      |  |                   |             |   |                   |   |            |  
|Preferred Stock, $.001 par value; 5,000,000 shares authorized and no shares issued and outstanding at September 30, 2009 or
December 31, 2008                                                                               |  |                   |            |   |                   |   |           |  
|Common Stock, $.001 par value; 100,000,000 shares authorized at September 30, 2009 and December 31, 2008; 27,024,369
and 23,759,806 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively |  |                   | 27,024      |   |                   |   | 23,760     |  
|Additional paid-in capital                                                                                                                                                                                                  |  |                   | 9,134,460   |   |                   |   | 7,270,611  |  
|Accumulated deficit                                                                                                                                                                                                         |  |                   | (10,905,961 | ) |                   |   | (7,571,414 | )
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total stockholders deficit                                                                                                                                                                                                 |  |                   | (1,744,477  | ) |                   |   | (277,043   | )
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  
|                                                                                                                                                                                                                            |  |                  
|Total liabilities and stockholders deficit                                                                                                                                                                                 |  | $                 | 3,140,833   |   |                   | $ | 2,715,085  |  
|                                                                                                                                                                                                                            |  |                   |             |   |                   |   |            |  



|* | 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

(Unaudited)



|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|---------------------------------------------------------- |  | --------------------------------------- | ---------- | - | -------------------------------------- | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                           |  | For the Three MonthsEnded
September 30, |            |   | For the Nine MonthsEnded
September 30, |  
|                                                           |  | 2009                                    |            |   | 2008                                   |   |           | 2009 |  |   | 2008       |  
|                                                           |  |                                         |            |  
|Sales                                                      |  | $                                       | 230,648    |   |                                        | $ | 155,375   |      |  | $ | 487,127    |   |  | $ | 1,469,803  |  
|Cost of sales                                              |  |                                         | 225,189    |   |                                        |   | 121,556   |      |  |   | 506,573    |   |  |   | 548,641    |  
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Gross profit                                               |  |                                         | 5,459      |   |                                        |   | 33,819    |      |  |   | (19,446    | ) |  |   | 921,162    |  
|                                                           |  |                                         |            |  
|Selling, general and administrative expenses               |  |                                         | 1,214,087  |   |                                        |   | 1,009,713 |      |  |   | 3,175,895  |   |  |   | 3,235,349  |  
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Loss from operations                                       |  |                                         | (1,208,628 | ) |                                        |   | (975,894  | )    |  |   | (3,195,341 | ) |  |   | (2,314,187 | )
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Other income (expense):                                    |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|Interest income                                            |  |                                         | 7,430      |   |                                        |   | 6,048     |      |  |   | 22,465     |   |  |   | 14,009     |  
|Interest expense                                           |  |                                         | (62,216    | ) |                                        |   | (18,268   | )    |  |   | (163,004   | ) |  |   | (24,612    | )
|Other income                                               |  |                                         |           |   |                                        |   |          |      |  |   | 1,333      |   |  |   | 171        |  
|Gain (loss) on foreign currency exchange                   |  |                                         |           |   |                                        |   | 126,928   |      |  |   |           |   |  |   | (36,521    | )
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Total other income and expenses                            |  |                                         | (54,786    | ) |                                        |   | 114,708   |      |  |   | (139,206   | ) |  |   | (46,953    | )
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Net loss before income taxes                               |  |                                         | (1,263,414 | ) |                                        |   | (861,186  | )    |  |   | (3,334,547 | ) |  |   | (2,361,140 | )
|                                                           |  |                                         |            |  
|Provision for (benefit from) income taxes                  |  |                                         |           |   |                                        |   |          |      |  |   |           |   |  |   |           |  
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Net loss                                                   |  | $                                       | (1,263,414 | ) |                                        | $ | (861,186  | )    |  | $ | (3,334,547 | ) |  | $ | (2,361,140 | )
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  
|                                                           |  |                                         |            |  
|Basic and fully-diluted net loss per share of Common Stock |  | $                                       | (0.05      | ) |                                        | $ | (0.04     | )    |  | $ | (0.13      | ) |  | $ | (0.11      | )
|                                                           |  |                                         |            |   |                                        |   |           |      |  |   |            |   |  |   |            |  

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 Statement of Changes in Stockholders Deficit

For the Nine Months Ended September 30, 2009

(Unaudited)



|                                                                  |  |                 |  |              |   |                          |            |                    |   |        |       |   |           |  |   |             |   |  |   |            |  
|----------------------------------------------------------------- |  | --------------- |  | ------------ | - | ------------------------ | ---------- | ------------------ | - | ------ | ----- | - | --------- |  | - | ----------- | - |  | - | ---------- | -
|                                                                  |  | Preferred Stock |  | Common Stock |   | AdditionalPaid-InCapital |            | AccumulatedDeficit |   |        | Total |  
|                                                                  |  | Shares          |  | Amount       |   | Shares                   |            | Amount             |   |        |      
|Balance, December 31, 2008                                        |  |                |  | $            |  |                          | 23,759,806 |                    | $ | 23,760 |       | $ | 7,270,611 |  | $ | (7,571,414  | ) |  | $ | (277,043   | )
|                                                                  |  |                 |  |              |   |                          |           
|Issuance of Common Stock for cash at $1.00 per share              |  |                |  |              |  |                          | 250,000    |                    |   | 250    |       |   | 249,750   |  |   |            |   |  |   | 250,000    |  
|                                                                  |  |                 |  |              |   |                          |           
|Issuance of Common Stock for cash at $0.50 per share              |  |                |  |              |  |                          | 2,794,900  |                    |   | 2,795  |       |   | 1,394,655 |  |   |            |   |  |   | 1,397,450  |  
|                                                                  |  |                 |  |              |   |                          |           
|Issuance of Common Stock in settlement of note at $1.00 per share |  |                |  |              |  |                          | 104,638    |                    |   | 104    |       |   | 104,534   |  |   |            |   |  |   | 104,638    |  
|                                                                  |  |                 |  |              |   |                          |           
|Issuance of Common Stock for services at $1.00 per share          |  |                |  |              |  |                          | 115,025    |                    |   | 115    |       |   | 114,910   |  |   |            |   |  |   | 115,025    |  
|                                                                  |  |                 |  |              |   |                          |           
|Net loss for the nine months ended September 30, 2009             |  |                |  |              |  |                          |           |                    |   |       |       |   |          |  |   | (3,334,547  | ) |  |   | (3,334,547 | )
|                                                                  |  |                 |  |              |   |                          |            |                    |   |        |       |   |           |  |   |             |   |  |   |            |  
|                                                                  |  |                 |  |              |   |                          |           
|Balance, September 30, 2009                                       |  |                |  | $            |  |                          | 27,024,369 |                    | $ | 27,024 |       | $ | 9,134,460 |  | $ | (10,905,961 | ) |  | $ | (1,744,477 | )
|                                                                  |  |                 |  |              |   |                          |            |                    |   |        |       |   |           |  |   |             |   |  |   |            |  

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



6



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Geospatial Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                            |  |                                        |            |   |      |   |            |  
|--------------------------------------------------------------------------- |  | -------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                            |  | For the Nine MonthsEnded
September 30, |           
|                                                                            |  | 2009                                   |            |   | 2008 |  
|                                                                            |  |                                       
|Cash flows from operating activities:                                       |  |                                        |            |   |      |   |            |  
|Net loss                                                                    |  | $                                      | (3,334,547 | ) |      | $ | (2,361,140 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                        |            |   |      |   |            |  
|Depreciation                                                                |  |                                        | 115,211    |   |      |   | 112,971    |  
|Rent expensed through increase in due to stockholder                        |  |                                        | 45,500     |   |      |   |           |  
|Accrued interest receivable                                                 |  |                                        | (22,408    | ) |      |   | (13,900    | )
|Accrued interest payable                                                    |  |                                        | 160,335    |   |      |   | 21,193     |  
|Issuance of Common Stock for reverse acquisition                            |  |                                        |           |   |      |   | 316,226    |  
|Issuance of Common Stock for services                                       |  |                                        | 115,025    |   |      |   |           |  
|Changes in operating assets and liabilities:                                |  |                                        |            |   |      |   |            |  
|Accounts receivable                                                         |  |                                        | (144,312   | ) |      |   | (78,132    | )
|Unbilled accounts receivable                                                |  |                                        | (11,064    | ) |      |   |           |  
|Costs and estimated earnings in excess of billings on uncompleted contracts |  |                                        | (47,364    | ) |      |   | (61,718    | )
|Prepaid expenses                                                            |  |                                        | 20,734     |   |      |   | (63,757    | )
|Accounts payable                                                            |  |                                        | 548,084    |   |      |   | 340,983    |  
|Accrued expenses                                                            |  |                                        | 367,943    |   |      |   | (77,758    | )
|Billings in excess of costs and estimated earnings on contracts in progress |  |                                        | (6,042     | ) |      |   | 13,022     |  
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Net cash used in operating activities                                       |  |                                        | (2,192,905 | ) |      |   | (1,852,010 | )
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Cash flows from investing activities:                                       |  |                                        |            |   |      |   |            |  
|Purchase of property and equipment                                          |  |                                        | (22,637    | ) |      |   | (37,169    | )
|Expenditures for license fees                                               |  |                                        |           |   |      |   | (781,900   | )
|Deposit on equipment                                                        |  |                                        | (300,000   | ) |      |   | (608,410   | )
|Notes receivable issued                                                     |  |                                        | (5,446     | ) |      |   | (217,932   | )
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Net cash used in investing activities                                       |  |                                        | (328,083   | ) |      |   | (1,645,411 | )
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Cash flows from financing activities:                                       |  |                                        |            |   |      |   |            |  
|Proceeds from sale of Common Stock                                          |  |                                        | 1,647,450  |   |      |   | 1,265,000  |  
|Net borrowings from stockholders                                            |  |                                        | 882,000    |   |      |   | 2,061,003  |  
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Net cash provided by financing activities                                   |  |                                        | 2,529,450  |   |      |   | 3,326,003  |  
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Net change in cash and cash equivalents                                     |  |                                        | 8,462      |   |      |   | (171,418   | )
|                                                                            |  |                                       
|Cash and cash equivalents at beginning of period                            |  |                                        | 42,793     |   |      |   | 183,448    |  
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Cash and cash equivalents at end of period                                  |  | $                                      | 51,255     |   |      | $ | 12,030     |  
|                                                                            |  |                                        |            |   |      |   |            |  
|                                                                            |  |                                       
|Supplemental disclosures:                                                   |  |                                        |            |   |      |   |            |  
|Cash paid during period for interest                                        |  | $                                      | 2,669      |   |      | $ | 3,401      |  
|Cash paid during period for income taxes                                    |  |                                        |           |   |      |   |           |  
|Non-cash transactions:                                                      |  |                                        |            |   |      |   |            |  
|Issuance of Common Stock in settlement of liabilities                       |  |                                        | 104,639    |   |      |   | 903,469    |  
|Issuance of Common Stock for reverse acquisition                            |  |                                        |           |   |      |   | 316,226    |  
|Issuance of Common Stock for services                                       |  |                                        | 115,025    |   |      |   |           |  
|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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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009

Note 1  Basis of Presentation

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 these Unaudited Condensed Consolidated Financial Statements is that of GMSI.

The Unaudited Condensed Consolidated Financial Statements included herein have been prepared by 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 nine months ended
September 30, 2009 should be read in conjunction with the Companys Financial Statements as of and for the year ended December 31, 2008. 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 and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

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.

From GMSIs inception on May 26, 2006 through December 31, 2007, the Company was considered a development
stage company as defined by Statement of Financial Accounting Standards No. 7, Accounting and Reporting by Development Stage Enterprises. As such, the Company devoted substantially all its efforts to establishing a new business. During
2008, the Company began to generate revenues from its planned operations, and ceased to be a development stage company.

The Condensed
Consolidated Financial Statements include the accounts of the Company and its subsidiaries, GMSI 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

September 30, 2009



Note 2  Merger

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

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

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

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

Note 3  Accounts Receivable

Accounts receivable consisted of the following at September 30, 2009:



|                                      |  |   |         |  
|------------------------------------- |  | - | ------- | -
|Billed:                               |  |   |         |  
|Completed contracts                   |  | $ | 118,334 |  
|Contracts in progress                 |  |   | 84,268  |  
|Retainage                             |  |   | 2,981   |  
|Unbilled                              |  |   | 11,064  |  
|                                      |  |   |         |  
|                                      |  |   | 216,647 |  
|Less: allowance for doubtful accounts |  |   | (10,000 | )
|                                      |  |   |         |  
|                                      | 
|                                      |  | $ | 206,647 |  
|                                      |  |   |         |  



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 4  Uncompleted Contracts

Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows at September 30, 2009:



|                                        |  |   |         |  
|--------------------------------------- |  | - | ------- | -
|Costs incurred on uncompleted contracts |  | $ | 51,815  |  
|Estimated earnings                      |  |   | 72,179  |  
|                                        |  |   |         |  
|                                        |  |   | 123,994 |  
|                                        | 
|Billings to date                        |  |   | (84,268 | )
|                                        |  |   |         |  
|                                        | 
|                                        |  | $ | 39,726  |  
|                                        |  |   |         |  

Included in the accompanying balance sheet under the following captions:



|                                                                            |  |   |         |  
|--------------------------------------------------------------------------- |  | - | ------- | -
|Costs and estimated earnings in excess of billings on uncompleted contracts |  | $ | 58,843  |  
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |   | (19,117 | )
|                                                                            |  |   |         |  
|                                                                            | 
|                                                                            |  | $ | 39,726  |  
|                                                                            |  |   |         |  

Note 5  Backlog

The following schedule summarizes changes in backlog on fixed-price contracts during the three and nine months ended September 30, 2009. 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.



|                                                |  |                                    |           |   |                                   |   |           |  
|----------------------------------------------- |  | ---------------------------------- | --------- | - | --------------------------------- | - | --------- | -
|                                                |  | Three MonthsEndedSeptember 30,2009 |           |   | Nine MonthsEndedSeptember 30,2009 |  
|                                                |  |                                   
|Backlog balance at beginning of the period      |  | $                                  | 995,130   |   |                                   | $ | 838,627   |  
|New contracts awarded during period             |  |                                    | 333,166   |   |                                   |   | 773,622   |  
|Contract adjustments                            |  |                                    | 17 ,707   |   |                                   |   | (10,142   | )
|                                                |  |                                    |           |   |                                   |   |           |  
|                                                |  |                                    | 1,346,003 |   |                                   |   | 1,602,107 |  
|                                                |  |                                   
|Less: contract revenue earned during the period |  |                                    | (230,348  | ) |                                   |   | (486,452  | )
|                                                |  |                                    |           |   |                                   |   |           |  
|                                                |  |                                   
|Backlog balance at September 30, 2009           |  | $                                  | 1,115,655 |   |                                   | $ | 1,115,655 |  
|                                                |  |                                    |           |   |                                   |   |           |  



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 6  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 $58,500 of lease expense for this building during the nine months ended September 30, 2009.

At December 31, 2008, notes payable by the Company to Mr. Smith for advances to the Company were $2,015,772. During the nine months ended
September 30, 2009, Mr. Smith loaned the Company $934,000, including unpaid rent, for working capital purposes. Interest on the loan at 8% amounted to $158,733 during the nine months ended September 30, 2009. At September 30,
2009, the balance due on the note, including accrued interest, was $3,108,505.

During 2008 another stockholder, who owns approximately 14% of
the Companys outstanding Common Stock, loaned the Company $100,000 for working capital purposes. Interest on the loan at 8% amounted to $1,603 during the three months ended March 31, 2009. On March 10, 2009, the balance due on the
note of $104,638 was converted to 104,638 shares of the Companys Common Stock and warrants to purchase 20,927 shares of the Companys Common Stock at $1.50 per share, exercisable for ten years.



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 7  Income Taxes

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



|                          |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|------------------------- |  | --------------------------------------- | -------- | - | -------------------------------------- | - | -------- | ---- |  | - | ---------- | - |  | - | -------- | -
|                          |  | For the Three MonthsEnded September 30, |          |   | For the Nine MonthsEnded
September 30, |  
|                          |  | 2009                                    |          |   | 2008                                   |   |          | 2009 |  |   | 2008       |  
|Current:                  |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|Federal                   |  | $                                       |         |   |                                        | $ |         |      |  | $ |           |   |  | $ |         |  
|                          |  |                                         |          |  
|State                     |  |                                         |         |   |                                        |   |         |      |  |   |           |   |  |   |         |  
|                          |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|                          |  |                                         |         |   |                                        |   |         |      |  |   |           |   |  |   |         |  
|                          |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|Deferred:                 |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|Federal                   |  |                                         | 396,329  |   |                                        |   | 270,484  |      |  |   | 1,046,207  |   |  |   | 641,394  |  
|                          |  |                                         |          |  
|State                     |  |                                         | 125,819  |   |                                        |   | 85,868   |      |  |   | 332,129    |   |  |   | 203,617  |  
|                          |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|                          |  |                                         | 522,148  |   |                                        |   | 356,352  |      |  |   | 1,378,336  |   |  |   | 845,011  |  
|                          |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|Total income taxes        |  |                                         | 522,148  |   |                                        |   | 356,352  |      |  |   | 1,378,336  |   |  |   | 845,011  |  
|                          |  |                                         |          |  
|Less: valuation allowance |  |                                         | (522,148 | ) |                                        |   | (356,352 | )    |  |   | (1,378,336 | ) |  |   | (845,011 | )
|                          |  |                                         |          |   |                                        |   |          |      |  |   |            |   |  |   |          |  
|                          |  |                                         |          |  
|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 September 30, |   |  | For the Nine MonthsEnded September 30, |  
|                                            |  | 2009                                    |   |  | 2008                                   |   |  | 2009  |   |  | 2008  |  
|Federal statutory rate                      |  | 35.0                                    | % |  | 35.0                                   | % |  | 35.0  | % |  | 35.0  | %
|                                            |  |                                         |   | 
|State income taxes (net of federal benefit) |  | 6.5                                     |   |  | 6.5                                    |   |  | 6.5   |   |  | 6.5   |  
|                                            |  |                                         |   | 
|Valuation allowance                         |  | (41.5                                   | ) |  | (41.5                                  | ) |  | (41.5 | ) |  | (41.5 | )
|                                            |  |                                         |   |  |                                        |   |  |       |   |  |       |  
|                                            |  |                                         |   | 
|Effective rate                              |  | 0.0                                     | % |  | 0.0                                    | % |  | 0.0   | % |  | 0.0   | %
|                                            |  |                                         |   |  |                                        |   |  |       |   |  |       |  



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 7  Income Taxes (continued)

Significant components of the Companys deferred tax assets and liabilities are summarized below as of September 30, 2009 and 2008. A valuation
allowance has been established as realization of such assets has not met the more-likely-than-not threshold requirement under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.



|                                   |  |                     |            |   |      |   |            |  
|---------------------------------- |  | ------------------- | ---------- | - | ---- | - | ---------- | -
|                                   |  | As of September 30, |           
|                                   |  | 2009                |            |   | 2008 |  
|                                   |  |                    
|Start-up costs                     |  | $                   | 98,950     |   |      | $ | 108,783    |  
|License fees                       |  |                     | (78,792    | ) |      |   | (40,972    | )
|Depreciation                       |  |                     | (94,832    | ) |      |   | (77,348    | )
|Allowance for doubtful accounts    |  |                     | 4,150      |   |      |   | 4,150      |  
|Unrealized foreign currency losses |  |                     |           |   |      |   | 449        |  
|Uncompleted contracts              |  |                     | (29,954    | ) |      |   | (32,846    | )
|Net operating loss carryforward    |  |                     | 4,479,622  |   |      |   | 2,145,472  |  
|                                   |  |                     |            |   |      |   |            |  
|                                   |  |                    
|Deferred income taxes              |  |                     | 4,379,144  |   |      |   | 2,107,688  |  
|                                   |  |                    
|Less: valuation allowance          |  |                     | (4,379,144 | ) |      |   | (2,107,688 | )
|                                   |  |                     |            |   |      |   |            |  
|                                   |  |                    
|Net deferred income taxes          |  | $                   |           |   |      | $ |           |  
|                                   |  |                     |            |   |      |   |            |  

At September 30, 2009, the Company had federal and state net operating loss carryforwards of
approximately $10,794,000. 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.

Note 8  Commitments and Contingencies

On March 31, 2009, the Company entered into a Letter of Agreement with Delta Networks, SA (Delta) and Reduct NV (Reduct) to change the terms of the Companys Exclusive
License and Distribution Agreement dated August 3, 2006. Pursuant to the Letter of Agreement, the Company must make minimum purchases of Smart Probes of 6,000,000 during 2009. A payment on the minimum purchase requirement of
$500,000 was due by June 1, 2009. The Company made payments towards the minimum purchase requirements totaling $300,000 through September 30, 2009. The Company, Delta, and Reduct are currently in negotiations regarding a restructuring of
the Companys payment obligations.



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 9  Stock-Based Payments

During the nine months ended September 30, 2009, the Company granted options to purchase 550,000 shares of the Companys Common Stock to eligible
employees under the 2007 Stock Option Plan, and options to purchase 50,000 shares of the Companys Common Stock under the 2007 Stock Option Plan were forfeited.

During the nine months ended September 30, 2009, the Company granted warrants to purchase 70,927 shares of the Companys Common Stock at $1.50 per share for five years to certain stockholders in
connection with the sale of Common Stock. No expense was recognized upon the grant of these warrants.

During the nine months ended
September 30, 2009, the Company granted warrants to purchase 217,800 shares of the Companys Common Stock at $0.55 per share for ten years to certain contractors in settlement of contractual obligations. No expense was recognized upon the
grant of these warrants.

On March 6, 2009, the Company granted warrants to purchase 2,000,000 shares of the Companys Common Stock
at $1.23 for ten years to the Companys President. Warrants to purchase 1,000,000 shares of the Companys Common Stock vested immediately upon the grant, and the balance vest over twelve months. No expense was recognized upon the grant of
these warrants.



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 10  Fair Value Measurement

The FASBs accounting standard for fair value measurements establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure
fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and
liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs
based on the Companys own assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significant to the fair
value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of
September 30, 2009:



|                                |  |                                        |           |                                               |   |                                         |  |   |   |  |   |          
|------------------------------- |  | -------------------------------------- | --------- | --------------------------------------------- | - | --------------------------------------- |  | - | - |  | - | ---------
|                                |  | TotalCarryingValue atSeptember 30,2009 |           | Fair Value Measurements at September 30, 2009
|                                |  | Quotedpricesin activemarkets(Level 1)  |           | Significantotherobservableinputs (Level 2)    |   | Significantunobservableinputs (Level 3)
|Intangible Asset  License Fees |  | $                                      | 1,367,000 |                                               | $ |                                        |  | $ |  |  | $ | 1,367,000

The license fee intangible asset is measured at fair value using undiscounted cash flows and is
classified within Level 3 of the valuation hierarchy. There was no change to the fair value of the asset during the nine months ended September 30, 2009.



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



Note 11  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 EndedSeptember 30, |            |   | Nine Months EndedSeptember 30, |   
|                                           |  | 2009                            |            |   | 2008                           |    |            | 2009 |  |    | 2008       |  
|Net loss                                   |  | $                               | (1,263,414 | ) |                                | $  | (861,186   | )    |  | $  | (3,334,547 | ) |  | $  | (2,361,140 | )
|                                           |  |                                 |            |  
|Divided by:                                |  |                                 |            |   |                                |    |            |      |  |    |            |   |  |    |            |  
|Weighted average shares outstanding        |  |                                 | 28,890,406 |   |                                |    | 23,759,806 |      |  |    | 24,756,581 |   |  |    | 23,361,140 |  
|                                           |  |                                 |            |   |                                |    |            |      |  |    |            |   |  |    |            |  
|                                           |  |                                 |            |  
|Basic and fully-diluted net loss per share |  | ($                              | 0.05       | ) |                                | ($ | 0.04       | )    |  | ($ | 0.13       | ) |  | ($ | 0.11       | )
|                                           |  |                                 |            |   |                                |    |            |      |  |    |            |   |  |    |            |  

The effects of options to purchase 12,070,000 shares of Common Stock, and warrants to purchase
6,126,272 shares of Common Stock were not included in the computation of diluted earnings per share because the effect of their conversion would be antidilutive.

Note 12  Subsequent Events

On October 29, 2009 the Company issued an 8%
Unsecured Promissory Note (the Note) in the amount of $2,866,700.00 due December 31, 2011 to Mark A. Smith, the Companys Chairman and CEO, to evidence Mr. Smiths periodic loans to the Company. The amounts
outstanding under the Note bear interest at a rate of 8% per annum from the date such periodic loans were made, compounded monthly, which interest will accrue until the Note is satisfied in full. As of October 29, the total principal
amount of the Note together with accrued interest thereon equaled $3,128,262.70. If the Note is not satisfied in full by December 31, 2011, then Mr. Smith may demand payment of the principal and interest due under the Note. Failure by the
Company to make payments of principal or interest or certain other events of bankruptcy shall be events of default under the Note. Upon the occurrence and during the continuance of any event of default, the Note shall bear interest at a rate of
17% per annum, compounded monthly.

On October 30, 2009 the Company entered into a Note Conversion Agreement with Mr. Smith
whereby Mr. Smith presented the Note to the Company and the Company converted $2,000,000 of the Note into two million shares of Common Stock at $1.00 per share (the Note Conversion). The issuance of shares of the Companys
common stock took place in a private placement transaction pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation D.



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##### Table of Contents

Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



On October 30, 2009, in connection with the Note Conversion, the Company also issued Mr. Smith
the following replacement notes to account for the remaining outstanding balance on the Note of $1,128,262.00: (i) an unsecured Convertible Note (the Convertible Note) in the amount of $1,000,000.00 due on the earlier of
(a) December 31, 2011 or (b) the closing by the Company of a round of convertible preferred or common stock financing in an amount equal to or greater than $10,000,000.00 (the earlier occurrence of either (a) or (b), the
Convertible Note Maturity Date) and (ii) an Unsecured Promissory Note (the Demand Note) in the amount of $128,262.70 due upon demand.

The Convertible Note bears interest at a rate of 8% per annum, compounded monthly, from the date of issuance, which interest will accrue until the Convertible Note is satisfied in full. If the
Convertible Note is not satisfied in full by the Convertible Note Maturity Date, then Mr. Smith may demand payment of the principal and interest due under the Convertible Note. Failure by the Company to make payments of principal or interest or
certain other events of bankruptcy shall be events of default under the Convertible Note. Upon the occurrence and during the continuance of any event of default, the Convertible Note shall bear interest at a rate of 17% per annum, compounded
monthly.

The Demand Note bears an interest rate of 8% per annum, compounded monthly, from the date of issuance which interest will
accrue until the Demand Note is satisfied in full. If the Demand Note is not satisfied in full by December 31, 2009, then Mr. Smith may demand payment of the principal and interest due under the Demand Note. Failure by the Company to make
payments of principal or interest or certain other events of bankruptcy shall be events of default under the Demand Note. Upon the occurrence and during the continuance of any event of default, the Demand Note shall bear interest at a rate of
17% per annum, compounded monthly.

On October 30, 2009, the Company entered into an Agreement by and between the Company and
Mr. David Vosbein (the Vosbein Warrant Agreement). In connection with the Vosbein Warrant Agreement, the Company and Mr. Vosbein agreed to cancel Warrant No. 1, which was previously issued under an employment agreement
dated March 6, 2009, and the Company issued Mr. Vosbein a new Warrant No. 16 for one million, five hundred ninety thousand shares of the Companys Common Stock at an exercise price of $1.00 per share (Warrant
No. 16). Pursuant to the Vosbein Warrant Agreement, the warrant awards shall vest as follows: warrants to purchase one million, one hundred seventy-three thousand, three hundred thirty-three shares of the Companys common stock shall
be vested and exercisable immediately upon grant; warrants to purchase eighty-three thousand, three hundred thirty-three shares of the Companys common stock shall be vested and exercisable on November 6, 2009; warrants to purchase
eighty-three thousand, three hundred thirty-four shares of the Companys common stock shall be vested and exercisable on December 6, 2009; warrants to purchase eighty-three thousand, three hundred thirty-three shares of the Companys
common stock shall be vested and exercisable on January 6, 2010; warrants to purchase eighty-three thousand, three hundred thirty-three shares of the Companys common stock shall be vested and exercisable on February 6, 2010; warrants
to purchase eighty-three thousand, three hundred thirty-four shares of the Companys common stock shall be vested and exercisable on March 6, 2010. Vested shares are exercisable until March 6, 2019. This award of warrants is outside
of 2007 Stock Option Plan of the Company



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Geospatial Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2009



dated December 1, 2007 dated December 1, 2007. The issuance of warrants to Vosbein were done pursuant to the exemption from the registration requirements of the Securities Act provided
by Regulation D.



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|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, 2008, filed
with our Annual Report on Form 10-K, as amended, on October 9, 2009, and our financial statements and notes thereto as of and for the three and nine months ended September 30, 2009, 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 September 30, 2009, we had current assets of $873,835, and current liabilities of $4,885,310.

We are a party to the Reduct License Agreement to license the Smart Probe technology from Reduct, the developer of
the technology. The Reduct License Agreement grants the Company exclusive control over the rights to the Smart Probetechnology throughout North America, South America and Australia.

Pursuant to Amendment No. 3 to the Reduct License Agreement dated December 18, 2008, a Letter of Agreement dated March 10, 2009, and a Letter of Agreement dated March 31, 2009, we:
(i) agreed to extend the payment due date for certain payments owed by the Company to Reduct; (ii) agreed to restructure certain other payments owed to Reduct; (iii) granted an option to purchase 500,000 shares of the Companys
Common Stock to Delta Networks SA (Delta), the owner of substantially all of the common stock of Reduct; and (iv) agreed to work in good faith with Reduct and Delta to draft and execute mutually acceptable agreements pursuant to
which we will acquire Reduct from Delta through the purchase of one hundred percent of Reducts outstanding capital stock in exchange for $40 million in the aggregate of cash and the Companys Common Stock (the Acquisition).

Pursuant to the Letter of Agreement dated March 31, 2009, the Company must make minimum purchases of Smart Probes
of 6,000,000 during 2009. A payment on the minimum purchase requirement of $500,000 was due by June 1, 2009. The Company made payments towards the minimum purchase requirements totaling $500,000 through October 2009. The Company, Delta,
and Reduct are currently in negotiations regarding a restructuring of the Companys payment obligations.

The initial
target closing date for the Acquisition was June 15, 2009, but that date may be extended for up to three successive three-month periods until March 15, 2010 (the Reduct Closing) and has been extended for the first two
three-month periods. For each three-month extension, we are required to make a



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payment to or minimum purchases from Reduct in an amount of 1.5 million. We have not yet made any such payments or purchases.

If we consummate the Acquisition by March 15, 2010, all license payments that we owe to Reduct will be discharged entirely. If we do
not consummate the Acquisition by March 15, 2010, we will maintain our exclusive license and distribution rights by paying approximately 4.0 million of suspended license payments for 2008 and 5.6 million of suspended Smart
Probe payments for 2009 (the Suspended Payments) and making minimum purchases of Smart Probes of approximately 7.9 million in 2010, 9.0 million in 2011, 10.4 million in 2012,
11.9 million in 2013, and thereafter, a minimum purchase that increases annually at a 15% rate over the prior year (collectively, the Minimum Purchase Requirements). In the event that we fail to make the Suspended License
Payments or the Minimum Purchase Requirements, Reduct shall continue to provide services to us on all of our existing Reduct products and accessories, and shall make additional Reduct products and services available to us on a non-exclusive basis.

If Reduct believes that we have failed to meet our obligations under the Reduct License Agreement, including our obligation
to effect the Reduct Closing in a timely manner, Reduct could seek to limit or terminate our license rights, which could lead to costly and time-consuming litigation and potentially, a loss of the licensed 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.

Results of Operations

From GMSIs inception on May 26,
2006, through December 31, 2007, we were considered a development stage company as defined by Statement of Accounting Standards No. 7, Accounting and Reporting by Development Stage Enterprises. As such, we devoted substantially all
of our efforts to establishing a new business. During 2008, we began to generate revenues from our planned operations, and ceased to be a development stage company.

Sales were $230,648 and $487,127 for the three and nine months ended September 30, 2009, respectively, compared to $155,375 and $1,469,803 for the three and nine months ended September 30, 2008,
respectively. Cost of sales was $225,189 and $506,573 for the three and nine months ended September 30, 2009, respectively, compared to $121,556 and $548,641 for the three and nine months ended September 30, 2008, respectively. Our sales
and cost of sales declined due to economic conditions each quarter from the second quarter of 2008 through the first quarter of 2009. Sales began to increase in the second and third quarters of 2009. Cost of sales as a percentage of sales increased
in 2009 as our fixed costs of sales increased. 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 $1,214,087 and $3,175,895 for the three and nine months ended September 30, 2009, respectively, compared to $1,009,713 and $3,235,349 for the
three and nine months ended September 30, 2008, respectively. The increase in SG&A costs for the three months ended September 30, 2009 compared to the three months ended September 30, 2008 was due to increased expenses resulting
from the expansion of our sales and administrative staff and facilities in 2009, and marketing costs associated with an advertising campaign in 2009. The decrease in SG&A costs for the nine months ended September 30, 2009 compared to the
nine months ended September 30, 2008 were primarily due to legal, accounting and other expenses incurred in 2008 related to the acquisition of Kayenta and the subsequent filing of a Registration Statement under the Securities Act of 1933, as
amended, for a portion of our shares. This decrease in expense was partially offset by increased expenses resulting from the expansion of our sales and administrative staff and facilities in 2009, and marketing costs associated with an advertising
campaign in 2009.

Other income and expenses include interest income, interest expense, non-business income and expenses, and
gains or losses on foreign currency exchange. Other income and expense for the three and



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nine months ended September 30, 2009 was a net expense of $54,786 and $139,206, respectively, which included interest income of $7,430 and $22,465, respectively, interest expense of $62,216
and $163,004, respectively, and other income of $0 and $1,333, respectively. Other income and expense for the three and nine months ended September 30, 2008 was a net income of $114,708 and a net expense of $46,953, respectively, which included
interest income of $6,048 and $14,009, respectively, interest expense of $18,268 and $24,612, respectively, other income of $0 and $171, respectively, and a gain on foreign currency exchange of $126,928 and a loss on foreign currency exchange of
$36,521, respectively. The increase in interest expense in 2009 is due to the increase in notes payable to stockholders. The decrease in losses on foreign currency exchange from 2008 to 2009 is because the Company had no liabilities to be settled in
foreign currency in 2009.

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

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of September 30, 2009.

Application of Critical Accounting Policies

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

Impairment Assessment of Intangible Assets. Intangible assets consist of exclusive and
perpetual license rights to the patent pending DuctRunner Smart Probe technology. We license the technology from Reduct NV, a Belgian company, the developer of the technology, under an Exclusive License and Distribution Agreement, as amended
from time to time, that 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. In addition to the license fees, we are required to make minimum purchases of Smart Probes. If the minimum purchase requirements are not met, the exclusivity portion of the license agreement with Reduct NV becomes void, and our
investment in the license rights would become impaired.

The license rights have an indefinite useful life. Accordingly, the
rights are not amortized under accounting principles generally accepted in the United States of America. 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 review of the license rights for the year ended December 31, 2008, we
determined that the value of the license rights was not impaired.

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 September 30, 2009, we do not believe that material changes to contract cost estimates at completion for any of our open contracts are reasonably likely to occur.

Realization of Deferred Income Tax Assets. We provide a net deferred tax asset or liability equal to the
expected future tax benefit or expense of temporary reporting differences between financial reporting



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and tax accounting methods and any available operating loss or tax credit carryovers. At September 30, 2009, we had a deferred tax asset resulting principally from our net operating loss
deduction carryforward available for tax purposes in future years. This deferred tax asset is completely offset by a valuation allowance due to the uncertainty of realization. We evaluate the necessity of the valuation allowance quarterly.



|ITEM 3. | QUANTATIVE 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.

Most
of our transactions with Reduct NV are denominated in Euros. At September 30, 2009, 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 nine months ended September 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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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
|------- | -----------------------------------------------------------

During the quarter ended September 30, 2009, the Company sold 1,989,900 shares of the Companys Common Stock. Each share of Common Stock was sold at a price of $0.50 for a total of $994,950. The
Company also issued 115,025 shares of the Companys Common Stock at a price of $1.00 per share in exchange for services with a value of $115,025. The sales took place in a series of private placement transactions pursuant to the exemption from
the registration requirements of the Securities Act provided by 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. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None.



|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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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: November 20, 2009 |  | 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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