-----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, VmIbUXj4BRXVOQOWSg7FlcPe83s+3rf86Hn5dQ3PZ0UsAObDY3U2/WHr8ieZXdDD PA22D3QWitkLXr0o7zBBMQ== 0000908230-05-000093.txt : 20051114 0000908230-05-000093.hdr.sgml : 20051111 20051114103028 ACCESSION NUMBER: 0000908230-05-000093 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GSV INC CENTRAL INDEX KEY: 0001051591 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 133979226 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23901 FILM NUMBER: 051197605 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 10QSB 1 gsv_10qsb-093005.txt GSV, INC. 093005 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 /x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2005 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 0-23901 GSV, INC. (Exact name of small business issuer as specified 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)
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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. Yes |X| No |_| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 14, 2005, there were 7,472,703 shares of common stock outstanding, excluding 168,592 shares held in Treasury. Transitional Small Business Disclosure Format (check one): Yes |_| No |X|. GSV, INC. AND SUBSIDIARIES INDEX TO FORM 10-QSB Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements: 3 Consolidated Balance Sheet (unaudited) 3 Consolidated Statements of Operations for the Three Months and Nine Months ended September 30, 2005 and 2004 (unaudited) 4 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2005 and 2004 (unaudited) 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Controls and Procedures 13 PART II. OTHER INFORMATION 14 Item 6. Exhibits 14 SIGNATURES 15 2 PART I. FINANCIAL INFORMATION Item 1. - Financial Statements GSV, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET September 30, 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 269,002 Accounts receivable and other current assets 118,792 -------------- Total current assets 387,794 Investments 50,000 Other long-term assets - geologic studies 2,316,721 Investments - oil & gas wells, net accumulated depletion 10,001 Property and equipment, net accumulated depreciation 6,174 -------------- 2,382,897 Total assets $ 2,770,691 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 387,218 Other Current liabilities 132,904 Accrued Interest 40,424 -------------- Total current liablities 560,546 Note payable 400,000 -------------- Total liablities 960,546 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; 7,472,703 issued; 7,472,703 outstanding 7,641 Additional paid-in capital 41,016,185 Treasury stock (558,998) Accumulated deficit (38,656,183) -------------- Total stockholders' equity 1,810,145 -------------- Total liabilities and stockholders' equity $ 2,770,691 ==============
The accompanying notes are an integral part of the financial statements. 3 GSV, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF OPERATIONS For the three months September 30, 2005 and 2004 2005 2004 ------------------------- ------------------------- Oil and gas income $ 150,030 $ 196,908 Other income -- 6,609 ------------------ ------------------ Total Revenues 150,030 203,517 General and administrative expenses 208,271 243,278 ------------------ ------------------ Total operating expenses 208,271 243,278 Loss from operations before other (58,241) (39,761) income and expenses Interest income, net 0 4 Interest expense (26,695) (9,000) Writedown of investments -- -- Gain on sale of investments -- -- ------------------ ------------------ NET LOSS $ (84,936) $ (48,756) ================== ================== Net loss per common share: Loss per common share from operations - basic $ (0.01) $ (0.01) ================== ================== Weighted average common shares outstanding, basic 7,472,703 7,472,703 ================== ==================
The accompanying notes are an integral part of the financial statements. 4 GSV, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF OPERATIONS For the nine months September 30, 2005 and 2004 2005 2004 ------------------------- ------------------------- Oil and gas income $ 482,429 $ 231,998 Other income -- 21,061 ------------------ ------------------ Total Revenues 482,429 253,059 General and administrative expenses 679,147 541,348 ------------------ ------------------ Total operating expenses 679,147 541,348 Loss from operations before other income and expenses (196,718) (288,289) Interest income, net 8 34 Interest expense (44,843) (17,500) Writedown of investments -- Gain on sale of investments -- 16,077 ------------------ ------------------ NET LOSS $ (241,552) $ (289,677) ================== ================== Net loss per common share: Loss per common share from operations - basic $ (0.03) $ (0.04) ================== ================== Weighted average common shares outstanding, basic 7,472,703 7,417,882 ================== ==================
The accompanying notes are an integral part of the financial statements. 5 GSV, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS For the nine months September 30, 2005 and 2004 2005 2004 ------------------------- ------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss (241,552) (292,177) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation 2,250 1,950 Depletion 282,037 153,677 Increase (decrease) in cash from changes in: Account receivable and other current assets 7,310 (93,378) Other assets 4,598 8,547 Accounts payable and other current liabilities 104,091 126,478 ------------------ ------------------ Net cash flows from operating activities 158,733 (94,875) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investment - oil & gas wells (6,954) (109,596) ------------------ ------------------ Net cash flows from investing activities (6,954) (109,596) CASH FLOWS FROM FINANCING ACTIVITIES Increase (Decrease) in notes payable (50,000) 250,000 ------------------ ------------------ Net cash flows from financing activities (50,000) 250,000 ------------------ ------------------ Net increase in cash 101,779 45,529 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 167,223 18,410 ------------------ ------------------ CASH AND CASH EQUIVALENTS, END OF YEAR 269,002 63,939 ================== ===================
The accompanying notes are an integral part of the financial statements. 6 GSV, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of the Business and Basis of Presentation Since July 2003 the business operations of GSV, Inc. and its subsidiaries (the "Company") have been focused on managing existing investments in oil and gas assets and entering into new investments in this industry. Currently, the Company has been pursuing opportunities in the alternative energies arena, specifically in the biodiesel sector. From June 2001 to July 2003, the Company's business operations included managing existing investments and entering into new business operations through acquisitions. 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. 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. As of September 30, 2005, these investments were valued at approximately 1.8% of the total value of the Company's assets. The Company is continuing to investigate whether or not there are any business prospects through which material value can be realized from the remaining 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. Corporation ("Polystick"), a privately held New York corporation. The consideration consisted of $550,000 in cash and 850,000 shares of the Company's common stock valued at $0.25 per share. Additionally, the Company acquired an option valued at $80,210, including a right of first refusal, to purchase other oil and gas properties held by Polystick. On July 21, 2003, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Polystick, 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 convertible preferred stock. As a result of the Merger, the Company, through Merger Sub, acquired interests in certain oil and gas properties in Texas and an interest in Century Royalty LLC ("Century"), a Texas limited liability company that manages the oil and gas properties in Texas, plus an additional interest in the Louisiana properties in which the Company already held an interest. Century 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 Merger Sub are included in the accompanying statements of operations. On May 20, 2004, the Company elected to participate in re-completion of one of the wells in Louisiana. The work was successfully completed on June 10, 2004. The total cost to the Company was $74,063. The Company has seen an increase in revenues as a result of the re-completion of this well. On November 1, 2004, the working interest partnership started work on a re-entry prospect in Texas. After reaching 6,000 feet and logging, it was determined that it was not economical to compete the well and it was decided on November 8, 2004, to plug and abandon the well. The Company's management has little practical experience in the oil and gas industry. Management relies to a great extent on the employees of Century Royalty LLC to monitor and implement strategy with respect to the Company's oil and gas assets. Management's inexperience may detrimentally affect the Company's operations and results because, for example, it could prevent the Company from taking advantage of opportunities that arise on a timely basis or cause the Company to take actions that a more experienced management team might determine are not in the Company's best interests. The information presented as of September 30, 2005 is unaudited, but, in the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the Company's financial position as of September 30, 2005, the results of its operations for the three and nine month periods ended September 30, 2005 and 2004 and its cash flows for the three and nine month periods ended September 30, 2005 and 2004. The consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes for the year ended December 31, 2004, included in the Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange Commission. Certain prior period amounts have been reclassified to conform to the current period presentation. 7 2. Investments The Company has invested in four internet-related companies, which have been accounted for using the cost method. These investments have been written off except the investment in Telephone.com, which is valued at $50,000. 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 quarter ended September 30, 2005 was $76,802. In the fourth quarter of 2002, the properties exhibited a marked decrease in the volume of oil and gas produced. On May 20, 2004, the Company elected to participate in re-completion of one of the wells in Louisiana. The work was successfully completed on June 10, 2004. The total cost to the Company was $74,063. The Company has seen an increase in revenues as a result of the re-completion of this well. An independent reserve study performed effective March 2005 estimates the total remaining reserves in this well including PDP and PDNP, net of expenses and discounted at 10%, was $778,954. 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 convertible preferred stock. Each share of Series B convertible preferred stock is convertible at any time at the holder's option into a number of shares of common stock equal to $1.00 divided by the conversion price then in effect. The conversion price is initially $1.00. No dividends are payable on the Series B convertible preferred stock, except that in the event dividends are declared with respect to common stock, each holder of share of Series B convertible 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 convertible 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 convertible 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 convertible preferred stock, then the entire net assets of the Company will be distributed ratably among the holders of the Series B convertible 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. The maturity date of the promissory note has been extended to March 1, 2006. As a result of the Merger, the Company acquired interests in certain oil and gas properties in Texas and an interest in Century, which manages the 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. The balance of this preference as of September 30, 2005 was $3,700,364. 8 On November 1, 2004, the working interest partnership started work on a re-entry prospect in Texas. After reaching 6,000 feet and logging, it was determined that it was not economical to complete the well and it was decided on November 8, 2004, to plug and abandon the well. 3. Stockholders' Equity There were no changes in stockholders' equity during the three months ended September 30, 2005. 4. 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: 9 Months ended September 30 2005 2004 ---------------------------------------- ---------------------------------------- Per Per Loss Shares Share Loss Shares Share ---------------------------------------- ---------------------------------------- Loss from continuing operations $ (241,552) 7,472,703 $ (0.03) $ (289,677) 7,417,882 $ (.04) Effect of preferred stock dividends ----------- --------- -------- ----------- --------- --------- Net loss available for common shareholders $ (241,552) 7,472,793 $ (0.03) $ (289,677) 7,417,882 $ (.04) =========== ========= ======== =========== ========= =========
9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Since July 2003 our business operations have been focused on managing our existing investments in oil and gas assets and entering into new investments in this industry. Currently, we have been pursuing opportunities in the alternative energies arena, specifically in the biodiesel sector. 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 September 30, 2005, 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 the remaining 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. Corporation ("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 convertible preferred stock. As a result of the merger we acquired, through Cybershop L.L.C., interests in certain oil and gas properties in Texas and an interest in Century Royalty LLC, a Texas limited liability company that manages 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 convertible preferred stock is convertible at any time at the holder's option into a number of shares of common stock equal to $1.00 divided by the conversion price then in effect. The terms upon which the Series B convertible preferred stock may be converted into common stock are set forth in the Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock filed by the Company with the Secretary of State of the State of Delaware on July 18, 2003 ("Certificate of Designations"). As of November 11, 2005, the Series B convertible preferred stock owned by Polystick was convertible into 1,500,000 shares of common stock. No dividends are payable on the Series B convertible preferred stock, except that in the event dividends are declared with respect to the common stock each holder of shares of Series B convertible preferred stock will be entitled to receive an amount equal to the amount of dividends that would have been paid on the shares of common stock issuable upon conversion of such shares of Series B convertible preferred stock had such shares of Series B convertible preferred stock been converted into common stock immediately before the dividend was declared. Upon any Liquidation Event, as defined in the 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 our net assets distributable among the holders of the Series B convertible preferred stock are insufficient to permit the payment in full of such preferential amount to the holders of the Series B convertible preferred stock, then the our net assets will be distributed ratably among the holders of the Series B convertible preferred stock in proportion to the amounts they otherwise would have been entitled to receive. The Certificate of Designations provides that so long as any shares of Series B Convertible Preferred Stock are outstanding, we will not, without the written approval of the holders of at least a majority of the then-outstanding Series B Convertible Preferred Stock, 10 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 convertible preferred stock are outstanding, the holders of the Series B convertible preferred stock, voting separately as a class, will be entitled to designate and elect three of the members of our board of directors. Also, a vacancy in any directorship elected by the holders of the Series B 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. Our management has little practical experience in the oil and gas industry. Our management relies to a great extent on the employees of Century Royalty LLC to monitor and implement strategy with respect to our oil and gas assets. Our management's inexperience may detrimentally affect our operations and results because, for example, it could prevent us from taking advantage of opportunities that arise on a timely basis or cause us to take actions that a more experienced management team might determine are not in our best interests. 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. On May 5, 2004 we filed a proof of claim against Nekema's estate in the United States Bankruptcy Court for the Southern District of New York. The proof of claim is for the total sum of $421,455.15 as permitted by law. We cannot assure you that we will be able to collect any of this claim. 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 $700,934. Results of Operations Three Months Ended September 30, 2005 compared to Three Months Ended September 30, 2004 Revenues: Revenues for the quarter decreased by $53,487 or 26.3% over the corresponding period of the preceding year. This decrease was due primarily to the impact of Hurricane Katrina, because production in our wells in Louisiana was suspended as a precautionary measure for 8 days beginning on August 30, 2005. General and administrative: General and administrative expenses consist primarily of payroll and payroll related expenses for administrative, information technology, accounting, and management personnel, legal fees, depletion and general corporate expenses. General and administrative expenses decreased by 14.4%, or $35,007, to $208,271 in the third quarter of 2005 from $243,278 in the third quarter of 2004, primarily as a result of a decrease in depletion caused by the 8-day suspension of production in our wells in Louisiana because of Hurricane Katrina. Interest expense: Interest expense for the quarter of $26,695 increased approximately 200% as compared with $9,000 in the corresponding period of the preceding year due to a one-time charge for interest related to the Company's unpaid rental obligation to its Jersey City landlord. Net Losses: Loss from operations increased by $36,180 from $48,756 in the third quarter of 2004, or ($0.01) per basic and diluted common share, to $84,936 in the third quarter of 2005, or ($0.01) per basic and diluted common share. Nine Months Ended September 30, 2005 compared to Nine Months Ended September 30, 2004. Revenues: Revenues for the period increased by $229,370 over the corresponding period of the preceding year due primarily to the increase in production resulting from the expansion of one of the two wells in Louisiana, which was completed on June 10, 2004. General and administrative: General and administrative expenses consist primarily of payroll and payroll related expenses for administrative, information technology, accounting, and management personnel, legal fees, depletion and general corporate expenses. General and administrative expenses increased by 25.4%, or $137,799, to $679,147 in the first nine months of 2005 from $541,348 in the first nine months of 2004, primarily as a result of increase in depletion expense. Interest income, net: Interest expense increased to $44,843 as compared with $17,500 in the preceding year, due to a one-time charge for interest related to the Company's unpaid rental obligation to its Jersey City landlord. Net Losses: Loss from operations decreased by $48,125 from $289,677 in the first nine months of 2004, or ($0.04) per basic and diluted common share, to $241,552 in the first nine months of 2005, or ($0.03) per basic and diluted common share. 11 Liquidity and Capital Resources Net cash provided by operations increased by $253,608, from a deficit of $94,875 for the nine months ended September 30, 2004, to a positive $158,733 for the nine months ended September 30, 2005. The increase in cash provided by operations was primarily due to the sharp increase in revenues from the wells in Louisiana and a drop in general and administrative expenses other than depletion. Net cash used in investing activities during the nine months ended September 30, 2005, was $(6,954), as compared to $(109,596) in the corresponding period of the prior year. In 2003, we issued to Polystick 4,500,000 shares of common stock and 1,500,000 shares of Series B convertible preferred stock valued at $2,625,000 to acquire assets in a non-cash transaction. On February 11, 2004, we borrowed $25,000 from Brooks Station Holdings, Inc., a private investment corporation ("Brooks Station"). In partial consideration for the loan, we issued 100,000 shares of common stock to Brooks Station. On March 18, 2004, we borrowed another $25,000 from Brooks Station and in partial consideration for the loan issued another 100,000 shares of common stock to Brooks Station. Each loan 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. On September 20, 2004, we negotiated an extension of the maturity of the notes from their original maturity date of September 1, 2004 to March 1, 2005. On March 10, 2005, we repaid the note issued on February 11, 2004 and negotiated an extension of the maturity of the note dated March 18, 2004 to September 1, 2005. We also extended to the same date the maturity of an 8% secured promissory note we issued to Brooks Station on July 21, 2003 in the principal amount of $200,000. On August 31, 2005, we repaid the March 18, 2004 note and negotiated an extension of the maturity date of the July 21, 2003 note to March 1, 2006. On May 11, 2004, we sold a convertible promissory note in the principal amount of $200,000 and a warrant to purchase up to 1,142,857 shares of our common stock at a price of $.70 per share to D. Emerald Investments Ltd., a private investment corporation ("Emerald"). The note bears interest at the rate of 8% per annum and is convertible into shares of our common stock at a price of $.70 per share. The aggregate purchase price of these securities was $200,000. In connection with the sale of these securities we agreed that if Emerald exercises the warrant in full and converts the convertible note in full, then, at Emerald's request, we will appoint a person designated by Emerald to our Board of Directors and, in addition, for so long as Emerald holds at least eighty-five percent (85%) of the common stock issued upon such exercise and conversion, we will nominate such person (or a different person designated by Emerald) to be reelected to the Board of Directors in connection with any meeting of our stockholders at which directors are to be elected. We also agreed that within 120 days of the exercise of the warrant and/or conversion of the note for an aggregate of at least 428,572 shares of common stock (subject to adjustment for dilutive events as set forth in the warrant and the note) we will register all of the shares issuable upon conversion of the note and exercise of the warrant under the Securities Act of 1933. Additionally, we granted Emerald rights to have the shares included in other registration statements we may file for the public offering of our securities for cash proceeds. In 2004, we recorded a charge to operations of $129,000 for the value of the warrants and the beneficial conversion feature of the convertible note. Our principal stockholder, Polystick, entered into a guaranty and a pledge agreement with Emerald under which Polystick pledged 200,000 shares of our Series B convertible preferred stock as collateral security for the note. Polystick also entered into a voting agreement with Emerald under which Polystick agreed that if we fail to fully and timely fulfill our obligations to appoint or nominate a representative for election to our board of directors, then, at Emerald's request, Polystick will vote its shares of Series B convertible preferred stock in favor of a nominee designated by Emerald in any election of directors occurring during such time and for so long as Emerald holds at least 85% of the common stock issued upon exercise of the warrant and conversion of the note. Polystick also agreed that, provided that Polystick continues to have the right to designate and elect three directors to the Company's board of directors under the terms of the Series B convertible preferred stock, any such nominee will count as one of such directors. Additionally, Polystick agreed to use all its power and authority as provided by our by-laws and the Series B convertible preferred stock to convene, at Emerald's request, meetings of stockholders as may be necessary to elect Emerald's nominee to the board of directors. On July 3, 2005, we entered into an agreement with Emerald dated as of May 10, 2005 (the "Agreement"), pursuant to which we agreed to extend and renew the note and the warrant. Under the terms of the Agreement, the maturity date of the note was extended from May 10, 2006 to May 10, 2007 and Emerald's right to convert the note and all accrued interest on the note into common stock at a price of $.70 per share was extended until any time prior to May 10, 2006. The term of the warrant was also extended from May 10, 2005 to May 10, 2006. We believe that our existing capital resources will enable us to maintain our operations at existing levels for at least the next 12 months. However, it is difficult to project our capital needs. We cannot assure you that any additional financing or other sources of capital will be available to us upon acceptable terms, if at all. The inability to obtain additional financing, when needed, would have a material adverse effect on our business, financial condition and operating results. 12 Forward-Looking Statements: Some of the statements in this report are forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements about our plans, objectives, expectations, intentions and assumptions that are not statements of historical fact. You can identify these statements by the following words: - - "may" - - "will" - - "should" - - "estimates" - - "plans" - - "expects" - - "believes" - - "intends" and similar expressions. We cannot guarantee our future results, performance or achievements. Our actual results and the timing of corporate events may differ significantly from the expectations discussed in the forward-looking statements. You are cautioned not to place undue reliance on any forward- looking statements. Potential risks and uncertainties that could affect our future operating results include, but are not limited to, our limited operating history, history of losses, need to raise additional capital, the high risk nature of our business, and other risks described in our Annual Report on Form 10-KSB for the year ended December 31, 2004. Item 3. Controls and Procedures We performed an evaluation under the supervision and with the participation of our management, including our chief executive and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2005. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports. Following the evaluation described above, our management, including our chief executive and chief financial officer, concluded that based on the evaluation our disclosure controls and procedures were operating at the reasonable effectiveness level at that time. There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred in the quarter ended September 30, 2005, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 13 PART II. OTHER INFORMATION Item 6. Exhibits 10.1 Agreement by and between GSV, Inc. and D. Emerald Investments Ltd. dated as of May 10, 2005. (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005). 10.2 Letter agreement between GSV, Inc. and Brooks Station Holdings, Inc. dated August 31, 2005. 31.1 Certification of Chief Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive and Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 14 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 14, 2005 By: /s/ Gilad Gat ------------- Gilad Gat Chief Executive Officer and President (principal executive officer) Chief Financial Officer (principal financial and accounting officer) 15 EX-10 2 gsv_10qsb-exhib102093005.txt GSV, INC. 093005 Exhibit 10.2 ------------ GSV, INC. 191 Post Road Westport, Connecticut 06880 August 31, 2005 Brooks Station Holdings, Inc. c/o Cavallo Capital Corp. 660 Madison Avenue New York, New York 10021 Re: Waiver of Default and Amendment of Promissory Notes --------------------------------------------------- Dear Sirs: Brooks Station Holdings, Inc. ("Brooks Station") holds two promissory notes issued by GSV, Inc. (the "Company"), as follows: (i) a promissory note dated July 21, 2003, in the principal amount of $200,000 (the "July 2003 Note") and (ii) a promissory note dated March 18, 2004, in the principal amount of $25,000 (the "March 2004 Note" and, together with the July 2003 Note, the "Notes"). Each of the Notes bears interest at the rate of 8% per annum and is secured by a first priority security interest in all assets of the Company pursuant to a Security Agreement between the Company and Brooks Station dated as of July 21, 2003. By agreement dated March 10, 2005, each of the Notes was amended to extend its maturity date to September 1, 2005 (the "Old Maturity Date"). Contemporaneously with the execution of this letter agreement, the Company is paying Brooks Station $27,909.59, representing the principal amount and accrued interest on the March 2004 Note. Brooks Station hereby acknowledges receipt of such payment and herewith surrenders the March 2004 Note to the Company for cancellation. Brooks Station and the Company now wish to extend the maturity of the July 2003 Note to March 1, 2006, in accordance with the terms set forth below: 1. Waiver of Default. Brooks Station hereby waives any claim against the Company or its assets arising from the Company's failure to pay the principal and accrued interest on the Notes on the Old Maturity Date or thereafter through the date of this letter agreement. 2. Extension of Maturity Date. Brooks Station and the Company agree that Section 1 of the July 2003 Note is hereby amended to read as follows: "1. The principal amount of this Note, together with any unpaid accrued interest thereon, shall be due and payable on March 1, 2006." 3. Miscellaneous. (i) Except as herein amended, the July 2003 Note shall remain in full force and effect. This letter agreement may not be amended, revised, terminated or waived except by an instrument in writing signed and delivered by the party to be charged therewith. (ii) This letter agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto. (iii) This letter agreement shall be construed and governed by the laws of the State of New York, applicable to agreements made and to be performed entirely therein. If you are in agreement with the foregoing, please sign below and return the original to the Company, keeping a copy for your files. Sincerely, GSV, INC. By: /s/ Gilad Gat ------------- Name: Gilad Gat Title: Chief Executive Officer and President Acknowledged and agreed: BROOKS STATION HOLDINGS, INC. By: /s/ Daniel Golan ------------------ Name: Daniel Golan Title: President -2- EX-31 3 gsv_10qsb-exhibi311093005.txt GSV, INC. 093005 Exhibit 31.1 Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Gilad Gat, Chief Executive Officer and Chief Financial Officer of GSV, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-QSB of GSV, Inc.; 2. Based on my knowledge, this quarterly 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) [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 most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) 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 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. By: /s/ Gilad Gat ------------- Gilad Gat Chief Executive Officer Chief Financial Officer November 14, 2005 EX-32 4 gsv_10qsb-exhibi321093005.txt GSV, INC. 093005 Exhibit 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 In connection with the Quarterly Report of GSV, Inc. (the "Company") on Form 10-QSB for the period ending September 30, 2005 (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. By: /s/ Gilad Gat ------------- Gilad Gat Chief Executive Officer Chief Financial Officer November 14, 2005 -----END PRIVACY-ENHANCED MESSAGE-----