UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
quarterly period ended March 31, 2008
OR
o
TRANSITION
REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
For
the
transition period
from
to
Commission
File Number 0-23901
GSV,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
13-3979226
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification No.)
|
191
Post Road West, Westport, CT
|
06880
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(203)
221-2690
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
|
o
|
|
Accelerated filer
|
|
Non-accelerated filer
|
o
|
(Do
not check if a smaller reporting company)
|
Smaller reporting company
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No
x
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date: As of May 5, 2008, there were
7,502,703 shares of common stock outstanding, excluding 168,592 shares held
in
treasury.
GSV,
INC. AND SUBSIDIARIES
INDEX
TO FORM 10-Q
|
Page
Number
|
PART
I. FINANCIAL INFORMATION
|
2
|
|
|
Item
1. Financial Statements (unaudited):
|
2
|
|
|
Condensed
Consolidated Balance Sheets at March 31, 2008 and December 31,
2007
|
2
|
|
|
Condensed
Consolidated Statements of Income for the Three Months ended March
31, 2008 and 2007
|
3
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months ended
March 31,
2008 and 2007
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4
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
5
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
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8
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|
|
Item
4T. Controls and Procedures
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14
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|
|
PART
II. OTHER INFORMATION
|
15
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|
|
Item
5. Other Information
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15
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Item
6. Exhibits
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15
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SIGNATURES
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16
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PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
GSV,
Inc.
CONDENSED
CONSOLIDATED BALANCE SHEETS - UNAUDITED
ASSETS
|
|
|
March
31,
2008
|
|
|
December
31,
2007
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
424,159
|
|
$
|
|
|
Accounts
receivable and other current assets
|
|
|
217,718
|
|
|
170,094
|
|
Total
current assets
|
|
|
641,877
|
|
|
568,355
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|
Investments:
|
|
|
|
|
|
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Internet
related
|
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50,000
|
|
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50,000
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|
Geologic
studies
|
|
|
2,316,721
|
|
|
2,316,721
|
|
Oil
and gas wells, net of accumulated depletion of $995,095 at March
31, 2008
and $977,225 at December 31, 2007
|
|
|
62,359
|
|
|
45,578
|
|
|
|
|
2,429,081
|
|
|
2,412,299
|
|
|
|
|
|
|
|
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|
Total
assets
|
|
$
|
3,070,958
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|
$
|
2,980,654
|
|
|
|
|
|
|
|
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
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CURRENT
LIABILITIES
|
|
|
|
|
|
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|
Accounts
payable
|
|
$
|
102,035
|
|
$
|
98,030
|
|
Current
portion of long-term debt
|
|
|
526,193
|
|
|
558,125
|
|
Other
current liabilities
|
|
|
114,001
|
|
|
106,352
|
|
Accrued
interest
|
|
|
69,283
|
|
|
121,899
|
|
Total
current liabilities
|
|
|
811,511
|
|
|
884,405
|
|
|
|
|
|
|
|
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|
LONG-TERM
DEBT, LESS CURRENT PORTION
|
|
|
124,645
|
|
|
178,125
|
|
Total
liabilities
|
|
|
936,156
|
|
|
1,062
,530
|
|
|
|
|
|
|
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|
STOCKHOLDERS’
EQUITY
|
|
|
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Series
B preferred stock, $0.001 par value; 1,500,000 shares authorized,
issued
and oustanding
|
|
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1,500
|
|
|
1,500
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|
Series
C preferred stock, $ 0.001 par value; 200,000 shares authorized,
issued
and oustanding
|
|
|
200
|
|
|
200
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|
Common
stock, $0.001 par value; 75,000,000 shares authorized; 7,671,303
shares
issued
|
|
|
7,671
|
|
|
7,671
|
|
Additional
paid-in capital
|
|
|
41,048,955
|
|
|
41,048,955
|
|
Treasury
stock (168,592 common shares) - at cost
|
|
|
(558,998
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)
|
|
(558,998
|
)
|
Accumulated
deficit
|
|
|
(38,364,526
|
)
|
|
(38,581,204
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)
|
Total
stockholders’ equity
|
|
|
2,134,802
|
|
|
1,918,124
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
3,070,958
|
|
$
|
2,980,654
|
|
The
accompanying notes are an integral part of the financial
statements.
GSV,
Inc.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
|
|
Three
months ended March 31,
|
|
|
|
2008
|
|
2007
|
|
Revenues
from oil and gas investments
|
|
$
|
354,543
|
|
$
|
150,142
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|
General
and administrative expenses
|
|
|
151,146
|
|
|
112,154
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
203,397
|
|
|
37,988
|
|
|
|
|
|
|
|
|
|
Gain
on settlement of indebtedness
|
|
|
23,863
|
|
|
|
|
Interest
expense
|
|
|
(10,583
|
)
|
|
(14,234
|
)
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
216,677
|
|
$
|
23,754
|
|
|
|
|
|
|
|
|
|
Net
income per common share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
$
|
0.00
|
|
Diluted
|
|
$
|
0.02
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
|
|
|
|
|
|
|
|
Basic
|
|
|
7,502,703
|
|
|
7,502,703
|
|
Diluted
|
|
|
10,285,560
|
|
|
10,285,560
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|
The
accompanying notes are an integral part of the financial
statements.
GSV,
Inc.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
|
|
Three months ended March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net
income
|
|
$
|
216,677
|
|
$
|
23,754
|
|
Adjustments
to reconcile net income to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
750
|
|
Gain
on settlement of indebtedness
|
|
|
(23,863
|
)
|
|
-
|
|
Depletion
|
|
|
17,872
|
|
|
35,642
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable and other current assets
|
|
|
(47,624
|
)
|
|
(33,435
|
)
|
Accounts
payable and other current liabilities
|
|
|
(40,963
|
)
|
|
63,503
|
|
Net
cash provided by operating activities
|
|
|
122,100
|
|
|
90,214
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
Investment
in oil and gas wells
|
|
|
(34,654
|
)
|
|
(6,139
|
)
|
Net
cash used by investing activities
|
|
|
(34,654
|
)
|
|
(6,139
|
)
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
Repayment
of long-term debt
|
|
|
(61,548
|
)
|
|
|
|
Net
cash used by financing activities
|
|
|
(61,548
|
)
|
|
|
|
Net
change in cash
|
|
|
25,898
|
|
|
84,075
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
398,261
|
|
|
38,260
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
424,159
|
|
$
|
122,335
|
|
SUPPLEMENTAL
INFORMATION
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
60,216
|
|
$
|
-
|
|
The
accompanying notes are an integral part of the financial statements
GSV,
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of the Business
GSV
Inc.
(the “Company”) manages investments in oil and gas wells. The Company
currently is seeking additional related opportunities. The Company
also has limited internet related investments.
2.
Basis
of Presentation
The
accompanying condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for interim financial reporting. Accordingly, certain information and notes
required by accounting principles generally accepted in the United States of
America for complete financial statements are not included. These financial
statements should be read in conjunction with the financial statements and
accompanying notes for the year ended December 31, 2007, included in the
Company’s Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission. In the opinion of management, the accompanying financial statements
include all adjustments (consisting primarily of normal recurring accruals)
that
the Company considers necessary for a fair presentation of its financial
position, results of operations and cash flows. Results for interim periods
are
not necessarily indicative of the results that may be achieved for the full
year.
The
Company has incurred substantial operating losses, resulting in an accumulated
deficit of $38,364,526 as of March 31, 2008. Its current investments are limited
to certain oil and gas producing properties in Louisiana and an interest in
Century Royalty. Century Royalty’s primary asset consists of geologic studies to
exploit oil and gas properties. One prospect, “Friendswood No. 2 RE,” has been
successfully completed and in June 2007 was successfully tied into a pipeline.
On or about September 14, 2007, efforts to increase the pressure of the flow
of
gas from the well were successful and the sale of gas through the pipeline
commenced. On February 4, 2008, fracturing of the well was completed
successfully. All 1150 bbls of frac water have been recovered, and the well
has
been tested at various pressures. On February 21, 2008, the well was put back
on
line full-time. Although the Company has not yet completed a study to evaluate
the underlying reserves, it believes that the reserves are at least adequate
to
recover the costs of the geologic studies
.
Century
Royalty and its partners are preparing to commence drilling a second well near
“Friendswood No. 2 RE” in the near future. Timing of work on the second well is
dependent on securing sufficient financing and the completion of the engineering
report.
In
recent
periods cash flows from the Company’s oil and gas investments have been
sufficient to enable the Company to fund its operating, investing and financing
needs. However, the Company will be required to obtain additional financing
to
fund drilling and development to recover its investment in geologic studies
and
to pay certain indebtedness as it becomes due. There is no assurance that the
Company will be able to obtain additional adequate financing nor is there any
assurance that proved reserves will be discovered. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that may
result from the outcome of this uncertainty.
3.
Recent
Accounting Pronouncements
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value,
establishes a framework for measuring the fair value of assets and liabilities,
and expands disclosure requirements regarding the fair value measurement.
SFAS
157 does not expand the use of fair value measurements. This statement, as
issued, is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. FASB
Staff Position (FSP) FAS No. 157-2 was issued in February 2008 and deferred
the
effective date of SFAS 157 for nonfinancial assets and liabilities to fiscal
years beginning after November 2008. As such, the Company adopted SFAS 157
as of
January 1, 2008 for financial assets and liabilities only. There was no
significant effect on the Company’s financial statements. The Company does not
believe that the application of SFAS 157 to non-financial assets and liabilities
will significantly affect its financial statements.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for
Financial Assets and Liabilities—including an amendment of FASB Statement
No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value
accounting but does not affect existing standards which require assets or
liabilities to be carried at fair value. The objective of SFAS 159 is to
improve financial reporting by providing companies with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets
and
liabilities differently without having to apply complex hedge accounting
provisions. Under SFAS 159, a company may elect to use fair value to
measure eligible items at specified election dates and report unrealized gains
and losses on items for which the fair value option has been elected in earnings
at each subsequent reporting date. Eligible items include, but are not limited
to, accounts receivable, accounts payable, and issued debt. If elected,
SFAS 159 is effective for fiscal years beginning after November 15,
2007. The Company has not elected to measure any additional assets or
liabilities at fair value that are not already measured at fair value under
existing standards.
As
of
March 31, 2008, the Company’s financial assets included an investment in an
internet related company. This investment is carried at cost and reviewed
periodically for impairment. In connection therewith, fair value is estimated
under FAS 157 based on third party valuation models (i.e., Level 2 as defined
under SFAS 157) and compared to cost. There was no impairment loss during
the
quarter ended March 31, 2008.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations
”
(“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any non-controlling
interest in the acquiree and the goodwill acquired. SFAS 141(R) also
establishes disclosure requirements to enable the evaluation of the nature
and
financial effects of the business combination. SFAS 141(R) is effective for
fiscal years beginning after December 15, 2008. The Company will apply the
provisions of SFAS 141(R) to any acquisition after January 1, 2009.
In
December 2007, the FASB issued SFAS No. 160, “Accounting for Noncontrolling
Interests.” SFAS 160 clarifies the classification of noncontrolling interests in
consolidated balance sheets and reporting transactions between the reporting
entity and holders of noncontrolling interests. Under this statement,
noncontrolling interests are considered equity and reported as an element
of
consolidated equity. Further, net income encompasses all consolidated
subsidiaries with disclosure of the attribution of net income between
controlling and noncontrolling interests. SFAS No. 160 is effective
prospectively for fiscal years beginning after December 15, 2008. Currently,
there are no noncontrolling interests in any of the Company’s
subsidiaries.
4.
Investments
The
Company has made investments in four internet-related companies that have been
accounted for using the cost method. Such investments are reviewed periodically
for impairment. Impaired investments have been written down to a nominal amount.
The
Company has working interests in two oil and gas wells in Louisiana. Production
from the wells in Louisiana was suspended temporarily on or about February
9,
2006, because the water level had risen in one of the wells. On or about May
8,
2006, work to recomplete the wells in a different sand zone was completed and
production was restarted. The wells returned to full production at the beginning
of July 2006. The Company’s share of the costs of recompletion was $70,300. The
delay between sales of gas by the operator and the Company’s receipt of payments
from the operator reduced revenues in the second and third quarters of 2006.
An
independent reserve study performed, effective January 2008, estimated that
the
remaining reserve in the wells including PDP and PDNP, net of expenses and
discounted at 10%, was $985,829.
The
Company has interests in certain oil and gas properties in Texas and an
undivided one-third interest in Century Royalty, which manages oil and gas
properties in Texas and Louisiana. Century Royalty also holds the rights to
certain geologic studies that are included under the caption “Investments”
in the accompanying balance sheet. These geologic studies are being carried
at cost. On June 28, 2006, the working interest partnership of which Century
Royalty is a member commenced drilling on one of the prospects and planned
to
commence drilling on a second prospect once the first was completed. The costs
of drilling these prospects were expected to exceed Century Royalty’s carried
interest in the working interest partnership. On June 20, 2006, the Company
agreed to contribute a maximum of $100,000 towards the drilling of the first
prospect and decrease its working interest in these two prospects to 11.918%.
On
October 5, 2006, the Company announced the successful completion of drilling
in
the first prospect, located in Liberty County, Texas. The pipeline tie-in of
the
“Friendswood No. 2 RE” gas well was completed successfully in June 2007. On or
about September 14, 2007, efforts to increase the pressure of the flow of gas
from the well were successful and the sale of gas through the pipeline
commenced. On February 4, 2008, fracturing of the well was completed
successfully. All 1150 bbls of frac water have been recovered, and the well
has
been tested at various pressures. On February 21, 2008, the well was put back
on
line full-time. Since then, it has produced around 350 - 400 Mcf per day, up
from about 60 Mcf per day prior to fracturing. The well continues to produce
a
small amount of water, up to about 20 bbls per day. An independent engineering
company has been hired to conduct a reserve and engineering report to establish
the estimated size and projected cash flow to be generated by the well. The
engineering report has not yet been completed because the flow of gas from
the
well has not yet become sufficiently steady and established. Based on initial
reports, the Company expects that up to four additional wells may be required
to
obtain maximum flow from the anticipated reserves. Century Royalty and its
partners are preparing to commence drilling a second well near “Friendswood No.
2 RE” in the near future.
In
October 2006, the Company granted one of the members of the Texas working
interest partnership the right to drill a well based on the geological seismic
data that Century Royalty holds. In return, the Company received a 2% carried
interest in the proposed well until completion, and a 2% working interest
thereafter. The “Shirley Gay” well was completed in the beginning of March 2007.
Pipeline tie-in was completed in February 2008 and sales began shortly
thereafter. The Company started to receive proceeds from these sales in April
2008. Through March 1, 2008, the Company’s expenses related to completion of the
“Shirley Gay” well total $25,547. The Company is currently awaiting the
completion of an independent engineering report to establish the estimated
size
and projected cash flow to be generated by the well.
When
the
engineering reports on the “Friendswood No. 2 RE” and “Shirley Gay” wells become
available, the Company will adjust the value of the geological studies
accordingly. If the report shows that the reserves are low the Company will
likely record an impairment loss of some or all of the carrying value of its
geologic studies.
5.
Net
Income Per Common Share
Basic
earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding at period end. Diluted earnings per share
is
computed by dividing net income by the weighted average number of common shares
and dilutive potential common shares outstanding.
A
summary of the denominators used to compute basic and
dilutive earnings per share follow:
|
|
March
31
|
|
|
|
2008
|
|
2007
|
|
Weighted
average shares outstanding - used to compute basic earnings per
share
|
|
|
7,502,703
|
|
|
7,502,703
|
|
Dilution
applicable to:
|
|
|
|
|
|
|
|
Warrant
|
|
|
1,142,857
|
|
|
1,142,857
|
|
Convertible
note payable
|
|
|
140,000
|
|
|
140,000
|
|
The
Series B Stock
|
|
|
1,500,000
|
|
|
1,500,000
|
|
Weighted
average shares outstanding - used to compute diluted earnings per
share
|
|
|
10,285,560
|
|
|
10,285,560
|
|
6.
Lease
Termination and Issuance of Series C Preferred Stock
On
January 9, 2008, the Company entered into an agreement, dated as of January
3,
2008, with 116 Newark Avenue Corporation (“116 Newark”) to amend and restate the
terms of a promissory note issued to 116 Newark dated as of November 30, 2005.
Pursuant to the agreement, the Company paid all accrued and unpaid interest
on
the promissory note through the date of the agreement, and the original note
was
amended and restated in a substitute note with a maturity date of December
20,
2009. The Company agreed to pay the substitute note’s outstanding principal
balance of $356,249 in 24 consecutive monthly installments of $14,844, each
payable on or before the 20th day of the month, beginning in January 2008.
The
amended note was non-interest bearing, therefore, the Company
discounted the note at its original interest r
ate
of 7
percent resulting in a gain on settlement of indebtedness of $23,863.
Payment and performance under the substitute note has been guaranteed by
Polystick and secured by a pledge agreement between Polystick and 116 Newark
pursuant to which Polystick has pledged 356,249 shares of the Company’s Series B
Preferred Stock to 116 Newark.
7.
Income
Taxes
Income
taxes otherwise required to be provided for all periods presented have been
eliminated as a result of net operating loss carryover benefits
realized.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Since
July 2003 our business operations have been focused on managing our existing
investments in oil and gas assets and entering into new investments in this
industry. From June 2001 to July 2003, our business operations included managing
our existing investments and entering into new business operations through
acquisitions or mergers.
Prior
to
June 2001, we had sought to identify and develop attractive early stage Internet
companies in exchange for equity positions in such companies. We have since
made
substantial write downs of these investments to more accurately reflect current
market valuations, and these investments do not represent a significant asset.
As of December 31, 2007, these investments were valued at approximately 1.7%
of
the total value of our assets. We are continuing to investigate whether or
not
there are any business prospects through which material value can be realized
from the remaining Internet investments.
We
hold
working interests in two oil and gas wells in the state of Louisiana.
Through
Cybershop we also own interests in certain oil and gas properties in Texas
and
an interest in Century Royalty LLC (“Century Royalty”), a Texas limited
liability company that manages the oil and gas properties in Texas and holds
a
portion of our interests in the oil and gas wells in Louisiana. Century Royalty
also holds the rights to certain geologic studies. Century Royalty was a member
of a working interest partnership that identified several prospects derived
from
the geological studies and worked towards drilling these prospects. Century
Royalty had a carried interest with this partnership of 20% for the first well
drilled in the first 5 prospects or $1.25 million of investment, whichever
came
first. Century Royalty continues to have a 20% participation interest in all
subsequent wells drilled in the first 5 prospects. As these joint interest
partnership agreements have expired, they relate only to prospects for which
leases have already been taken and not expired. We are entitled to the first
$4,168,659 of net income in Century Royalty and to 75% of net income thereafter.
We have received $1,512,370 of this amount as of March 31, 2008. Due to the
existence of these revenue overrides, the operations of Century Royalty are
included in the accompanying statements of operations.
On
June
28, 2006, the working interest partnership of which Century Royalty was a member
commenced drilling on one of the prospects and planned to drill on a second
prospect once the first was completed. The costs of drilling these prospects
were expected to exceed Century Royalty’s carried interest in the working
interest partnership. On June 20, 2006, we agreed to contribute a maximum of
$100,000 towards the drilling of these two prospects and decrease our working
interest in these two prospects to 11.918%.
On
October 5, 2006, we announced the successful completion of drilling in the
first
prospect, located in Liberty County, Texas. The pipeline tie-in of the
“Friendswood No. 2 RE” gas well was completed successfully in June 2007. On or
about September 14, 2007, efforts to increase the pressure of the flow of gas
from the well were successful and the sale of gas through the pipeline
commenced. On February 4, 2008, we successfully completed fracturing of the
well. All 1150 bbls of frac water have been recovered, and the well has been
tested at various pressures. On February 21, 2008, the well was put back on
line
full-time. Since then, it has produced around 350 - 400 Mcf per day, up from
about 60 Mcf per day prior to fracturing. The well continues to produce a small
amount of water, up to about 20 bbls per day. An independent engineering company
has been hired to conduct a reserve and engineering report to establish the
estimated size and projected cash flow to be generated by the well. The
engineering report has not yet been generated because the flow of gas from
the
well has not yet become sufficiently steady and established. Based on initial
reports, we expect that up to four additional wells may be required to obtain
maximum flow from the anticipated reserves. Century Royalty and its partners
are
preparing to commence drilling a second well near “Friendswood No. 2 RE” in the
near future.
In
October 2006, we granted one of the members of the Texas working interest
partnership the right to drill a well based on the geological seismic data
that
Century Royalty holds. In return, we received a 2% carried interest in the
proposed well until completion, and a 2% working interest thereafter. The
“Shirley Gay” well was completed in the beginning of March 2007. Pipeline tie-in
was completed in February 2008 and sales began shortly thereafter. We started
to
receive proceeds from these sales in April 2008. Through March 1, 2008, our
expenses related to completion of the “Shirley Gay” well total $25,547. We are
currently awaiting the completion of an independent engineering report to
establish the estimated size and projected cash flow to be generated by the
well.
When
the
engineering reports on the “Friendswood No. 2 RE” and “Shirley Gay” Wells become
available, we will adjust the value of the geological studies accordingly.
If
the report shows that the reserves are low we may be required to write-down
their value or possibly write them off completely.
Our
management has little practical experience in the oil and gas industry. Our
management relies to a great extent on the employees of Century Royalty to
monitor and implement strategy with respect to our oil and gas assets. Our
management’s inexperience may detrimentally affect our operations and results
because, for example, it could prevent us from taking advantage of opportunities
that arise on a timely basis or cause us to take actions that a more experienced
management team might determine are not in our best interests. We are currently
seeking to engage additional professional managers to assist in extracting
value
from the properties.
Our
principal stockholder is Polystick U.S. Corp. (“Polystick”). The sole
shareholder of Polystick is RT Sagi Holding Ltd., an Israeli corporation. The
sole stockholder of RT Sagi and indirect owner of Polystick is Mr. Sagi Matza.
Effective as of the consummation of the Merger, Mr. Matza was appointed to
our
board of directors as the designee of Polystick. Polystick has the right to
elect two additional persons to our board of directors but has not yet done
so.
Each
share of Series B convertible preferred stock is convertible at any time at
the
holder’s option into a number of shares of common stock equal to $1.00 divided
by the conversion price then in effect. The terms upon which the Series B
convertible preferred stock may be converted into common stock are set forth
in
the Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock filed by the Company with the Secretary of State of the State
of
Delaware on July 18, 2003 (“Series B Certificate of Designations”). As of
November 11, 2005, the Series B convertible preferred stock owned by Polystick
was convertible into 1,500,000 shares of common stock.
No
dividends are payable on the Series B convertible preferred stock, except that
in the event dividends are declared with respect to the common stock each holder
of shares of Series B convertible preferred stock will be entitled to receive
an
amount equal to the amount of dividends that would have been paid on the shares
of common stock issuable upon conversion of such shares of Series B convertible
preferred stock had such shares of Series B convertible preferred stock been
converted into common stock immediately before the dividend was
declared.
Upon
any
Liquidation Event, as defined in the Series B Certificate of Designations,
the
holders of the outstanding Series B convertible preferred stock will be
entitled, before any distribution or payment is made to any holder of common
stock or any other Junior Stock (as defined in the Series B Certificate of
Designations), to be paid an amount equal to $1.00 per share plus the amount
of
any declared and unpaid dividends thereon. If upon any Liquidation Event our
net
assets distributable among the holders of the Series B convertible preferred
stock are insufficient to permit the payment in full of such preferential amount
to the holders of the Series B convertible preferred stock, then our net assets
will be distributed ratably among the holders of the Series B convertible
preferred stock in proportion to the amounts they otherwise would have been
entitled to receive.
The
Series B Certificate of Designations provides that so long as any shares of
Series B convertible preferred stock are outstanding, we will not, without
the
written approval of the holders of at least a majority of the then-outstanding
Series B convertible preferred stock, increase the maximum number of directors
constituting our board of directors to more than seven. The Series B Certificate
of Designations also provides that, so long as any shares of Series B
convertible preferred stock are outstanding, the holders of the Series B
convertible preferred stock, voting separately as a class, will be entitled
to
designate and elect three of the members of our board of directors. Also, a
vacancy in any directorship elected by the holders of the Series B convertible
preferred stock may be filled only by vote or written consent of the holders
of
at least a majority of the then outstanding shares of Series B convertible
preferred stock. The Series B convertible preferred stock has no other voting
rights except as provided by applicable law.
In
June
2001, we sublet to Nekema.com our former offices in Jersey City, New Jersey
through December 31, 2008. The rent on the sublease was guaranteed by Lumbermens
Mutual Casualty Company, d/b/a Kemper Insurance Company, until May 2003. In
September 2002 Nekema ceased business operations and defaulted on the sublease.
Kemper Insurance Company made all payments of rent due under the sublease
through May 2003. We ceased paying rent under the lease for this space in July
2003. On May 5, 2004 we filed a proof of claim against Nekema’s estate in the
United States Bankruptcy Court for the Southern District of New York. The proof
of claim was for the total sum of $421,455.15 as permitted by law and the court
approved a settlement of $363,048.88. On November 15, 2005, the trustee in
the
bankruptcy filed a notice of filing of final accounts. On February 15, 2006,
we
received $22,300.77 in settlement of our claim.
On
January 3, 2006, we entered into a Termination, Settlement and Release Agreement
with 116 Newark Avenue Corporation (“116 Newark”), dated as of November 30,
2005, pursuant to which we agreed to terminate the lease for our former offices
in Jersey City, New Jersey. Under the terms of the agreement, we paid 116 Newark
$70,000 in cash, issued a promissory note in the principal amount of $356,249.04
and 200,000 shares of Series C preferred stock to 116 Newark and reimbursed
116
Newark for $10,000 of its legal fees. The promissory note bears interest at
a
rate of 7% per annum and is secured by a pledge agreement between Polystick
and
116 Newark pursuant to which Polystick has pledged 356,249 shares of our Series
B Preferred Stock that it holds to 116 Newark. On January 9, 2008, we entered
into an agreement, dated as of January 3, 2008, with 116 Newark to amend and
restate the terms of the promissory note. Pursuant to the agreement, we paid
all
accrued and unpaid interest on the promissory note through the date of the
agreement, and the original note was amended and restated in a substitute note
with a maturity date of December 20, 2009. We agreed to pay the substitute
note’s outstanding principal balance of $356,249.04 in 24 consecutive monthly
installments of $14,843.71, each payable on or before the 20th day of the month,
beginning in January 2008. The substitute note will not accrue interest, except
that if any monthly installment is not received by 116 Newark within ten days
of
its applicable monthly installment date (the “Trigger Date”) then (i) interest
at the rate of 7% per annum shall be deemed to have begun to accrue from the
date of the agreement on the then unpaid principal balance of the substitute
note, and shall continue to accrue until all principal and accrued interest
on
the substitute note is paid in full; (ii) all interest that is accrued and
unpaid as of the Trigger Date shall be immediately due and payable on the
Trigger Date; and (iii) with each monthly installment following the Trigger
Date, we will pay all then accrued and unpaid interest on the unpaid principal
balance of the substitute note through the relevant monthly installment date.
Payment and performance under the substitute note has been guaranteed by
Polystick and secured by a pledge agreement between Polystick and 116 Newark
pursuant to which Polystick has pledged 356,249 shares of our Series B Preferred
Stock to 116 Newark.
Each
share of Series C preferred stock is convertible at any time into a number
of
shares of common stock equal to $1.00 divided by the conversion rate then in
effect. The terms upon which the Series C convertible preferred stock may be
converted into common stock are set forth in the Certificate of Designations,
Preferences and Rights of Series C Convertible Preferred Stock filed by the
Company with the Secretary of State of the State of Delaware on January 3,
2006
(“Series C Certificate of Designations”). As of May 5, 2008, the Series C
convertible preferred stock owned by 116 Newark was convertible into 200,000
shares of common stock.
No
dividends are payable on the Series C convertible preferred stock.
Upon
any
Liquidation Event, as defined in the Series C Certificate of Designations,
the
holders of the outstanding Series C convertible preferred stock will be
entitled, before any distribution or payment is made to any holder of common
stock or any other Junior Stock (as defined in the Series C Certificate of
Designations), to be paid an amount equal to $1.00 per share. If upon any
Liquidation Event our net assets distributable among the holders of the Series
C
convertible preferred stock are insufficient to permit the payment in full
of
such preferential amount to the holders of the Series C convertible preferred
stock, then our net assets will be distributed ratably among the holders of
the
Series C convertible preferred stock in proportion to the amounts they otherwise
would have been entitled to receive.
The
Series C Certificate of Designations provides that so long as any shares of
Series C convertible preferred stock are outstanding, we will not, without
the
written approval of the holders of at least a majority of the then-outstanding
Series C convertible preferred stock, (i) issue any additional shares of Series
C convertible preferred stock, or (ii) issue any Senior Stock or Parity Stock
(as such terms are defined in the Series C Certificate of Designations), unless
such Senior Stock or Parity Stock is to be issued in exchange for (A) cash
or
services rendered or to be rendered by parties who are not Affiliates (as
defined in the Series C Certificate of Designations) of the Company, in either
case having a value greater than the aggregate liquidation preference of such
Senior Stock or Parity Stock, or (B) equity securities or assets of one or
more
businesses that are not Affiliates of the Company, in either case having a
value
that is equal to or greater than the aggregate liquidation preference of such
Senior Stock or Parity Stock. The Series C convertible preferred stock has
no
other voting rights except as provided by applicable law.
Results
of Operations
Three
Months Ended March 31, 2008 compared to Three Months Ended March 31,
2007
Revenues:
Revenues for the quarter increased by $204,401 or 136.1%, to $354,543 in 2008
from $150,142 in 2007. This increase was due to increased production and
increased oil and gas prices.
General
and administrative: General and administrative expenses consist primarily of
payroll and payroll related expenses for administrative, information technology,
accounting, and management personnel, legal fees, depletion
and
general corporate expenses. General and administrative expenses increased by
$38,992 or 34.8%, to $151,146 in the quarter ended March 31, 2008 from $112,154
in the quarter ended March 31, 2007, primarily as a result of an increase in
administrative expenses which was offset by a decrease in depletion of the
wells
in Louisiana.
Interest
expense: Interest expense for the quarter ended March 31, 2008 was $10,583
and
for the quarter ended March 31, 2007 was $14,234. The decrease is a result
of
the reduction in outstanding debt.
Net
Income: Net Income increased by $192,923 from net income of $23,754 in the
first
quarter of 2007, or $0.00 per basic and diluted common share, to net income
of
$216,677 in the first quarter of 2008, or $0.03 per basic and $0.02 for diluted
common share.
Income
taxes otherwise required to be provided for
all periods presented have been eliminated as a result of net operating loss
carryover benefits realized.
Liquidity
and Capital Resources
Net
cash
provided by operations increased by 35%, or $31,887, from $90,214 for the three
months ended March 31, 2007, to $122,100 for the three months ended March 31,
2008. The increase was due primarily to the increase in production of the
Lousiana wells.
Net
cash
used by investing activities during the three months ended March 31, 2008,
was
$34,654, as compared to $6,139 in the corresponding period of the prior
year. The increase relates to additional investments in Texas
wells.
Net
cash
used by financing activities during the three months ended March 31, 2008,
was
$61,548, as compared to $0 used by financing activities in the prior year.
The
cash used in 2008 was attributable to a repayment of principal on notes
payable.
In
2003,
we issued to Polystick 4,500,000 shares of common stock and 1,500,000 shares
of
Series B convertible preferred stock valued at $2,625,000 to acquire assets
in a
non-cash transaction.
On
February 11, 2004, we borrowed $25,000 from Brooks Station Holdings, Inc.,
a
private investment corporation (“Brooks Station”). In partial consideration for
the loan, we issued 100,000 shares of common stock to Brooks Station. On March
18, 2004, we borrowed another $25,000 from Brooks Station and in partial
consideration for the loan issued another 100,000 shares of common stock to
Brooks Station. Each loan was evidenced by a promissory note bearing interest
at
8% per annum secured by a lien on all of our assets. On September 20, 2004,
we
negotiated an extension of the maturity of the notes from their original
maturity date of September 1, 2004 to March 1, 2005. On March 10, 2005, we
repaid the note issued on February 11, 2004 and negotiated an extension of
the
maturity of the note dated March 18, 2004 to September 1, 2005. We also extended
to the same date the maturity of an 8% secured promissory note we issued to
Brooks Station on July 21, 2003 in the principal amount of $200,000. On August
31, 2005, we repaid the March 18, 2004 note and negotiated an extension of
the
maturity date of the July 21, 2003 note to March 1, 2006. On March 20, 2006,
we
repaid $20,000 of the accrued and unpaid interest on the July 21, 2003 note
and
negotiated an extension of the maturity date of the note to September 1, 2006.
On September 20, 2006, we negotiated an extension of the maturity date of the
note to March 1, 2007. On March 1, 2007, we negotiated an extension of the
maturity date of the note to September 1, 2007. On September 6, 2007, we repaid
$20,000 of the accrued and unpaid interest on the note and $20,000 of the
principal balance of the note and negotiated an extension of the maturity date
of the note to March 1, 2008. On March 13, 2008, we repaid $20,000 of the
accrued and unpaid interest on the note and $10,000 of the principal balance
of
the note and negotiated an extension of the maturity date of the note to
September 1, 2008.
On
May
11, 2004, we sold a convertible promissory note in the principal amount of
$200,000 and a warrant to purchase up to 1,142,857 shares of our common stock
at
a price of $.70 per share to D. Emerald Investments Ltd., a private investment
corporation (“Emerald”). The note bears interest at the rate of 8% per annum and
is convertible into shares of our common stock at a price of $.70 per share.
The
aggregate purchase price of these securities was $200,000. In connection with
the sale of these securities we agreed that if Emerald exercises the warrant
in
full and converts the convertible note in full, then, at Emerald’s request, we
will appoint a person designated by Emerald to our Board of Directors and,
in
addition, for so long as Emerald holds at least eighty-five percent (85%) of
the
common stock issued upon such exercise and conversion, we will nominate such
person (or a different person designated by Emerald) to be reelected to the
Board of Directors in connection with any meeting of our stockholders at which
directors are to be elected. We also agreed that within 120 days of the exercise
of the warrant and/or conversion of the note for an aggregate of at least
428,572 shares of common stock (subject to adjustment for dilutive events as
set
forth in the warrant and the note) we will register all of the shares issuable
upon conversion of the note and exercise of the warrant under the Securities
Act
of 1933. Additionally, we granted Emerald rights to have the shares included
in
other registration statements we may file for the public offering of our
securities for cash proceeds. In 2004, we recorded an expense of $129,000 for
the value of the warrants and the conversion feature of the note calculated
using the Black-Scholes method.
Our
principal stockholder, Polystick, entered into a guaranty and a pledge agreement
with Emerald under which Polystick pledged 200,000 shares of our Series B
convertible preferred stock as collateral security for the note. Polystick
also
entered into a voting agreement with Emerald under which Polystick agreed that
if we fail to fully and timely fulfill our obligations to appoint or nominate
a
representative for election to our board of directors, then, at Emerald’s
request, Polystick will vote its shares of Series B convertible preferred stock
in favor of a nominee designated by Emerald in any election of directors
occurring during such time and for so long as Emerald holds at least 85% of
the
common stock issued upon exercise of the warrant and conversion of the note.
Polystick also agreed that, provided that Polystick continues to have the right
to designate and elect three directors to the Company’s board of directors under
the terms of the Series B convertible preferred stock, any such nominee will
count as one of such directors. Additionally, Polystick agreed to use all its
power and authority as provided by our by-laws and the Series B convertible
preferred stock to convene, at Emerald’s request, meetings of stockholders as
may be necessary to elect Emerald’s nominee to the board of
directors.
On
July
3, 2005, we entered into an agreement with Emerald dated as of May 10, 2005,
pursuant to which we agreed to extend and renew the note and the warrant. Under
the terms of the agreement, the maturity date of the note was extended from
May
10, 2006 to May 10, 2007 and Emerald’s right to convert the note and all accrued
interest on the note into common stock at a price of $.70 per share was extended
until any time prior to May 10, 2006. The term of the warrant was also extended
from May 10, 2005 to May 10, 2006.
On
July
11, 2006, we entered into an agreement with Emerald dated as of May 10, 2006,
pursuant to which we agreed to extend and renew the note and the warrant. Under
the terms of the agreement, the maturity date of the note was extended from
May
10, 2007 to January 10, 2008 and Emerald’s right to convert the note and all
accrued interest on the note into common stock at a price of $.70 per share
was
extended until any time prior to May 10, 2007. The term of the warrant was
also
extended from May 10, 2006 to May 10, 2007.
On
May 7,
2007, we entered into an agreement with Emerald dated as of May 7, 2007,
pursuant to which we agreed to further extend and renew the note and the
warrant. Under the terms of the agreement, the maturity date of the note was
extended from January 10, 2008 to July 10, 2008, and Emerald’s right to convert
the note and all accrued interest on the note into common stock at a price
of
$.70 per share was extended until any time prior to July 10, 2008. The term
of
the warrant was also extended from May 10, 2007 to May 10, 2008.
On
January 3, 2006, we entered into a Termination, Settlement and Release Agreement
with 116 Newark Avenue Corporation, dated as of November 30, 2005, pursuant
to
which we agreed to terminate the lease for our former offices in Jersey City,
New Jersey. Under the terms of the agreement, we paid 116 Newark $70,000 in
cash, issued a promissory note in the principal amount of $356,249.04 and
200,000 shares of Series C preferred stock to 116 Newark and reimbursed 116
Newark for $10,000 of its legal fees. The promissory note matured on November
29, 2007 and bore interest at a rate of 7% per annum. Payment and performance
under the promissory note was guaranteed by Polystick and secured by a pledge
agreement between Polystick and 116 Newark pursuant to which Polystick pledged
356,249 shares of our Series B Preferred Stock that it holds to 116 Newark.
116
Newark has the right to include any shares of common stock received upon
conversion of the Series C preferred stock and upon conversion of the pledged
shares as part of any registration statement that we may file in connection
with
any public offering of our securities (excluding registration statements on
Forms S-4 and S-8). On January 9, 2008, we entered into an agreement, dated
as
of January 3, 2008, with 116 Newark to amend and restate the terms of the
promissory note. Pursuant to the agreement, we paid all accrued and unpaid
interest on the promissory note through the date of the agreement, and the
original note was amended and restated in a substitute note with a maturity
date
of December 20, 2009. We agreed to pay the substitute note’s outstanding
principal balance of $356,249.04 in 24 consecutive monthly installments of
$14,843.71, each payable on or before the 20th day of the month, beginning
in
January 2008. The substitute note will not accrue interest, except that if
any
monthly installment is not received by 116 Newark within ten days of its
applicable monthly installment date (the “Trigger Date”) then (i) interest at
the rate of 7% per annum shall be deemed to have begun to accrue from the date
of the agreement on the then unpaid principal balance of the substitute note,
and shall continue to accrue until all principal and accrued interest on the
substitute note is paid in full; and (ii) all interest that is accrued and
unpaid as of the Trigger Date shall be immediately due and payable on the
Trigger Date; and (iii) with each monthly installment following the Trigger
Date, we will pay all then accrued and unpaid interest on the unpaid principal
balance of the substitute note through the relevant monthly installment date.
Payment and performance under the substitute note has been guaranteed by
Polystick and secured by a pledge agreement between Polystick and 116 Newark
pursuant to which Polystick has pledged 356,249 shares of our Series B Preferred
Stock to 116 Newark.
We
believe that our existing capital resources will enable us to maintain our
operations at existing levels for at least the next 12 months, assuming that
we
can extend the maturities of the notes we issued to Brooks Station and Emerald
beyond the next 12 months. However, it is difficult to project our capital
needs. We cannot assure you that any additional financing or other sources
of
capital will be available to us upon acceptable terms, if at all. The inability
to obtain additional financing, when needed, would have a material adverse
effect on our business, financial condition and operating results.
Critical
Accounting Policies and Use of Estimates
The
Company’s discussion and analysis of financial condition and results of
operations are based on the condensed financial statements. The preparation
of
these financial statements requires the Company to make estimates and judgments
that affect the amounts reported in them. The Company’s critical accounting
policies and estimates include those related to oil and natural gas activities,
full cost method, proved oil and natural gas reserves, depletion reserves,
future development and abandonment costs, asset retirement obligations, and
valuation of investment in non-publicly traded companies. The Company bases
its
estimates on historical experience and on various other assumptions that
management believes to be reasonable under the circumstances. Actual results
may
differ from these estimates under different assumptions or conditions. For
additional information about the Company’s critical accounting policies and
estimates, see Note 2 to the financial statements included in the Company’s Form
10-KSB for the year ended December 31, 2007. There were no significant changes
in critical accounting policies and estimates during the three months ended
March 31, 2008.
New
accounting pronouncements and the Company’s assessment of their impact on the
financial statements are disclosed in Note 2 to the notes to consolidated
financial statements contained herein.
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements that have or are reasonably likely to have
a
current or future material effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
Tabular
Disclosure of Contractual Obligations
The
following summarizes the Company’s estimated contractual obligations at March
31, 2008, and the effect such obligations are expected to have on its liquidity
and cash flows in the future periods.
|
|
Payments
due by period
|
|
Contractual
Obligations
|
|
Total
|
|
Less than 1 year
|
|
1-3
years
|
|
3-5
years
|
|
More
than
5
years
|
|
Long-term
Debt Obligations
|
|
$
|
650,838
|
|
$
|
526,193
|
|
$
|
124,645
|
|
|
0
|
|
|
0
|
|
Capital
(Finance) Lease Obligations
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Operating
Lease Obligations
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Purchase
Obligations
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Other
Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
GAAP
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Total
|
|
$
|
650,838
|
|
$
|
526,193
|
|
$
|
124,645
|
|
|
0
|
|
|
0
|
|
Forward-Looking
Statements
Some
of
the statements in this report are forward-looking statements that involve risks
and uncertainties. These forward-looking statements include statements about
our
plans, objectives, expectations, intentions and assumptions that are not
statements of historical fact. You can identify these statements by the
following words:
-
“may”
-
“will”
-
“should”
-
“estimates”
-
“plans”
-
“expects”
-
“believes”
-
“intends”
and
similar expressions. We cannot guarantee our future results, performance or
achievements. Our actual results and the timing of corporate events may differ
significantly from the expectations discussed in the forward-looking statements.
You are cautioned not to place undue reliance on any forward- looking
statements. Potential risks and uncertainties that could affect our future
operating results include, but are not limited to, our limited operating
history, history of losses, need to raise additional capital, the high risk
nature of our business, and other risks described in our Annual Report on Form
10-KSB for the year ended December 31, 2007.
Item
4T. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
.
Our
management, including our chief executive officer and chief financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of
the
end of the period covered by this report. Based on that evaluation, our
management, including our chief executive officer and chief financial officer,
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were effective such that the information required
to be disclosed by us in reports filed under the Securities Exchange Act of
1934
is (i) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and (ii) accumulated and communicated to
our management, including our chief executive officer and chief financial
officer, as appropriate to allow timely decisions regarding disclosure. A
controls system cannot provide absolute assurance, however, that the objectives
of the controls system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within a company have been detected.
Changes
in Internal Control over Financial Reporting.
There
has been no change in our internal control over financial reporting, known
to
the chief executive officer and chief financial officer, that occurred during
the quarter ended March 31, 2008, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
Item
5. Other Information
On
May
13, 2008, GSV, Inc. (the “Company”) and Brooks Station Holdings, Inc. (“Brooks
Station”) entered into an amended and restated promissory note, dated as of
March 11, 2008 (the “Restated Note”). The Restated Note restates a promissory
note made by the Company in favor of Brooks Station on July 21, 2003 to conform
the terms of the instrument to an amendment agreement entered into by the
parties as of March 11, 2008. The Restated Note has a principal amount of
$160,000 and accrued interest of $22,533.33, bears interest at a rate of
8% per
annum and matures on September 1, 2008. The Restated Note is secured by a
lien
on all of the Company’s assets.
Item
6. Exhibits
10.1
|
Agreement
dated as of March 11, 2008, between the Registrant and Brooks Station
Holdings, Inc.
|
|
|
10.2
|
Form
of Amended and Restated Promissory Note issued to Brooks Station
Holdings,
Inc.
|
|
|
31.1
|
Certification
of Chief Executive and Financial Officer pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification
of Chief Executive and Financial Officer pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
Date:
May 14, 2008
|
|
|
|
By:
|
/s/
Gilad Gat
|
|
|
Gilad
Gat
Chief
Executive Officer
(principal
executive officer)
Chief
Financial Officer
(principal financial and accounting officer)
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
Agreement
dated as of March 11, 2008, between the Registrant and
Brooks
Station Holdings, Inc.
|
|
|
|
10.2
|
|
Form
of Amended and Restated Promissory Note issued to Brooks
Station
Holdings, Inc.
|
|
|
|
31.1
|
|
Certification
of Chief Executive and Financial Officer pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification
of Chief Executive and Financial Officer pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002.
|
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