-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mb74WmGUBt9+KMH1QUvDT5Gz8Ie6nIPeWJxyMrZGWmJpkhBygmNJ+FzgUccJkhQ2 Hq5t0+M2sVbWi8TLs0l89g== 0000908230-04-000025.txt : 20040414 0000908230-04-000025.hdr.sgml : 20040414 20040414160432 ACCESSION NUMBER: 0000908230-04-000025 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GSV INC CENTRAL INDEX KEY: 0001051591 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 133979226 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23901 FILM NUMBER: 04733181 BUSINESS ADDRESS: STREET 1: 191 POST ROAD WEST CITY: WESTPORT STATE: CT ZIP: 06880 BUSINESS PHONE: 2125323553 MAIL ADDRESS: STREET 1: 191 POST ROAD WEST CITY: WESTPORT STATE: CT ZIP: 06880 FORMER COMPANY: FORMER CONFORMED NAME: CYBERSHOP INTERNATIONAL INC DATE OF NAME CHANGE: 19971217 10KSB 1 gsv_10ksb-041304.txt GSV, INC. 041304 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F O R M 10-KSB [X] ANNUAL REPORT UNDER SECTION l3 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF l934 For the fiscal year ended December 31, 2003 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission file number 000-23901 GSV, INC. (Name of small business issuer in its charter) Delaware 13-3979226 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 191 Post Road West, Westport, CT 06880 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 221-2690 Securities registered under Section 12(b) of the Act: None Securities registered under Section 12(g) of the Act: Common Stock, par value $.001 per share (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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. X Yes No - --- --- Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X --- The issuer's revenues for the year ended December 31, 2003 were $317,522. The aggregate market value of our voting common equity held by non-affiliates on March 31, 2004, was approximately $140,239. On such date, the last sale price of our common stock was $ 0.07 per share. While such market value excludes the market value of shares that may be beneficially owned by executive officers and directors, this should not be construed as indicating that all such persons are affiliates. As of March 31, 2004, there were 7,353,408 shares of common stock outstanding, excluding 168,600 shares of our common stock held in Treasury. Transitional Small Business Disclosure Format (check one): Yes X No --- --- PART I Item 1. Description of Business. We were formed as a Delaware corporation on October 29, 1997. 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, 2003, these investments were valued at approximately 1.8% of the total value of our assets. We are presently investigating as to whether or not there are any business prospects through which material value can be realized from these investments. Effective June 1, 2002, we acquired working interests in two oil and gas wells in the state of Louisiana pursuant to an asset purchase agreement with Polystick U.S. Corp. ("Polystick"), a privately held New York corporation. The consideration consisted of $550,000 in cash and 850,000 shares of our common stock valued at $0.25 per share. Additionally, we acquired a one-year option valued at $80,210, including the right of first refusal, to purchase other oil and gas properties held by Polystick. On July 21, 2003, we entered into an Agreement and Plan of Merger with Polystick, Cybershop, L.L.C., a New Jersey limited liability company and wholly-owned subsidiary of GSV, Inc., and Polystick Oil & Gas, Inc., a Delaware corporation and wholly-owned subsidiary of Polystick ("POGI"), pursuant to which, on the same day, POGI was merged into Cybershop, L.L.C. and in consideration thereof we issued to Polystick 4,500,000 shares of our common stock and 1,500,000 shares of our Series B Preferred Stock. As a result of the merger, we acquired, through Cybershop, L.L.C., an interest in Century Royalty LLC, a Texas limited liability company that holds certain oil and gas properties in Texas plus an additional interest in the Louisiana properties in which we presently hold an interest. Century Royalty also holds the rights to certain geologic studies. Century Royalty is a member of a working interest partnership that has identified several prospects derived from the geological studies and is working towards drilling these prospects. Century Royalty has 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 comes first. Century Royalty has a 20% participation interest in all subsequent wells drilled in the first 5 prospects. For later prospects, Century Royalty is entitled to an 80% participation interest. GSV is entitled to the first $4,168,659 of net income in Century Royalty and to 75% of net income thereafter. We have already received $12,952 of this amount as of the date of this report. We face competition for good exploratory prospects or existing developmental prospects from entities possessing substantially larger financial resources and staffs. The demand for domestically produced gas remains substantial and should remain substantial in the foreseeable future especially in light of the turmoil in the Middle East. We own less than 100% of the working interest in our gas holdings. We do not conduct any operations. Operations are conducted by operating companies that follow the instructions of the working interest owners. Because of this structure, drilling and operating decisions are not entirely within our control. If we disagree with the decision of a majority of working interest owners, we may be required, among other things, to decline to participate in a particular activity. If we decline to participate, we might be required to relinquish our interest. Under most operating agreements, the operator is given direct and full control over all operations on the property and is obligated to conduct operations in a workman-like manner; however the operator is usually not liable to the working interest owners for losses sustained or for liabilities incurred, except those resulting from its own gross negligence or willful misconduct. Each working interest owner is generally liable for its share of the costs of developing and operating jointly owned properties. The operator is required to pay the expenses of developing and operating the property and will invoice working interest owners for their proportionate share of such costs. As of December 31, 2003, we had one full-time employee (including management). Our employee is not represented by any collective bargaining organization. Item 2. Properties. Our corporate headquarters are located at 191 Post Road West, Westport, Connecticut 06880. We lease approximately 150 square feet of office space at these facilities at a cost of $1,424 per month. We have a revolving six-month lease. We believe that our existing facilities are adequate for our current requirements and that additional space can be obtained to meet our requirements for the foreseeable future. -2- Wells and acreage: At March 31, 2004, we owned non-operated working interests in 2 producing wells on 746 gross (21 net) acres covered by state leases in Assumption Parish, Louisiana. The properties are operated by Southwestern Energy Production Company. The wells are primarily gas producing. For the year ending December 31, 2003, the wells produced 9,310 gross, 260 net barrels of oilat an average price of $27.05 per barrel, and 439,290 million cubic feet (mcf) gross, 11,930 mcf net natural gas at an average price of $6.24 per mcf. For the period June 1, 2002 (the acquisition date) to December 31, 2002, the wells produced 43,000 gross, 862 net barrels of oil at an average price of $27.10 per barrel, and 1,919,000 mcf gross, 38,000 mcf net natural gas at an average price of $3.60 per mcf. We pay Southwestern Energy Production Company a monthly fee to support production costs. At March 31, 2004, we owned a non-operating working interest in one undeveloped well on 80 gross (12 net) acres in Texas. We have not reported to, nor filed with, any other Federal authority or agency any estimates of total, proved net oil or gas reserves since the beginning of our last fiscal year. We did not participate in the drilling of any wells during fiscal 2003. 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.com 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 beginning in July 2003 and since then have been negotiating towards a settlement with the landlord. If we are unable to negotiate a settlement with the landlord, we will remain obligated to pay rent on the space until our lease expires in December 2008. The lease contains automatic increases based upon the consumer price index. Estimated minimum future lease payments, including such increases, aggregate approximately $902,165. Item 3. Legal Proceedings. None Item 4. Submission of Matters to a Vote of Security Holders. None. -3- PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Market Information Our common stock is currently trading on the OTC Bulletin Board under the symbol "GSVI." The following table sets forth the range of quarterly high and low sales prices for shares of our common stock for each quarter of 2002 and 2003 and for the first quarter of 2004 as reported on the OTC Bulletin Board. Fiscal Year 2004 2003 2002 High Low High Low High Low ------ ------ ------ ------ ------ ------ First Quarter $0.11 $0.07 $0.14 $0.08 $0.30 $0.03 Second Quarter $0.21 $0.07 $0.29 $0.10 Third Quarter $0.40 $0.10 $0.25 $0.08 Fourth Quarter $0.25 $0.08 $0.14 $0.06
Our common stock trades only sporadically. The public market for our common stock is limited and you should not assume that these quotations reflect prices that you might be able to obtain in actual market transactions or in transactions involving substantial numbers of shares. As of March 31, 2004, there were 95 holders of record of our common stock. Equity Compensation Plan Information The following table sets forth certain information at December 31, 2003, with respect to our equity compensation plans that provide for the issuance of options, warrants or rights to purchase our securities. Number Of Securities Remaining Number of Available Securities For Future To Be Issuance Under Issued Upon Equity Compen- Exercise of Weighted-Average sation Plans Outstanding Exercise Price of (excluding Options, Outstanding Options securities Warrants, Warrants and reflected in the Plan Category and Rights and Rights first column) Equity Compensation Plans Approved by Security Holders 440,000 $.54 per share 160,000 Equity Compensation Plans Not Approved by Security Holders 0 $0 14,000
In March 1998, the Board adopted the 1998 Directors' Stock Option Plan (the "Directors' Plan"), pursuant to which each member of the Board of Directors who is not an employee of the Company who is elected or continues as a member of the Board of Directors is entitled to receive annually options to purchase 600 shares of common stock at an exercise price equal to fair market value on the date of grant. A Compensation Committee administers the Directors' Plan; however, it cannot direct the number, timing or price of -4- options granted to eligible recipients thereunder. Each option grant under the Directors' Plan vests after the first anniversary of the date of grant and expires three years thereafter. The number of shares of Common Stock related to awards that expire unexercised or are forfeited, surrendered, terminated or canceled are available for future awards under the Directors' Plan. If a director's service on the Board terminates for any reason other than death, all vested options may be exercised by such director until the expiration date of the option grant. In the event of a director's death, any options which such director was entitled to exercise on the date immediately preceding his or her death may be exercised by a transferee of such director for the six-month period after the date of the director's death; provided that such options may not be exercised after their expiration date. In the case of a director who represents an institutional investor that is entitled to the compensation paid by the Company to such director, option grants shall be made directly to the institutional investor on whose behalf such director serves on the Board. The maximum number of shares of common stock reserved for issuance under the Directors' Plan is 14,000 shares. No options are currently outstanding under the Directors' Plan. We did not sell any of our securities without registration under the Securities Act of 1933 during the fourth quarter of 2003. On February 9, 2004, we borrowed $25,000 from Brooks Station Holdings, Inc., a private investment corporation. 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 is evidenced by a promissory note bearing interest at 8% per annum and maturing on September 1, 2004 and is secured by a lien on all of our assets. Neither we nor any "affiliated purchasers," as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, repurchased any of our equity securities during the fourth quarter of 2003. Item 6. 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 our investments do not represent a significant asset. As of December 31, 2003, these investments were valued at approximately 1.8% of the total value of our assets. We are presently investigating whether or not there are any business prospects through which material value can be realized from these investments. Effective June 1, 2002, we acquired working interests in two oil and gas wells in the state of Louisiana pursuant to an asset purchase agreement with Polystick. The consideration consisted of $550,000 in cash and 850,000 shares of our common stock valued at $0.25 per share. Additionally, we acquired a one-year option valued at $80,210, including the right of first refusal, to purchase other oil and gas properties held by Polystick. On July 21, 2003, we entered into an Agreement and Plan of Merger with Polystick, Cybershop, L.L.C., a New Jersey limited liability company and wholly-owned subsidiary of GSV, Inc. and Polystick Oil & Gas, Inc., a Delaware corporation and wholly-owned subsidiary of Polystick ("POGI"), pursuant to which, on the same day, POGI was merged into Cybershop, L.L.C. and in consideration thereof we issued to Polystick 4,500,000 shares of our common stock and 1,500,000 shares of our Series B Preferred Stock. As a result of the merger we acquired, through Cybershop L.L.C., an interest in Century Royalty LLC, a Texas limited liability company that holds certain oil and gas properties in Texas plus an additional interest in the Louisiana properties in which we presently hold an interest. Century Royalty LLC also holds the rights to certain geologic studies. Due to the existence of certain revenue overrides accruing to the benefit of Polystick, the operations of Century Royalty LLC are included in the accompanying statements of operations. 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 Preferred Stock is convertible at any time at the holder's option into a number of shares of common stock equal -5- to $1.00 divided by the conversion price then in effect. The terms upon which the Series B 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. As of November 1, 2003, the Series B Preferred Stock owned by Polystick was convertible into 1,500,000 shares of common stock. No dividends are payable on the Series B Preferred Stock, except that in the event dividends are declared with respect to the common stock each holder of shares of Series B 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 Preferred Stock had such shares of Series B Preferred Stock been converted into common stock immediately before the dividend was declared. Upon any Liquidation Event, as defined in the 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 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 the net assets of GSV, Inc. distributable among the holders of the Series B Preferred Stock are insufficient to permit the payment in full of such preferential amount to the holders of the Series B Preferred Stock, then the entire net assets of GSV, Inc. will be distributed ratably among the holders of the Series B Preferred Stock in proportion to the amounts they otherwise would have been entitled to receive. The Certificate of Designations provides that so long as any shares of Series B 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 Preferred Stock, increase the maximum number of directors constituting our board of directors to more than seven. The Certificate of Designations also provides that, so long as any shares of Series B Preferred Stock are outstanding, the holders of the Series B 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 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 Preferred Stock. The Series B Preferred Stock has no other voting rights except as provided by applicable law. In connection with and as a condition to consummation of the merger in July 2003, we redeemed all of our outstanding Series A Convertible Preferred Stock, par value $0.001 per share, for $400,001 plus dividends payable. We paid $263,801 of the redemption price in cash and $200,000 by a promissory note secured by a lien on all of our assets. Off-Balance Sheet Transactions 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 beginning in July 2003 and since then have been negotiating towards a settlement with the landlord. If we are unable to negotiate a settlement with the landlord, we will remain obligated to pay rent on the space until our lease expires in December 2008. The lease contains automatic increases based upon the consumer price index. Estimated minimum future lease payments, including such increases, aggregate approximately $902,165. Results of Operations Year Ended December 31, 2003 compared to Year Ended December 31, 2002. Revenue: Revenue consisted of royalty payments from our working interests in two oil and gas wells in the state of Louisiana and rent payments on the space in Jersey City sublet to Nekema.com. Revenues decreased by 6.8%, to $284,750 in 2003 from $305,611 in 2002. The decrease in revenues for this period is a result of the decrease in production is the Louisiana wells and the termination of rent on the space in Jersey City in June 2003. General and administrative: General and administrative expenses consisted primarily of payroll and payroll-related expenses for administrative, information technology, accounting, and management personnel, recruiting, legal fees, depreciation and general corporate expenses. General and administrative expenses increased by 36.3%, or $263,161, to $988,494 in the year ended December 31, 2003, from $725,333 in the prior year. The increase in 2003 was the result of increased activity relating to the oil and gas operations, a write-off of $131,169 of fixed equipment related primarily to the New Jersey office in the fourth quarter of 2003, and an increase in legal and accounting fees resulting from the merger in July 2003. Interest income, net: Interest income decreased by 71.6%, or $9,710, to $3,845 in the year ended December 31, 2003, from $13,546 in the prior year. The decrease is primarily the result of a decrease in average cash and cash equivalents. Net Losses: Loss from operations decreased by 16.1%, or $138,498, to $721,566 in the year ended December 31, 2003, or ($0.15) per -6- basic and diluted common share, from $860,064 in the prior year, or ($0.38) per basic and diluted common share. The decreased loss was primarily due to the change in operations. Net loss available to common stockholders in the year ended December 31, 2003, was $721,566, or ($0.15) per basic and diluted common share, as compared to $908,064, or ($0.38) per basic and diluted common share, in the prior year. Year Ended December 31, 2002 compared to Year Ended December 31, 2001. Revenue: Revenue consisted of royalty payments from our working interests in two oil and gas wells in the State of Louisiana and rent payments on the space in Jersey City sublet to Nekema.com. Revenues increased by 178,392, or 140.2%, to $305,611 in 2002 from $127,219 in 2001, primarily because of the addition of revenues from the interests in the oil and gas wells. General and administrative: General and administrative expenses consisted primarily of payroll and payroll related expenses for administrative, information technology, accounting, and management personnel, recruiting, legal fees, and general corporate expenses. General and administrative expenses decreased by 45.6%, or $609,011, to $725,333 in the year ended December 31, 2002 from $1,334,344 in the prior year. The decrease in 2003 was the result of decreased wages and an insurance settlement we received in 2002. Interest income, net: Interest income decreased by 84.0%, or $71,371, to $13,546 in the year ended December 31, 2002, from $84,917 in the prior year. The decrease was primarily the result of a decrease in average cash and cash equivalents. Net Losses: Loss from operations decreased by 64.2%, or $1,545,599, to $860,064 in the year ended December 31, 2002, or ($0.38) per basic and diluted common share, from $2,405,663 in the prior year, or ($1.34) per basic and diluted common share. The decreased loss was primarily due to the change in operations and a smaller writedown on investments, as well as increased revenues. We invested in two oil and gas wells, increasing revenue. Net loss available to common stockholders in the year ended December 31, 2002 was $908,064, or ($0.38) per basic and diluted common share, as compared to $2,446,463 or ($1.36) in the prior year. Liquidity and Capital Resources Net cash used in operations increased by 21.8%, or $46,642, from $213,876 in the year ended December 31, 2002, to $260,518 in the year ended December 31, 2003. The increase was primarily due to higher general and administrative expenses in 2003. Cash used in operations in 2001 was $1,294,893. Net cash provided by investing activities during the year ended December 31, 2003, was $(55,739), as compared to $(475,000) in the prior year. Net cash provided by financing activities during the year ended December 31, 2002, was $(263,801), as compared to $(25,000) in the prior year. The decrease was the result of a partial redemption of the preferred stock. We issued to Polystick 4,500,000 shares of common stock and 1,500,000 shares of Series B Preferred Stock valued at $2,625,000 to acquire assets in a non-cash transaction. In connection with and as a condition to consummation of the merger in July 2003, was redeemed all of our existing outstanding Series A Convertible Preferred Stock, par value $0.001 per share, for $400,001 plus dividends payable. We paid $263,801 of the redemption price in cash and $200,000 by a promissory note secured by a lien on all of our assets. The note bears interest at the rate of 8% per annum and matures on September 1, 2004. After the year end, we issued two notes payable in the amount of $25,000 each bearing interest at 8% per annum and due September 1, 2004, and issued 200,000 restricted shares of common stock to the lender. We are presently in negotiations for an additional infusion of $200,000 to $1,000,000 in debt and equity financing but we cannot assure you that we will be able to obtain all or any of this financing. We believe that our existing capital resources will enable us to maintain our operations at existing levels for at least the next 12 months. The sufficiency of our capital resources is substantially dependent upon our future acquisitions. Accordingly, it is difficult to project our capital needs. However, we will evaluate potential acquisitions in terms of our then existing capital resources and the availability of additional debt or equity financing. There can be no assurance 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. 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 -7- 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. Item 7. Financial Statements. The financial statements required by Item 7 are included in this report beginning on page F-1. Item 8. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure There have been no changes in or disagreement with our principal independent accountants on accounting and financial disclosure. Item 8A. Controls and Procedures Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of December 31, 2004 (the "Evaluation Date"), has concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure the timely collection, evaluation and disclosure of information relating to GSV, Inc. that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. There were no significant changes in our internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date. -8- PART III Item 9. Directors, Executive Officers, Promoters And Control Persons; Compliance With Section 16(a) of The Exchange Act Our directors and executive officers are as follows: Name Age Title Sagi Matza 35 Chairman of the Board Gilad Gat 40 Chief Executive Officer, Chief Financial Officer and Director Yoav Bitter 36 Director SAGI MATZA has served as Chairman of the Board of GSV, Inc. since July 28, 2003 and as a director since July 21, 2003. He has been the Chief Executive Officer of Polystick U.S. Corp., a New York corporation engaged in the business of investing in oil and gas assets, since April 1999. From 1989 until April 1999 he was the Chief Executive Officer of Polystick Ltd., an Israeli corporation engaged in chemical manufacturing, petrochemical trading and manufacturing and adhesives manufacturing and distribution. Mr. Sagi founded Polystick U.S. Corp. GILAD GAT has served as President and Chief Executive Officer of GSV, Inc. since May 2001 and as Chief Financial Officer since September 30, 2002. He served as Chairman of the Board from May 2001 until July 28, 2003. Mr. Gat was the President and a director of Brooks Station Holdings, Inc., a private investment corporation, from February 2001 to December 2002. From 1996 until May 2001, Mr. Gat was a self-employed entrepreneur. Prior to 1996, Mr. Gat held various positions in the banking industry in Israel. Mr. Gat holds a BA in economics and an MBA from the Hebrew University in Jerusalem. YOAV BITTER has served as a director of GSV, Inc. since May 2001. Since December 1999, Mr. Bitter has been President of TIG Ventures, a company engaged in strategic consulting and implementation. From August 1999 until May 2002, he was Executive Vice President of Strategic Business Development of ElephantX Online Securities LLC, an internet financial services company, which he co-founded. From 1997 until August 1999, Mr. Bitter was a partner and Director, Marketing/Sales at Hambro America Securities, Inc., a private equity investment corporation. Mr. Bitter holds a B.A. in economics from Queens College and an M.B.A. with honors (Beta Gamma Sigma) from Zicklin School of Business, Baruch College. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our officers and directors and holders of more than 10% of our common stock (collectively "Reporting Persons") to file reports of initial ownership, ownership and changes in ownership of the common stock with the Securities and Exchange Commission within certain time periods and to furnish the Company with copies of all such reports. Based solely on our review of copies of such reports furnished to us by such Reporting Persons or on the written representations of such Reporting Persons that no reports on Form 5 were required, the Company believes that during the fiscal year ended December 31, 2003, all of the Reporting Persons complied with their Section 16(a) filing requirements. Code of Ethics. We adopted a code of ethics for our officers, directors and employees in April 2004. We have filed a copy of the code of ethics as Exhibit 14.1 to this annual report. Item 10. Executive Compensation The following table sets forth all compensation awarded to, earned by, or paid for all services rendered to us during the fiscal years ended December 31, 2003, 2002 and 2001, by our chief executive officer and our other executive officers whose total compensation exceeded $100,000 ("Named Executive Officers"). -9- Annual Compensation Long-Term Compensation Name & Other Securities Principal Annual Underlying Position Year Salary Bonus Compensation Options Gilad Gat(1) 2003 $120,000 - - 120,000 2002 $120,000 $ 30,000 - - 2001 $ 93,500 - - 20,000 Jeffrey Tauber(2) 2001 $104,167 - $250,000(2) -
(1) Mr. Gat became President and Chief Executive Officer on May 4, 2001. Mr. Gat's annual salary is $120,000. (2) Mr. Tauber resigned on May 4, 2001. Mr. Tauber received a severance payment of $250,000. Option Grants in Last Fiscal Year Number of % of Total Options Securities Granted to Underlying Options Employees in Fiscal Exercise or Base Name Granted (#) Year Price Expiration Date ----------- ---- ----- --------------- Gilad Gat 120,000 100 $0.60 October 31, 2008
The options issued to Mr. Gat were exercisable in full upon grant. Stock Option Exercises and Holdings Our Named Executive Officers did not exercise any options in 2003. The following table sets forth the number of shares of common stock underlying unexercised options held by our Named Executive Officers as of December 31, 2003. At December 31, 2003, none of our Named Executive Officers held any "in-the-money" stock options. Number of Securities Underlying Unexercised Options at December 31, 2003 Name Exercisable/Unexercisable Gilad Gat 140,000/0 Jeffrey S. Tauber 0/0 Employment Agreement On May 4, 2001, we entered into an employment agreement with Gilad Gat pursuant to which Mr. Gat was hired to be our President and Chief Executive Officer. Mr. Gat's salary is $120,000 per annum. Mr. Gat is an "at will" employee of GSV, Inc., provided however that, if he is terminated without cause, he is entitled to a severance payment of $120,000. Directors' Compensation All directors are reimbursed for certain expenses in connection with attendance at board of directors and committee meetings. Directors are eligible to be granted options to purchase common stock under the GSV, Inc. 1998 Stock Option Plan. In October 2003 -10- we issued options under the plan to purchase 120,000 shares of common stock at a price of $.60 per share to each of our non-employee directors. Directors who are not employees of GSV, Inc. also receive annual compensation in the amount of $12,000 for their service as directors. Audit Committee Financial Expert Currently, our entire board acts as our audit committee. Our board presently does not include any member who qualifies as an "audit committee financial expert" (as defined in Regulation 228.401(e)(1)(i)(A) of Regulation S-B). Given our limited financial resources and operations at present the board does not believe that it is necessary at this time to establish a separate audit committee or appoint an "audit committee financial expert" to the board. Item 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information as of March 31, 2004, regarding the beneficial ownership of our common stock by (i) each person who is known to us to be the beneficial owner of more than five percent (5%) of our common stock; (ii) each director and each executive officer; and (iii) all current directors and executive officers as a group. Information contained in this report with regard to stock ownership was obtained from our stockholder list, filings with governmental authorities, or from the named individual, directors and officers. The persons identified in the following table disclaim beneficial ownership of shares owned or held in trust for the benefit of members of their families or entities with which they may be associated. Amount and Percentage of Nature of Outstanding Name and Address of Beneficial Common Stock Beneficial Owner (1) Ownership(2) Owned (3) Yoav Bitter 140,000(4) * Gilad Gat 140,000(5) * Sagi Matza 6,970,000(6) 77.7% All executive officers and directors as a group (3 persons) 7,250,000(4)(5)(6) 78.3% - ---------------------------- * less than 1 percent. (1) Unless otherwise indicated, the address of each beneficial owner identified is c/o GSV, Inc., 191 Post Road West, Westport, Connecticut 06880. (2) Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of our securities beneficially owned by them. (3) Each beneficial owner's percentage ownership is determined by assuming: (i) that options, warrants or convertible securities that are held by such person (but not those held by any other person) and that are exercisable within 60 days of the date of this report have been exercised and converted, and (ii) 7,353,408 shares of common stock were outstanding, before any consideration is given to such options, warrants or convertible securities and before any consideration is given to shares of common stock held in treasury. (4) Includes 140,000 shares of common stock issuable upon exercise of options owned by Mr. Bitter. (5) Includes 140,000 shares of common stock issuable upon exercise of options owned by Mr. Gat. (6) Includes 5,350,000 shares of common stock and 1,500,000 shares of common stock issuable upon conversion of an equal number of shares of Series B Preferred Stock held by Polystick U.S. Corp. Mr. Matza is the Chief Executive Officer of Polystick U.S. Corp. and is the indirect owner of all of its outstanding voting securities. Also includes 120,000 shares of common stock issuable upon exercise of options owned by Mr. Matza. -11- Item 12. Certain Relationships and Related Transactions. Gilad Gat, our President and Chief Executive Officer, was the President and a director of Brooks Station Holdings, Inc., a private investment corporation, from February 2001 until December 2002. Brooks acquired 363,637 shares of our Series A Convertible Preferred Stock in a private placement offering consummated in March 2001. In connection with and as a condition to consummation of the merger in July 2003 in which we acquired an interest in Century Royalty LLC, we redeemed all of the outstanding Series A Preferred Stock from Brooks Station for $400,001 plus dividends payable. We paid $263,801 of the redemption price in cash and $200,000 by a promissory note secured by a lien on all of our assets. On February 9, 2004, we borrowed $25,000 from 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 is evidenced by a promissory note bearing interest at 8% per annum and maturing on September 1, 2004, and is secured by a lien on all of our assets. Effective June 1, 2002, we acquired working interests in two oil and gas wells in the State of Louisiana pursuant to an asset purchase agreement with Polystick U.S. Corp., a privately held New York corporation. The consideration consisted of $550,000 in cash and 850,000 shares of our common stock valued at $0.25 per share. Additionally, we acquired an option, including a right of first refusal, to purchase other oil and gas properties held by Polystick. Concurrent with the asset purchase agreement, we signed a management agreement with Polystick to assist us in the management of our oil and gas working interests and the development of new oil and gas activities. The agreement was for one year with an annual consulting fee of $150,000, payable in monthly installments. On July 21, 2003 we entered into an Agreement and Plan of Merger with Polystick, Cybershop, L.L.C., a New Jersey limited liability company and wholly-owned subsidiary of GSV, Inc. and Polystick Oil & Gas, Inc., a Delaware corporation and wholly-owned subsidiary of Polystick ("POGI"), pursuant to which, on the same day, POGI was merged into Cybershop, L.L.C. and in consideration thereof we issued to Polystick 4,500,000 shares of our common stock and 1,500,000 shares of our Series B Preferred Stock. 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. On July 28, 2003, he was elected Chairman of the board. Polystick has the right to elect two additional persons to our board, but has not yet done so. Item 13. Exhibits and Reports on Form 8-K (a) Exhibits Item No. Title 2.1 Asset Purchase Agreement, dated as of June 1, 2002, by and between GSV, Inc., Cybershop LLC and Polystick U.S. Corp. (Incorporated by reference to Exhibit 2.1 of the Company's report on Form 8-K filed June 5, 2002). 2.2 Agreement and Plan of Merger dated as of July 21, 2003, by and among GSV, Inc., Cybershop L.L.C., Polystick Oil & Gas, Inc. and Polystick U.S. Corp. (incorporated by reference to Exhibit 2.2 of the Company's report on Form 8-K, filed July 22, 2003). 3.1 Certificate of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No. 333-42707). 3.2 Certificate of Amendment of the Certificate of Incorporation of Cybershop International, Inc. (Incorporated by reference to Exhibit 3.2 of the Company's report on Form 10-Q for the fiscal quarter ended June 30, 1999, File No. 000-23901) 3.3 Certificate of Merger of GSV, Inc into Cybershop.com, Inc. (Incorporated by reference to Exhibit 3.5 of the Company's report on Form 10-K for the year ended December 31, 1999, File No. 000-23901) 3.4 Certificate of designations, preferences and rights of Series A convertible Preferred Stock of GSV, Inc. (incorporated by reference to Exhibit 3.1 of the Company's report on Form 8-K, filed March 6, 2001). 3.4 Certificate of designations, preferences and rights of Series B -12- convertible preferred stock of GSV, Inc. (incorporated by reference to Exhibit 4.1 of the Company's report on Form 8-K, filed July 22, 2003). 3.5 By-Laws as currently in effect.* 4.1 Specimen of Certificate for Common Stock (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1, File No. 333-42707) 4.2 Convertible Stock Purchase Agreement, dated March 1, 2001, by and between GSV, Inc. and Brooks Station Holding, Inc. (Incorporated by reference to Exhibit 4.1 of the Company's report on Form 8-K filed March 6, 2001). 10.1 Form of Officer and Director Indemnification Agreement (Filed as Exhibit 10.4 to the Company's Registration Statement on Form S-1, effective March 20, 1998, File No. 333-42707). 10.2 1998 Stock Option Plan of the Company (Filed as Exhibit 10.5 to the Company's Registration Statement on Form S-1, effective March 20, 1998, File No. 333-42707). 10.3 1998 Directors' Stock Option Plan (Filed as Exhibit 10.6 to the Company's Registration Statement on Form S-1, effective March 20, 1998, File No. 333-42707). 10.4 Registration Rights Agreement dated September 30, 1999 among Cybershop.com, Inc., Strong River Investments, Inc. and Montrose Investments, L.P. (Incorporated by reference to Exhibit 10.4 of the Company's report on Form 10-Q for the fiscal quarter ended September 30, 1999, File No. 000-23901). 10.5 Registration Rights Agreement dated December 8, 1999 among Cybershop.com, Inc., Strong River Investments, Inc. and Montrose Investments, L.P. (Incorporated by reference to Exhibit 10.14 of the Company's report on Form 10-K for the year ended December 31, 1999, File No. 000-23901). 10.6 Employment Agreement dated May 4, 2001, by and between GSV, Inc. and Gilad Gat (Incorporated by reference to Exhibit 10.1 of the Company's report on Form 8-K, filed May 11, 2001). 10.7 Management Consulting Agreement, dated as of June 1, 2002, by and between GSV, Inc. and Polystick U.S. Corp. (Incorporated by reference to Exhibit 2.1 of the Company's report on Form 8-K filed June 5, 2002). 10.8 Stock Redemption Agreement dated as of July 21, 2003, between the Company and Brooks Station Holdings, Inc. (incorporated by reference to Exhibit 4.2 of the Company's report on Form 8-K, filed July 22, 2003). 10.9 Form of promissory note issued to Brooks Station Holdings, Inc. (Incorporated by reference to Exhibit 4.2 of the Company's report on Form 8-K, filed July 22, 2003). 10.10 Security Agreement dated as of July 21, 2003, by and between the Company and Brooks Station Holdings, Inc. (Incorporated by reference to Exhibit 4.2 of the Company's report on Form 8-K, filed July 22, 2003). 14.1 GSV, Inc. Code of Ethics.* 21 Subsidiaries of the Company.* 23.1 Consent of Comiskey & Company, P.C.* 31 Certification required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934* 32 Certification pursuant to 18 U.S.C. Section 1350* 99.1 Risk factors.* * Filed herewith. -13- (b) Reports on Form 8-K. On October 2, 2003, we filed an amendment on Form 8-K/A to a report on Form 8-K filed in July 2003 in connection with the merger in which we acquired an interest in Century Royalty LLC. The amendment filed on October 2, 2003, included the financial statements required by Item 7 of Form 8-K relating to the merger. Item 14. Principal Accountant Fees and Services 2003 2002 ---- ---- Audit Fees(1) $34,749.63 $22,827.64 Tax Fees(2) $2,627.5 $3,722.76 Audit-Related Fees -0- -0- All Other Fees -461.5- -593.25- Total $37,838.63 $27,143.65
(1) Represents the aggregate fees billed for professional services rendered by our principal accountant for the audit of our annual financial statements for the years ended December 31, 2003, and December 31, 2002 and review of financial statements included in our quarterly reports on Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those periods. There were no additional fees billed by our principal accountant during the years ended December 31, 2003 and 2002. (2) Represents the aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the years ended December 31, 2003 and 2002. Our entire board of directors acts as our audit committee. In accordance with Section 10A(i) of the Securities Exchange Act of 1934, before we engage our independent accountant to render audit or non-audit services, the engagement is approved by our full board of directors. Our audit committee approved all of the fees referred to in the sections entitled "Audit Fees," "Audit-Related Fees," "Tax Fees" and "All Other Fees" above. -14- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, GSV has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GSV, INC. By /s/ Gilad Gat Gilad Gat Chief Executive Officer and President Date: April 13, 2004 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below. Signature Title Date /s/Gilad Gat Chief Executive Officer, April 13, 2004 Gilad Gat Chief Financial Officer and President (Principal Executive Officer, Principal Financial and Accounting Officer) /s/ Yoav Bitter Director April 13, 2004 Yoav Bitter /s/ Sagi Matza Director April 13, 2004 Sagi Matza -15- EX-99.3 3 gsv_10ksb-041304fn.txt GSV, INC. 041304 Financial Statements GSV, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants F-2 Consolidated Balance Sheet as of December 31, 2003 F-3 Consolidated Statements of Operations for the years ended December 31, 2003 and 2002 F-4 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2003 and 2002 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2003 and 2002 F-6 Notes to the Consolidated Financial Statements F-7 to F-16 -F-1- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors GSV, Inc and subsidiaries Westport, Connecticut We have audited the accompanying consolidated balance sheets of GSV, Inc., a Delaware corporation and Subsidiaries ("the Company") as of December 31, 2003 and the related consolidated statements of operations, changes of stockholders' equity and cash flows for the year ended December 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GSV, Inc. and Subsidiaries as of December 31, 2003 and the results of its operations and its cash flows for the year ended December 31, 2003 and 2002 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements are prepared assuming that the Company will continue as a going concern. As more fully described in Footnote 1, the Company has incurred recurring operating losses, and it has a deficit in working capital at December 31, 2003 of $ 404,618. The Company's expected future sources of revenue will be derived from its investments in oil and gas, but the exploitation of the Company's holdings will be dependent upon obtaining financing to engage in drilling of the prospects, of which there can be no assurance. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans to overcome this uncertainty are also described in Footnote 1. The accompanying financial statements do not include any adjustments which may be necessary if the Company is unable to continue. Denver, Colorado March 29, 2004 /s/ Comiskey & Company Comiskey & Company Professional Corporation -F-2- GSV, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET December 31, 2003 ASSETS CURRENT ASSETS Cash and cash equivalents $ 18,410 Accounts receivable and other current assets 18,778 -------------- Total current assets 37,188 Investments 50,000 Other long-term assets - geologic studies 2,316,721 Option to purchase oil and gas properties - Investments - oil & gas wells, net 452,249 Property and equipment, net 10,374 Other assets 13,173 -------------- 2,842,517 Total assets $ 2,879,705 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 241,806 Note payable 200,000 -------------- Total current liablities 441,806 -------------- Total liablities 441,806 -------------- STOCKHOLDERS' EQUITY Series B Preferred stock, $0.001 par value; 1,500,000 shares authorized; 1,500,000 shares issued and outstanding 1,500 Common stock, $0.001 par value; 75,000,000 shares authorized; 7,422,016 issued; 7,253,416 outstanding 7,422 Additional paid-in capital 40,867,897 Treasuy stock (558,998) Accumulated deficit (37,879,922) -------------- Total stockholders' equity 2,437,899 -------------- Total liabilities and stockholders' equity $ 2,879,705 ============== The accompanying notes are an integral part of the financial statements. -F-3- GSV, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF OPERATIONS December 31, 2003 and 2002 2003 2002 ---------- -------- Sublease income $ 150,384 $ 159,742 Oil and gas income 134,366 145,869 ------------ ----------- Total revenues 284,750 305,611 General and administrative expenses 988,494 725,333 ------------ ----------- Total operating expenses 988,494 725,333 Loss from operations before other income and expense (703,744) (419,722) Interest income, net 3,845 13,546 Interest expense (6,667) - Writedown of investments (15,000) (498,888) Gain on sale of investments - 45,000 ------------ ----------- NET LOSS (721,566) (860,064) ------------ ----------- Preferred stock dividends - 48,000 ------------ ----------- Net loss available to common shareholders $ (721,566) $ (908,064) ============ =========== Net loss per common share: Loss per common share from operations - basic $ (0.15) $ (0.38) ============ =========== Weighted average common shares outstanding, basic 4,668,929 2,286,117 ============ =========== The accompanying notes are an integral part of the financial statements. -F-4- GSV, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Preferred Stock, Series A Preferred Stock, Series B ------------------------- ------------------------- Number of Par Number of Par Shares Value Shares Value ---------- -------- --------- ------- Balance at December 31, 2001 363,637 $ 380,000 -- $ -- Sale of common stock -- -- -- -- Preferred stock dividend -- -- -- -- Net loss, as restated -- -- -- -- -------- ---------- --------- -------- Balance at December 31, 2002 363,637 380,000 -- -- Issuance of preferred stock for asset purchase -- -- 1,500,000 1,500 Issuance of common stock for asset purchase -- -- -- -- Issuance of common stock for services -- -- -- -- Redemption of preferred stock (363,637) (380,000) -- -- Net loss -- -- -- -- -------- ---------- --------- -------- Balance at December 31, 2003 -- $ -- 1,500,000 $ 1,500 ======== ========== ========= ========
Common Stock ------------------------- Additional Number of Par Paid-In Treasury Accumulated Shares Value Capital Stock Deficit ------------ --------- ------------ ----------- ----------- Balance at December 31, 2001 1,790,090 $ 1,959 $ 38,009,029 $ (558,998) $(36,178,151) Sale of common stock 850,000 850 211,650 -- -- Preferred stock dividend -- -- -- -- (48,000) Net loss, as restated -- -- -- -- (860,064) ------------ --------- ------------ ---------- ------------ Balance at December 31, 2002 2,640,090 2,809 38,220,679 (558,998) (37,086,215) Issuance of preferred stock for asset purchase -- -- -- -- -- Issuance of common stock for asset purchase 4,500,000 4,500 2,619,000 -- (72,141) Issuance of common stock for services 113,326 113 28,218 -- -- Redemption of preferred stock -- -- -- -- -- Net loss -- -- -- -- (721,566) ----------- --------- ------------ ---------- ------------ Balance at December 31, 2003 7,253,416 $ 7,422 $ 40,867,897 $ (558,998) $(37,879,922) =========== ========= ============ ========== ============
The accompanying notes are an integral part of the financial statements. -F-5- GSV, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2003 and 2002 2003 2002 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss (721,566) (860,064) Adjustments to reconcile net loss to net cash flows from operating activities: Cost of preferred stock previously issued 20,000 - Common stock issued for services 28,331 - Depreciation 52,668 160,900 Depletion 51,883 59,232 Gain on disposal of investments - (45,000) Impairment of property and equipment 120,580 - Writedown of investments 15,000 498,888 Increase (decrease) in cash from changes in: Account receivable and other current assets (78,517) (18,779) Other assets 22,426 - Accounts payable 279,927 (9,053) Tenant security deposit (51,250) - -------- --------- Net cash flows from operating activities (260,518) (213,876) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of investment - 75,000 Purchase of investment - oil & gas wells (55,739) (550,000) -------- --------- Net cash flows from investing activities (55,739) (475,000) CASH FLOWS FROM FINANCING ACTIVITIES Redemption of preferred stock (200,000) - Preferred dividends paid (63,801) (25,000) -------- --------- Net cash flows from financing activities (263,801) (25,000) -------- --------- Net decrease in cash (580,058) (713,876) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 598,467 1,312,343 -------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR 18,409 598,467 ======== =========
(1) The accompanying notes are an integral part of the financial statements. \ -F-6- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. Description of the Business and Basis of Presentation ----------------------------------------------------- Commencing in June 2001, GSV, Inc. and Subsidiaries ("the Company") changed the direction of its business. The Company's business operations since June 2001 include entering into new business operations through acquisitions or mergers and managing existing investments including the Company's oil and gas assets. Prior to June 2001, the Company had sought to identify and develop attractive early stage Internet companies in exchange for equity positions in such companies. In connection with this activity, the Company made investments in Fasturn, Inc., Weema Technologies, Inc., Telephone.com, Inc., MeetChina.com, Inc., and e-Commerce Solutions, Inc. The Company has since made substantial write downs of its internet investments to more accurately reflect current market valuations, and these investments do not represent a significant asset. In September 2002 the Company restructured its investment in Telephone.com, Inc. and received $75,000 in cash and 358,000 shares of common stock of Telephone.com, Inc. in exchange for 600,000 shares of series A preferred stock of Telephone.com. The Company is presently investigating whether or not there are any business prospects through which material value can be realized from its internet investments. Effective June 1, 2002, the Company acquired working interests in two oil and gas wells in the state of Louisiana pursuant to an asset purchase agreement with Polystick U.S. Corp., a privately held New York corporation. Additionally, the Company acquired an option, including a right of first refusal, to purchase other oil and gas properties held by Polystick U.S. Corp. The consideration consisted of $550,000 in cash and 850,000 shares of the Company's common stock valued at $0.25 per share. Concurrent with the asset purchase agreement, the Company signed a management agreement with Polystick U.S. Corp. to assist the Company in the management of its oil and gas working interests and the development of new oil and gas activities. The agreement is for one year with an annual consulting fee of $150,000, paid in monthly installments. On July 21, 2003, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Polystick U.S. Corp., Cybershop, L.L.C., a New Jersey limited liability company and wholly-owned subsidiary of the Company ("Merger Sub"), and Polystick Oil & Gas, Inc., a Delaware corporation and a wholly-owned subsidiary of Polystick ("POGI), pursuant to which, on the same day, POGI was merged into Merger Sub (the "Merger") and in consideration thereof the company issued to Polystick 4,500,000 shares of Common Stock and 1,500,000 shares of Series B Preferred Stock. As a result of the Merger, the Company, through Merger Sub, acquired an interest in Century Royalty LLC ("Century"), a Texas limited liability company that holds certain oil and gas properties in Texas plus an additional interest in the Louisiana properties in which the Company previously held an interest. Century also holds the rights to certain geologic studies. Presentation as a Going Concern The Company has incurred substantial operating losses, resulting in an accumulated retained earnings deficit of approximately $38,000,000 at December 31, 2003. Its current investments are limited to its investments in certain oil and gas producing properties in Louisiana, and an interest in Century Royalty LLC, which has as its primary asset an investment in geologic studies to exploit other as yet unowned oil and gas properties. At the present time, the Company is receiving minimal cash flow from its oil and gas investments. Future realization of the Company's investment in geologic studies will be dependent upon the Company's ability to obtain financing for drilling and development, of which there can be no assurance. The Company projects that potential future cash flows related to the studied prospects will exceed their carrying value, if all of the subject prospects are developed. The Company intends to defer the payment of existing liabilities and pursue settlements of other amounts using its common stock. -F-7- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 2. Summary of Significant Accounting Policies ------------------------------------------ Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents The Company considers all short-term marketable securities with a maturity of three months or less to be cash equivalents. Investments Investments are accounted for on the cost basis. Advertising Advertising costs are expensed as incurred. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the assets' estimated useful lives, which range from three to ten years. Long-Lived Assets The Company reviews its long-lived assets and certain related intangibles for impairment periodically, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. As a result of its review, the Company determined that impairment existed in certain of its investments as explained in Note 4. An impairment was also recognized on leasehold improvements as explained in Note 9. Stock-Based Compensation The Financial Accounting Standards Board has issued "Accounting for Stock-Based compensation" ("SFAS 123"). SFAS 123 requires that an entity account for employee stock-based compensation under a fair value base method. However, SFAS 123 also allows an entity to continue to measure compensation cost for employee stock-based compensation using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing to remain with the accounting under Opinion 25 are required to make pro forma disclosures of net loss and loss per share as if the fair value based method of accounting under SFAS 123 had been applied. The Company continues to account for employee stock-based compensation under -F-8- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 Opinion 25 and has included, in a note below, the pro forma disclosures required under SFAS 123. Income Taxes The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted Federal, state, and local income tax rates and laws that are expected to be in effect when the differences reverse. Significant Concentrations From time-to-time, the Company maintains cash balances in excess of FDIC insured limits. The amount of such excess at December 31, 2003 was approximately $0. Fair Value of Financial Instruments Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments approximate the carrying values of such instruments. 3. Correction of an error ---------------------- The accompanying financial statements for 2002 have been restated to correct an error in the accrual of oil and gas income receivable at December 31, 2002. The effect of the restatement was to increase net loss for the year ended December 31, 2002 by $28,789, or $0.02 per share. 4. Investments ----------- The Company has investments in five internet-related companies, which have been accounted for using the cost method. During the years ended December 31, 2003 and 2002, the Company recorded a charge to operations of $0 and $20,000, respectively, for impairment of these investments. During the year ended December 31, 2002, the Company surrendered 600,000 shares of preferred stock in one of the internet companies in exchange for $75,000, paid in three installments, and 358,000 shares of common stock, representing a 5% ownership interest in the company. A gain of $45,000 was recognized on the surrender for the year ended December 31, 2002. Subsequent to year end, one investment was disposed of for its book value. As described above, the Company acquired working interests in two oil and gas wells effective June 1, 2002 for $550,000 in cash and common stock of the Company valued at $212,500, for a total investment of $762,500. The asset is depleted on a periodic basis using the units of production method. Depletion expense for the years ended December 31, 2003 and 2002 was $51,883 and 53,001, respectively. In the fourth quarter of 2002, the properties exhibited a marked decrease in the volume of oil and gas produced. Based upon an independent reserve study performed effective March 2003, the Company reduced the carrying amount of its oil and gas properties by approximately $479,000 for the year ended December 31, 2002. As described above, on July 21, 2003, the Company entered into the Merger Agreement, pursuant to which, on the same day, POGI was merged into Merger Sub and in consideration thereof the Company issued to Polystick 4,500,000 shares of Common Stock and 1,500,000 shares of Series B Preferred Stock. Each share of Series B Preferred Stock is convertible at any time at the holder's option into a number of shares of Common Stock equal to $1.00 -F-9- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 divided by the conversion price then in effect. The conversion price is initially $1.00. No dividends are payable on the Series B Preferred Stock, except that in the event dividends are declared with respect to Common Stock, each holder of share of Series B Preferred Stock shall 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 Preferred Stock has such shares been converted into Common Stock immediately before such dividend was declared. Upon any Liquidation Event, the holders of the outstanding Series B Preferred Stock will be entitled 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, the net assets of the Company are insufficient to permit payment in full of such preferential amount to the holders of Series B Preferred Stock, then the entire net assets of the Company will be distributed ratably among the holders of the Series B Preferred Stock. Following is a condensed balance sheet showing the fair values of the assets acquired and the liabilities assumed as of the date of the acquisition: Current assets $ 210,784 Other long-term assets 2,316,721 Investments - oil & gas wells 219,420 --------- 2,746,925 Current liabilities (121,925) --------- Net assets acquired $2,625,000 ========== In connection with and as a condition to the Merger, the Company redeemed all of its existing outstanding Series A Preferred Stock, par value $0.001 per share, for $400,001, plus dividends payable. The Company paid $263,801 of the redemption price in cash and $200,000 by a full recourse promissory note bearing interest at a rate of 8% per annum and due September 4, 2004, secured by a lien on all of the Company's assets. As a result of the merger, the Company acquired an interest in Century Royalty LLC ("Century"), which holds certain oil and gas properties in Texas plus an additional interest in the Louisiana properties in which the Company presently holds an interest. Century also holds the rights to certain geologic studies that are included in other long term assets on the accompanying balance sheet. Century is a member of a working interest partnership that has identified several prospects derived from the geological studies and is working towards drilling these prospects. Century has 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 comes first. Century has a 20% participation interest in all subsequent wells drilled in the first 5 prospects. For later prospects, Century is entitled to an 80% participation interest. GSV is entitled to the first $4,168,659 of net income in Century and to 75% of net income thereafter. 5. Stockholders' Equity -------------------- Pursuant to the terms of the Asset Purchase Agreement with Polystick U.S. Corp. (Polystick") effective June 1, 2002, the Company issued 850,000 shares of common stock valued at a price of $.25 per share, the closing price on May 28, 2002, to Polystick. On March 1, 2001, the Company entered into a Convertible Preferred Stock Purchase Agreement (the "Purchase Agreement") with Brooks Station Holdings, Inc. ("Brooks Station") for the issuance and sale of its preferred stock for aggregate consideration of $400,000. Pursuant to the Purchase Agreement, the Company sold and issued to Brooks Station a total of 363,637 shares of its Series A Convertible Preferred Stock, $0.001 par value per share (the "Series A Convertible Preferred"), at a purchase price of $1.10 per share (the "Purchase Price"). The Series A Convertible Preferred is convertible into shares of the Company's Common Stock, at a conversion price of $1.10 per share, subject to certain anti-dilution adjustments. The current conversion price is $0.25 per share. The Preferred Stock carries a cumulative 12% dividend payable in June and December of each year, and may participate in common share dividends, if any, on an as-if converted basis, and has preference upon liquidation, -F-10- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 including accumulated unpaid dividends. The shares may be redeemed at the option of the holder, but only upon the occurrence of certain triggering events, which include bankruptcy, material judgments and defaults, and suspension of trading of the Company's stock for more than 20 days (which days need not be consecutive). On October 31, 2003, the Company issued 113,326 share of common stock to a consultant to the Company, in exchange for the cancellation of the Company's obligation to pay accrued fees aggregating $28,331. 6. Stock Option Plan ----------------- In 1998, the Company adopted the 1998 Stock Option Plan (the "1998 Option Plan"). Under the 1998 Option Plan, stock options may be granted to directors, officers, employees, and consultants of the Company. Under the 1998 Option Plan the number of shares available for issuance is 600,000. The 1998 Option Plan is summarized as follows: Weighted Average Exercise Shares Price ------ --------- Outstanding at December 31, 2001 210,000 .30 Granted -- -- Cancelled (170,000) .30 Exercised -- -- --------- --------- Outstanding at December 31, 2002 40,000 $ 0.30 Granted 400,000 0.56 Cancelled -- -- Exercised -- -- --------- --------- Outstanding at December 31, 2003 440,000 $ 0.54 ========= =========
The options granted prior to 2003 vest one-third annually over three years and expire five years from the date of grant. The options granted in 2003 vested immediately and expire five years from the date of grant. The Company applies Accounting Principles Board No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its plan. Accordingly, no compensation costs were recorded for options issued at prices which reflect no intrinsic value at the grant or modification date. The Company considered the effects of recognizing compensation cost pursuant to the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (SFAS No. 123). Using the Black-Scholes option pricing model, which takes into account the exercise price of the options, expected life, current price of the underlying stock, its expected volatility and dividends, and the risk-free interest rate, net income would have been decreased to the pro forma amounts as follows for the years ending December 31: -F-11- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003
2003 2002 ----------------------------------- ------------------------------------
As Pro As Pro Reported Forma Reported Forma -------------- ------------ ------------ ------------ Net loss $ (721,566) $ (721,566) $ (860,064) $ (860,064) ============== ============ ============ ============ Net loss per share $ (0.15) $ (0.15) $ (0.36) $ (0.36) ============== ============ ============ ============
There were options granted in the year ended December 31, 2003. The average fair value of options granted was $0. The fair value of options is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 5.0 percent; expected life of 1,825 days; dividend yield percentage of 0%; and volatility of 300%. 7. Statement of Cash Flows ----------------------- Supplemental disclosure of other cash information: Non-cash investing activities: Net assets acquired during the year $2,625,000 Value of preferred shares issued for acquisition (1,500,000) Value of common shares issued for acquisition (1,125,000) ----------- $ - =========== 8. Notes Payable ------------- As described in Note 4, a $200,000 note payable bearing interest at 8% per annum was issued in conjunction with the redemption of Series A Preferred Stock. The note is due September 4, 2004. Accrued interest at December 31, 2003 totals $6,667. 9. Property and Equipment ---------------------- Office equipment and software $ 608,855 Furniture and fixtures 127,381 Leasehold improvement 355,273 ------------ 1,091,509 Less: Accumulated depreciation (1,081,135) ------------ $ 10,374 ============ The Company determined that an impairment existed on certain leasehold improvements and recorded a write down of $120,580. 10. Leases ------ The Company leases for its own use office space under a non-cancelable operating lease expiring April 30, 2004, with an option for a six-month renewal. Future minimum lease payments on this non-cancelable operating lease for 2004 are approximately $6,800. Rent expense for the years ended December 31, 2003 and 2002 was $194,366 and $112,265, respectively. -F-12- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 In June 2001, the Company sublet to Nekema.com its 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 from October, 2002 through May 31, 2003, totaling $133,091. The Company is actively seeking a replacement subtenant for the property. If the Company is unable to find a subtenant, or unable to negotiate a settlement with the landlord, the Company will be obligated to pay rent on the space until the lease expires in December 2008. The lease contains automatic increases based upon the consumer price index. Estimated minimum future lease payments including such increases are as follows: 2004 $ 164,908 2005 172,329 2006 180,084 2007 188,188 2008 196,656 ---------- $ 902,165 ========== 11. Income Taxes ------------ Deferred taxes are recognized on the differences between the financial reporting and income tax basis of assets and liabilities using enacted tax rates. The tax effects of temporary differences and the net operating loss carryforwards that give rise to significant portions of the net deferred income tax asset at December 31, 2003 are as follows: Net operating loss carryforwards $12,109,998 Net book value of property and equipment 125,000 Investments ( 7,500) ------------ 12,227,498 Valuation allowance (12,227,498) ------------ $ -- ============ Due to the uncertain realization of the deferred tax asset, the Company has provided a full valuation allowance. As of December 31, 2003, the Company had net operating loss carryforwards of approximately $31,067,000, which begin to expire in 2013. 12. Net Loss Per Common Share ------------------------- Basic net loss per common share is calculated by dividing net loss per common share after effect of adjustable common stock warrants, as explained below, by the weighted average number of shares of common stock outstanding during the period as follows: -F-13- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 2003 2002 --------------------------------------- -------------------------------------
Per Per Loss Shares Share Loss Shares Share --------------------------------------- -------------------------------------- Loss from continuing operations $ (721,566) 4,668,929 $ (.15) $(860,064) 2,286,275 $(.36) Effect of preferred stock dividends -- --- -- (48,000) --- (.02) ----------- --------- ------- ---------- --------- ------ Net loss available for common shareholders $ (721,566) 4,668,929 $ (.15) $(908,064) 2,286,117 (.38) =========== ========= ======= ========= ========= ======
13. Subsequent Events ----------------- Subsequent to year end, the Company issued a note payable in the amount of $25,000 bearing interest at 8% per annum due September 1, 2004 and issued 100,000 restricted shares of common stock. 14. Unaudited Oil and Gas Reserve Quantities ---------------------------------------- This section provides information required by Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities." The following unaudited reserve estimates were prepared internally, based upon a study conducted by Pressler Petroleum Consultants, Inc., an independent engineering company, as of April 5, 2004, and adjusted by the Company for production through Dec. 31, 2003. There are many uncertainties inherent in estimated proved reserve quantities and in projecting future production rates and the timing of development expenditures. In addition, reserve estimates of new discoveries that have little production history are more imprecise than those of properties with more production history. Accordingly, these estimates are expected to change as future information becomes available. Proved oil and gas reserves are the estimated quantities of crude oil, condensate, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are those reserves expected to be recovered through existing wells with existing equipment and operating methods. Unaudited net quantities of proved and proved developed reserves of crude oil (including condensate) and natural gas, all of which are located within the continental United States, are summarized below: -F-14- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 Changes in Proved Reserves: (BBLS) (MCF) Estimated quantity, December 31, 2002 624 46,393 Production (263) (11,927) Acquisitions 953 75,875 Discoveries - - Revisions of previous estimates (276) (8,653) ----- -------- Estimated quantity, December 31, 2003 1,038 101,688 ===== ======== Proved developed reserves: Oil (BBLS) December 31, 2002 624 December 31, 2003 1,038 Gas (MCF) December 31, 2002 46,393 December 31, 2003 101,688 Proved undeveloped reserves: Oil (BBLS) December 31, 2003 5,120 The following table presents a standardized measure of the discounted future net cash flows attributable to the Company's proved oil and gas reserves. Future cash inflows were computed by applying period-end prices of oil and gas to the estimated future production of proved oil and gas reserves. The future production and development costs represent the estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, assuming continuation of existing economic conditions. Future unexpected costs or changes in production could affect discounted future net cash flows. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair market value of the Company's oil and gas properties. As of Dec. 31, 2003 -------------- Future cash inflows $ 838,325 Future development and production costs (180,938) ----------- Future net cash flows 657,387 10% annual discount for estimating timing of cash flows (154,801) ----------- -F-15- GSV, Inc. and Subsidiaries NOTES TO FINANCIAL STATEMENTS December 31, 2003 Standardized measure of discounted future net cash flows $ 502,586 =========== Changes in Standardized measure are as follows: Standardized measure of discounted future net cash flows, December 31, 2002 $ 144,170 Purchase of reserves in place 275,956 Changes in price, net of future production costs 88,311 Changes in estimated future development costs 105,534 Changes in estimated quantities (63,649) Changes due to operations: Production (84,092) Accretion of discount (3,063) Other 39,419 ----------- Standardized measure of discounted future net cash flows, December 31, 2003 $ 502,586 ========== -F-16- EX-3.(II) 4 gsv_exhib35-041304.txt GSV, INC. 041304\ Exhibit 3.5 - ----------- AMENDED AND RESTATED BY-LAWS OF GSV, INC. ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of the Corporation within the State of Delaware shall be located at United Corporate Services, Inc., 15 East North Street, in the City of Dover, County of Kent. SECTION 2. Other Offices. The Corporation may also have an office or offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board of Directors shall from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at any such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof. SECTION 2. Annual Meeting. The annual meeting of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall elect, by a plurality vote, a Board of Directors and shall transact such other business as may properly be brought before the meeting. SECTION 3. Special Meetings. Special meetings of stockholders may be called at any time by the Board of Directors, by the Chairman of the Board or by written request signed by at least two-thirds of the stockholders of the Corporation. SECTION 4. Notice of Meetings. Except as otherwise expressly required by statute, written notice of each annual and special meeting of stockholders stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which such meeting is called, shall be given to each stockholder of record entitled to vote thereat not fewer than ten (10) nor more than sixty (60) days before the date of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purpose or purposes stated in the notice. Notice shall be given personally or by mail and, if by mail, shall be sent in a postage prepaid envelope, addressed to each stockholder at such stockholder's address as it appears on the records of the Corporation. Notice by mail shall be deemed given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any written waiver of notice. SECTION 5. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 6. Quorum, Adjournments. The holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, until a quorum shall be present or represented. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which adjournment is taken. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 7. Organization. At each meeting of stockholders, the Chairman of the Board, if one shall have been elected, or, in his or her absence or if one shall not have been elected, the President, shall act as chairman of the meeting. The Secretary or, in his or her absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof. -2- SECTION 8. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. SECTION 9. Voting. Except as otherwise provided by statute, by the Certificate of Incorporation or by any agreement to the contrary between the Corporation and all its stockholders, each stockholder of the Corporation having the right to vote shall be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder. When a quorum is present at any meeting, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote on the subject matter shall be the act of the stockholders except where the General Corporation Law of the State of Delaware, the Corporation's Certificate of Incorporation or any agreement between the Corporation and all its stockholders prescribes a different percentage of votes and/or a different exercise of voting power. In the election of directors, voting need not be by written ballot. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by written ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his or her proxy, if there be such proxy, and shall state the number of shares voted. Section 10. Proxy Representation. Each stockholder entitled to vote at any meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a proxy signed by such stockholder or his or her attorney-in-fact, but no proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies. SECTION 11. Inspectors. The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof and make a written report thereof. The Board of Directors may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall: ascertain the number of shares outstanding and the voting power of each; determine the shares represented at a meeting and the validity of proxies and ballots; count all votes and ballots; determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of inspectors. On request of the person presiding at the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office -3- of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. SECTION 12. Action by Consent. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of statute or any provision of the Certificate of Incorporation or of these By-laws, the meeting and vote of stockholders may be dispensed with, and the action taken without such meeting and vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the Corporation entitled to vote thereon were present and voted, and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. ARTICLE III BOARD OF DIRECTORS SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders. SECTION 2. Number, Qualifications. Election and Term of Office. The number of directors constituting the initial Board of Directors shall be as determined in the resolutions of the Incorporator of the Corporation electing the initial Board of Directors. Thereafter, the number of directors may be fixed, from time to time, by the affirmative vote of a majority of the entire Board of Directors or by action of the stockholders of the Corporation. Any decrease in the number of directors shall be effective at the time of the next succeeding annual meeting of stockholders unless there shall be vacancies in the Board of Directors, in which case such decrease may become effective at any time prior to the next succeeding annual meeting to the extent of the number of such vacancies. Directors need not be stockholders of the Corporation. Except as otherwise provided by statute, these By-laws or any agreement to the contrary between the Corporation and all its stockholders, the directors (other than members of the initial Board of Directors) shall be elected at the annual meeting of stockholders. Each director shall hold office until his or her successor shall have been elected and qualified, or until his or her death, or until he or she shall have resigned, or have been removed, as hereinafter provided in these By-laws. SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting. -4- SECTION 4. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such other time or place as shall be specified in a notice thereof given as hereinafter provided in Section 7 of this ARTICLE III. SECTION 5. Regular Meetings. Regular meetings of the Board of Directors shall be held each fiscal year at such time and place as the majority of the Board of Directors may from time to time designate. If any day designated for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by statute or these By-laws. SECTION 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, if one shall have been elected, or by two or more Directors of the Corporation or by the President. SECTION 7. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each regular meeting for which notice is required) shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the place, date and hour of the meeting. Except as otherwise required by these By-laws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, addressed to such director at such director's residence or usual place of business, by first class mail, at least two days before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, cable, telex, telecopier or other similar means, or be delivered to him personally or be given to him by telephone or other similar means, at least twenty-four hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting, except when he or she shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 8. Quorum and Manner of Acting. A majority of the total number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. Except as otherwise expressly required by statute, the Certificate of Incorporation, these By-laws or any agreement to the contrary between the Corporation and all its stockholders, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted -5- which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such. SECTION 9. Organization. At each meeting of the Board of Directors, the Chairman of the Board, if one shall have been elected, or, in the absence of the Chairman of the Board or if one shall not have been elected, the President (or, in his or her absence, another director chosen by a majority of the directors present) shall act as chairman of the meeting and preside thereat. The Secretary or, in his or her absence, any person appointed by the chairman of the meeting shall act as secretary of the meeting and keep the minutes thereof. SECTION 10. Resignations. Any director of the Corporation may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 11. Vacancies. Except as may otherwise be required by law and subject to the terms of any agreement to the contrary between the Corporation and all its stockholders, any vacancy in the Board of Directors, whether arising from death, resignation, removal or any other cause, and any newly created directorship resulting from any increase in the authorized number of directors of the Corporation, may be filled by the vote of a majority of the Directors then in office, though less than a quorum, or by the sole remaining director or by the stockholders at the next annual meeting thereof or at a special meeting thereof. Each director so elected shall hold office until his or her successor shall have been elected and qualified. SECTION 12. Removal of Directors. Subject to the terms of any agreement to the contrary between the Corporation and all its stockholders, any director may be removed, either with or without cause, at any time, by the holders of a majority of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote at an election of directors. SECTION 13. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation as directors. SECTION 14. Committees. The Board of Directors shall have the authority to appoint any temporary or standing committee to exercise any powers or authority as the Board of Directors may see fit, subject to such conditions as may be prescribed by the Board of Directors. All committees so appointed shall keep regular minutes of their meetings and shall cause such minutes to be recorded in books kept for that purpose in the principal office of the Corporation and shall report the same to the Board of Directors as required by it. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In addition, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Except to the extent restricted -6- by statute or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors and may authorize the seal of the Corporation to be affixed to all papers which require it. Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 15. Action by Consent. Unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors or such committee, as the case may be. SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting by such means shall constitute presence in person at a meeting. ARTICLE IV OFFICERS SECTION 1. Number and Qualifications. The officers of the Corporation shall be elected by the Board of Directors and shall include the President, one or more Vice-Presidents, the Secretary and the Treasurer. If the Board of Directors wishes, it may also elect as an officer of the Corporation a Chairman of the Board and may elect other officers (including one or more Assistant Treasurers and one or more Assistant Secretaries) as may be necessary or desirable for the business of the Corporation. Any two or more offices may be held by the same person, and no officer except the Chairman of the Board need be a director. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified, or until his or her death, or until he or she shall have resigned or have been removed, as hereinafter provided in these By-laws. SECTION 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective. SECTION 3. Removal. Any officer of the Corporation may be removed, either with or without cause, at any time, by the Board of Directors at any meeting thereof. SECTION 4. Chairman of the Board. The Chairman of the Board, if one shall have been elected, shall be a member of the Board, an officer of the Corporation and, if present, -7- shall preside at each meeting of the Board of Directors or the stockholders. He or she shall advise and confer with the President, and in the President's absence with other executives of the Corporation, and shall perform such other duties as may from time to time be assigned to him by the Board of Directors. SECTION 5. The President. The President shall be the Chief Executive Officer of the Corporation. The President shall, in the absence of the Chairman of the Board or if a Chairman of the Board shall not have been elected, preside at each meeting of the Board of Directors or the stockholders. The President shall perform all duties incident to the office of President and Chief Executive Officer and such other duties as may from time to time be assigned to him by the Board of Directors. SECTION 6. Vice-President. Each Vice-President shall perform all such duties as from time to time may be assigned to him by the Board of Directors or the President. At the request of the President or in his or her absence or in the event of his or her inability or refusal to act, the Vice-President, or if there shall be more than one, the Vice-Presidents in the order determined by the Board of Directors (or if there be no such determination, then the Vice-Presidents in the order of their election), shall perform the duties of the President, and, when so acting, shall have the powers of and be subject to the restrictions placed upon the President in respect of the performance of such duties. SECTION 7. Treasurer. The Treasurer shall (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; (c) deposit all moneys and other valuables to the credit of the Corporation in such depositaries as may be designated by the Board of Directors or pursuant to its direction; (d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever; (e) disburse the funds of the Corporation and supervise the investments of its funds, taking proper vouchers therefor; (f) render to the Board of Directors, whenever the Board of Directors may require, an account of the financial condition of the Corporation; and (g) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 8. Secretary. The Secretary shall -8- (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors and the stockholders; (b) see that all notices are duly given in accordance with the provisions of these By-laws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed by the Corporation are properly kept and filed; and (e) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 9. The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as from time to time may be assigned by the Board of Directors. SECTION 10. The Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 11. Officers' Bonds or Other Security. If required by the Board of Directors, any officer of the Corporation shall give a bond or other security for the faithful performance of his or her duties, in such amount and with such surety as the Board of Directors may require. SECTION 12. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the Board of Directors. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that such person is also a director of the Corporation. -9- ARTICLE V STOCK CERTIFICATES AND THEIR TRANSFER SECTION 1. Stock Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board or the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restriction of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. SECTION 3. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond in such sum as the Board of Directors may direct sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or certificates. SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, to cancel the old certificate and to record the transaction upon its records; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. -10- SECTION 5. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars. SECTION 6. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these By-laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. SECTION 7. Fixing the Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor fewer than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 8. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE VI INDEMNIFICATION OF DIRECTORS AND OFFICERS SECTION 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all expenses (including, without limitation, attorneys' fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, create a presumption that the person did not act in good faith and in a -11- manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, create a presumption that the person had reasonable cause to believe that his or her conduct was unlawful. SECTION 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against all expenses (including, without limitation, attorneys' fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. Indemnification in Certain Cases. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this ARTICLE VI, or in defense of any claim, issue or matter therein, he or she shall be indemnified against all expenses (including, without limitation, attorneys' fees and expenses) actually and reasonably incurred by him in connection therewith. SECTION 4. Procedure. Any indemnification under Sections 1 and 2 of this ARTICLE VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in such Sections 1 and 2. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders of the Corporation. SECTION 5. Advances for Expenses. The right to indemnification conferred in this ARTICLE VI upon a director or officer shall include the right to be paid by the Corporation all the expenses (including, without limitation, attorneys' fees and expenses) incurred in defending an action, suit or proceeding of the types set forth in Sections 1 and 2 of this ARTICLE VI in advance of the final disposition of such action, suit or proceeding; provided, however, that if the General Corporation Law of the State of Delaware requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, -12- service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified for such expenses under this ARTICLE VI or otherwise. Expenses (including, without limitation, attorneys' fees and expenses) incurred by an employee or agent in defending an action, suit or proceeding of the types set forth in Sections 1 and 2 of this ARTICLE VI may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such employee or agent to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified for such expenses by the Corporation under this ARTICLE VI or otherwise. SECTION 6. Rights Not Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, the other sections of this ARTICLE VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. SECTION 7. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this ARTICLE VI. SECTION 8. Definition of Corporation. For the purposes of this ARTICLE VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this ARTICLE VI with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. SECTION 9. Definitions with respect to Employee Benefit Plans. For purposes of this ARTICLE VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed upon a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any services as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and the person who acted in good faith and in manner he or she reasonably believed to be in the interest of the participants and beneficiaries of -13- an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this ARTICLE VI. SECTION 10. Survival of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this ARTICLE VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE VII GENERAL PROVISIONS SECTION 1. Dividends. Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors. Dividends may be paid in cash, in property or in shares of stock of the Corporation, unless otherwise provided by statute or the Certificate of Incorporation. SECTION 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors may think conducive to the interests of the Corporation. The Board of Directors may modify or abolish any such reserves in the manner in which it was created. SECTION 3. Seal. The seal of the Corporation shall be in such form as shall be approved by the Board of Directors. SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be fixed, and once fixed, may thereafter be changed, by resolution of the Board of Directors. SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation. SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors may authorize any officer or officers, agent or agents, in the name and on behalf of the Corporation to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 7. Voting of Stock in Other Corporations. Unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board or the President, from time to -14- time, may (or may appoint one or more attorneys or agents to) cast the votes which the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose shares or securities may be held by the Corporation, at meetings of the holders of the shares or other securities of such other corporation. If one or more attorneys or agents are appointed, the Chairman of the Board or the President may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The Chairman of the Board or the President may, or may instruct the attorneys or agents appointed to, execute or cause to be executed in the name and on behalf of the Corporation and under its seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances. ARTICLE VIII AMENDMENTS These By-Laws may be altered, amended or repealed or new by-laws adopted (a) by action of the stockholders entitled to vote thereon at any annual or special meeting of stockholders or (b) if the Certificate of Incorporation so provides, by action of the Board of Directors at a regular or special meeting thereof. Any by-law made by the Board of Directors may be amended or repealed by action of the stockholders at any annual or special meeting of stockholders. -15- EX-99.P 5 gsv_exhib141-041304.txt GSV, INC. 041304 Exhibit 14.1 - ------------ GSV, INC. CODE OF ETHICS 1. Introduction ------------ The Board of Directors of GSV, Inc. has adopted this code of ethics (the "Code"), which is applicable to all directors, officers and employees, to: o promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o promote the full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC, as well as in other public communications made by or on behalf of the Company; o promote compliance with applicable governmental laws, rules and regulations; o deter wrongdoing; and o require prompt internal reporting of breaches of, and accountability for adherence to, this Code. This Code may be amended only by resolution of the Company's Board of Directors. In this Code, references to the "Company" means GSV, Inc. (the "Parent") and, in appropriate context, the Parent's subsidiaries. 2. Honest, Ethical and Fair Conduct -------------------------------- Each person owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest, fair and candid. Deceit, dishonesty and subordination of principle are inconsistent with integrity. Service to the Company never should be subordinated to personal gain and advantage. Each person must: o Act with integrity, including being honest and candid while still maintaining the confidentiality of the Company's information where required or in the Company's interests. o Observe all applicable governmental laws, rules and regulations. o Comply with the requirements of applicable accounting and auditing standards, as well as Company policies, in the maintenance of a high standard of accuracy and completeness in the Company's financial records and other business- related information and data. o Adhere to a high standard of business ethics and not seek advantage through unlawful or unethical business practices. o Deal fairly with the Company's customers, suppliers, competitors and employees. o Refrain from taking advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice. o Protect the assets of the Company and ensure their proper use. o Refrain from taking for themselves opportunities that are discovered through the use of corporate assets or using corporate assets, information or position for general personal gain outside the scope of employment with the Company. o Avoid conflicts of interest whenever possible. Anything that would be a conflict for a person subject to this Code also will be a conflict if it is related to a member of his or her family or a close relative. Examples of conflict of interest situations include, but are not limited to, the following: o any significant ownership interest in any supplier, customer or competitor; o any consulting or employment relationship with any customer, supplier or competitor; o any outside business activity that detracts from an individual's ability to devote appropriate time and attention to his or her responsibilities with the Company; o the receipt of any money, non-nominal gifts or excessive entertainment from any company or person with which the Company has current or prospective business dealings; o being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any close relative; and o selling anything to the Company or buying anything from the Company, except on reasonable commercial terms for Company employees. 3. Disclosure ---------- The Company strives to ensure that the contents of and the disclosures in the reports and documents that the Company files with the Securities and Exchange Commission (the "SEC") and other public communications shall be full, fair, accurate, timely and understandable in -2- accordance with applicable disclosure standards, including standards of materiality, where appropriate. Each person must: o not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, governmental regulators, self-regulating organizations and other governmental officials, as appropriate; and o in relation to his or her area of responsibility, properly review and critically analyze proposed disclosure for accuracy and completeness. In addition to the foregoing, the Chief Executive Officer, the Chief Financial Officer, and each other person that typically is involved in the financial reporting of the Company must familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company. Each person must promptly bring to the attention of the Chairman of the Audit Committee of the Board of Directors any information he or she may have concerning (a) significant deficiencies in the design or operation of internal and/or disclosure controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls. 4. Compliance ---------- It is the Company's obligation and policy to comply with all applicable governmental laws, rules and regulations. It is the personal responsibility of each person to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters. 5. Reporting and Accountability ---------------------------- The Audit Committee of the Board of Directors of the Company is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. Any person who becomes aware of any existing or potential breach of this Code is required to notify the Chairman of the Audit Committee promptly. Failure to do so is itself a breach of this Code. Specifically, each person must: o Notify the Chairman of the Audit Committee promptly of any existing or potential violation of this Code. o Not retaliate against any other person for reports of potential violations that are made in good faith. -3- The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code: o The Audit Committee will take all appropriate action to investigate any breaches reported to it. o If the Audit Committee determines that a breach has occurred, it will inform the Board of Directors. o Upon being notified that a breach has occurred, the Board of Directors will take or authorize such disciplinary or preventive action as it deems appropriate, after consultation with the Audit Committee and counsel, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities. No person following the above procedure shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion suspension, threat, harassment or, in any manner, discrimination against such person in terms and conditions of employment. 6. Waivers And Amendments ---------------------- Any waiver (defined below) or an implicit waiver (defined below) from a provision of this Code for the principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions or any amendment (as defined below) to this Code is required to be disclosed in the Company's Annual Report on Form 10-KSB or in a Current Report on Form 8-K filed with the SEC. A "waiver" means the approval by the Company's Board of Directors of a material departure from a provision of the Code. An "implicit waiver" means the Company's failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an executive officer of the Company. An "amendment" means any amendment to this Code other than minor technical, administrative or other non-substantive amendments hereto. All persons should note that it is not the Company's intention to grant or to permit waivers from the requirements of this Code. The Company expects full compliance with this Code. 7. Other Policies And Procedures ----------------------------- Any other policy or procedure set out by the Company in writing or made generally known to employees, officers or directors of the Company prior to the date hereof or hereafter are separate requirements and remain in full force and effect. -4- 8. Inquiries --------- All inquiries and questions in relation to this Code or its applicability to particular people or situations should be addressed to the Chief Financial Officer of the Company. -5- EX-21 6 gsv_exhib21-041304.txt GSV, INC. 041304 Exhibit 21 - ---------- Subsidiaries of GSV, Inc. Name Jurisdiction of Organization - ---- ---------------------------- Cybershop, L.L.C. New Jersey EX-23 7 gsv_exhib23-041304.txt GSV, INC. 041304 Exhibit 23.1 - ------------ INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT To the Board of Directors GSV, Inc. and subsidiaries Westport, Connecticut We hereby consent to incorporation by reference in Registration Statement Numbers 333-75159 and 333-91575 on Form S-8 of our report dated March 29, 2004 on the consolidated balance sheet of GSV, Inc. and Subsidiaries as of December 31, 2003 and the related consolidated statements of operations, changes of stockholders' equity and cash flows for the years ended December 31, 2003 and 2002, which appear in the December 31, 2003 Annual Report on Form 10-KSB of GSV, Inc. Denver, Colorado /s/ Comiskey & Company, P.C. April 13, 2003 Comiskey & Company, P.C. EX-31 8 gsv_exhib31-041304.txt GSV, INC. 041304 Exhibit 31 - ---------- Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934. I, Gilad Gat, certify that: 1. I have reviewed this Annual Report on Form 10-KSB of GSV, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [intentionally omitted]; (c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and to the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: April 13, 2004 By: /s/ Gilad Gat ---------------------------------- Gilad Gat Chief Executive Officer Chief Financial Officer EX-32 9 gsv_exhib32-041304.txt GSV, INC. 041304 Exhibit 32 - ---------- CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350. In connection with the Annual Report of GSV, Inc. (the "Company") on Form 10-KSB for the period ending December 31, 2002 (the "Report"), I, Gilad Gat, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) The Report fully complies with the requirement of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and 2) The information contained in the Report fairly presents, in all material respects, the Company's financial position and results of operations. Date: April 13, 2004 By: /s/ Gilad Gat ---------------------------------- Gilad Gat Chief Executive Officer Chief Financial Officer EX-99.1 10 gsv_exhib991-041304.txt GSV, INC. 041304 Exhibit 99.1 - ------------ RISK FACTORS We have a history of operating losses. We have incurred operating losses of $721,566 and $831,275 for the fiscal years ended December 31, 2003 and 2002, respectively. Our ability to achieve profitability depends primarily upon our ability to successfully manage our existing oil and gas interests. In view of the rapidly evolving nature of our business and our limited operating history, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and you should not rely upon them as an indication of our future performance. We may need additional capital to fund our operations, and we may not be able to obtain it on terms acceptable to us or at all. We believe that our existing capital resources will enable us to maintain our current operations through March 31, 2005. However, we may require additional funds during or after that period. In particular, we would be required to secure additional sources of capital to continue operating at our current level or curtail our current operations if we do not achieve the results of operations that we expect as a result of lower than expected revenues, higher than expected expenses, or other possible adverse developments. In addition, if we expand our existing business plan to focus on growth in international markets, make acquisitions of businesses or technologies, or modify our business plan in other ways, we would likely require additional funding. If we require additional financing for any reason, we cannot assure you that such additional financing will be available to us on acceptable terms, or at all. In the event we are unable to raise additional capital, we may be required to substantially reduce or curtail operations. Further, if we raise additional funds through the issuance of additional equity securities, the percentage ownership of our shareholders will be diluted. Any new equity securities may have rights, preferences, or privileges senior to those of our common stock. We do not control operations at the oil & gas properties in which we hold interests. We own less than 100% of the working interest in our gas holdings. We do not conduct any operations. Operations are conducted by operating companies that follow the instructions of the working interest owners. Because of this structure, drilling and operating decisions are not entirely within our control. If we disagree with the decision of a majority of working interest owners, we may be required, among other things, to decline to participate in a particular activity. If we decline to participate, we might be required to relinquish our interest or may be subject to certain non-consent penalties, as provided in the applicable operating agreement. Such penalties typically allow participating working interest owners to recover from the proceeds of production. Under most operating agreements, the operator is given direct and full control over all operations on the property and is obligated to conduct operations in a workman-like manner; however the operator is usually not liable to the working interest owners for losses sustained or for liabilities incurred, except those resulting from its own gross negligence or willful misconduct. Each working interest owner is generally liable for its share of the costs of developing and operating jointly owned properties. The operator is required to pay the expenses of developing and operating the property and will invoice working interest owners for their proportionate share of such costs. We may have a limited ability to exercise control over operations and the associated costs of such operations. The success of our investment in these activities may, therefore, be dependent upon a number of facts that are outside of our control. We may be liable to pay rent on our former offices in Jersey City until December 2008. In June 2001 we sublet our former offices in Jersey City, New Jersey to Nekema.com through December 31, 2008. In September 2002 Nekema.com ceased business operations and defaulted on the sublease. The rent on the sublease was guaranteed by Lumbermens Mutual Casualty Company, d/b/a Kemper Insurance Company, until only May 2003. The aggregate rent for the period June 2003 through December 2008 is $995,668. If we are unable to find a subtenant or negotiate a settlement with the landlord we will be obligated to pay rent on the space until the lease expires in December 2008, which would have a severe negative impact on our cash flow and operating results. Trading in our common stock on the OTC Bulletin Board may be limited. Our common stock is traded on the OTC Bulletin Board. The OTC Bulletin Board is not an exchange and, because trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on an exchange or Nasdaq, you may have difficulty reselling your securities. Our common stock is subject to penny stock regulation. Our common stock is subject to regulations of the Securities and Exchange Commission relating to the market for penny stocks. These regulations generally require that a disclosure schedule explaining the penny stock market and the risks associated with the penny stock market be delivered to purchasers of penny stocks and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. The regulations applicable to penny stocks may severely limit the market liquidity for our securities and could reduce your ability to sell your securities in the market. -2- -----END PRIVACY-ENHANCED MESSAGE-----