UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




Washington,
DC 20549




FORM
10-Q




(Mark
One)




x
  QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
quarterly period ended March 31, 2009




OR




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




For the
transition period from ____________ to ____________




Commission
File Number 0-23901





GSV,
INC.


(Exact
name of registrant as specified in its charter)





Delaware
              
              13-3979226(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)





191
      Post Road West, Westport, CT
              06880(Address
      of principal executive offices)
              (Zip
      Code)





(203)
221-2690


(Registrant’s
telephone number, including area code)





N/A


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




Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o





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





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




Large accelerated filer
            o
            
            Accelerated filer
            oNon-accelerated filer
            o
            
            Smaller reporting company
            x


(Do not check if a smaller reporting company)




Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes  o No x




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: As of May 11, 2009, there were
7,502,703 shares of common stock outstanding, excluding 168,592 shares held in
treasury.







GSV,
INC. AND SUBSIDIARIES




INDEX
TO FORM 10-Q





Page
                  NumberPART
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements (unaudited):
                3Condensed
      Consolidated Balance Sheets at March 31, 2009 and December 31,
      2008
                3Condensed
      Consolidated Statements of  Operations for the Three Months
      ended March 31, 2009 and 2008
                4Condensed
      Consolidated Statements of Cash Flows for the Three Months ended March 31,
      2009 and 2008
                5Notes
      to Unaudited Condensed Consolidated Financial Statements
                6Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                10Item
      4T. Controls and Procedures
                15PART
      II. OTHER INFORMATIONItem
      6. Exhibits
                17SIGNATURES
                18


2




PART I. FINANCIAL INFORMATION





Item 1. Financial Statements


GSV,
Inc.


CONDENSED
CONSOLIDATED BALANCE SHEETS – UNAUDITED





March
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                          
                          $
                          108,879
                          
                          
                          $
                          236,402Accounts
      receivable and other current assets
                          
                          
                          36,355
                          
                          
                          
                          29,172Total
      current assets
                          
                          
                          145,234
                          
                          
                          
                          265,574Investments
      in oil and gas wells, net of accumulated depletion of $3,172,725 as
      of March 31, 2009 and $3,159,890 as of December
      31, 2008
                          
                          
                          130,889
                          
                          
                          
                          124,800130,889
                          
                          
                          
                          124,800Total
      assets
                          
                          $
                          276,123
                          
                          
                          $
                          390,374LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                          
                          $
                          105,012
                          
                          
                          $
                          129,148Current
      portion of long-term debt
                          
                          
                          499,466
                          
                          
                          
                          521,551Accrued
      interest
                          
                          
                          97,682
                          
                          
                          
                          90,682Other
      current liabilities
                          
                          
                          30,812
                          
                          
                          
                          30,812Total
      current liabilities
                          
                          
                          732,973
                          
                          
                          
                          772,193STOCKHOLDERS'
      EQUITY (DEFICIENCY IN ASSETS)Series
      B preferred stock, $0.001 par value; 1,500,000 shares authorized, issued,
      and outstanding
                          
                          
                          1,500
                          
                          
                          
                          1,500Series
      C preferred stock, $ 0.001 par value; 200,000 shares authorized, issued
      and outstanding
                          
                          
                          200
                          
                          
                          
                          200Common
      stock, $0.001 par value; 75,000,000 shares authorized; 7,671,303 shares
      issued
                          
                          
                          7,671
                          
                          
                          
                          7,671Additional
      paid-in capital
                          
                          
                          41,048,955
                          
                          
                          
                          41,048,955Treasury
      stock (168,600 shares) - at cost
                          
                          
                          (558,998
                          )
                          
                          
                          (558,998
                          )Accumulated
      deficit
                          
                          
                          (40,956,178
                          )
                          
                          
                          (40,881,147
                          )Total
      stockholders' equity (deficiency in assets)
                          
                          
                          (456,850
                          )
                          
                          
                          (381,819
                          )Total
      liabilities and stockholders' equity
                          
                          $
                          276,123
                          
                          
                          $
                          390,374




The
accompanying notes are an integral part of the financial
statements.


3





GSV,
Inc.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED


For the three months ended March
      31,2009
                    
                    
                    2008Revenues
      from oil and gas investments
                    
                    $
                    3,160
                    
                    
                    $
                    354,543General
      and administrative expenses
                    
                    
                    (68,433
                    )
                    
                    
                    (151,146
                    )Interest
      expense
                    
                    
                    (9,759
                    )
                    
                    
                    (10,583
                    )Gain
      on settlement of indebtedness
                    
                    
                    -
                    
                    
                    
                    23,863NET
      (LOSS) INCOME
                    
                    $
                    (75,032
                    )
                    
                    $
                    216,677Net
      (loss) income per common share:Basic
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.03Diluted
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.02Weighted
      average common sharesBasic
                    
                    
                    7,502,703
                    
                    
                    
                    7,502,703Diluted
                    
                    
                    7,502,703
                    
                    
                    
                    10,285,560


The
accompanying notes are an integral part of the financial
statements


4




GSV,
Inc.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED





For the three months ended March
      31,2009
                            
                            
                            2008OPERATING
      ACTIVITIESNet
      (loss) income
                            
                            $
                            (75,032
                            )
                            
                            $
                            216,677Adjustments
      to reconcile net (loss) income to net cash (used) provided
      by operating activities:Gain
      on settlement of indebtedness
                            
                            
                            -
                            
                            
                            
                            (23,863
                            )Depletion
                            
                            
                            12,835
                            
                            
                            
                            17,872Changes
      in operating assets and liabilities:Account
      receivable and other current assets
                            
                            
                            (7,183
                            )
                            
                            
                            (47,624
                            )Accounts
      payable and other current liabilities
                            
                            
                            (17,136
                            )
                            
                            
                            (40,962
                            )Net
      cash (used) provided by operating activities
                            
                            
                            (86,515
                            )
                            
                            
                            122,100INVESTING
      ACTIVITIES:Investment
      in oil and gas wells
                            
                            
                            (18,924
                            )
                            
                            
                            (34,654
                            )Net
      cash used by investing activities
                            
                            
                            (18,924
                            )
                            
                            
                            (34,654
                            )FINANCING
      ACTIVITIESRepayment
      of long-term debt
                            
                            
                            (22,084
                            )
                            
                            
                            (61,548
                            )Net
      cash used by financing activities
                            
                            
                            (22,084
                            )
                            
                            
                            (61,548
                            )Net
      change in cash
                            
                            
                            (127,524
                            )
                            
                            
                            25,898CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                            
                            
                            236,402
                            
                            
                            
                            398,261CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                            
                            $
                            108,879
                            
                            
                            $
                            424,159SUPPLEMENTAL
      INFORMATIONCash
      paid for interest
                            
                            $
                            1,001
                            
                            
                            $
                            60,216





The
accompanying notes are an integral part of the financial
statements


5





GSV,
INC. AND SUBSIDIARIES


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.
Description of the Business





GSV Inc.
(the “Company”) manages investments in oil and gas wells. The Company currently
is seeking additional related opportunities.





2. Basis
of Presentation





The
accompanying condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for interim financial reporting. Accordingly, certain information and notes
required by accounting principles generally accepted in the United States of
America for complete financial statements are not included. These financial
statements should be read in conjunction with the financial statements and
accompanying notes for the year ended December 31, 2008, included in the
Company’s Annual Report on Form 10-K as filed with the Securities and Exchange
Commission. In the opinion of management, the accompanying financial statements
include all adjustments (consisting primarily of normal recurring accruals) that
the Company considers necessary for a fair presentation of its financial
position, results of operations and cash flows. Results for interim periods are
not necessarily indicative of the results that may be achieved for the full
year.





The
Company has incurred substantial operating losses, resulting in an accumulated
deficit of $40,956,178 as of March 31, 2009. Its current investments are limited
to certain oil and gas producing properties in Louisiana and an interest in
Century Royalty LLC (“Century Royalty”), a Texas limited liability company that
holds interests in oil and gas producing properties in Texas. In recent
periods cash flows provided by the Company’s oil and gas investments have been
sufficient to enable the Company to fund its operating, investing and financing
needs. However, the Company will be required to obtain additional financing to
fund drilling and development and to pay certain indebtedness as it becomes due.
There is no assurance that the Company will be able to obtain additional
adequate financing. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments that may result from the outcome of this
uncertainty.





3. Recent
Accounting Pronouncements












6


4.
Investments in Oil and Gas Wells




Louisiana





The
Company has working interests in two oil and gas wells in Louisiana. In June
2008 the well that had been producing oil and gas started to produce some water,
and by the fourth quarter of 2008 the rising water level had caused production
to decrease significantly. An independent reserve study performed, effective
January 2009, estimated that the remaining reserve in the wells including PDP
and PDNP, net of expenses and discounted at 10%, was $69,050.





Texas





The
Company has interests in certain oil and gas properties in Texas and an
undivided one-third interest in Century Royalty, which manages oil and gas
properties in Texas and Louisiana. Century Royalty also holds the rights to
certain geologic studies. Summary information for these investments
follows:





Friendswood
No. 2 RE





On June
28, 2006, the working interest partnership of which Century Royalty is a member
commenced drilling on Friendswood No. 2 RE and planned to commence drilling on a
second prospect once the first was completed. The costs of drilling these
prospects were expected to exceed Century Royalty’s carried interest in the
working interest partnership. On June 20, 2006, the Company agreed to contribute
a maximum of $100,000 towards the drilling of the first prospect and decrease
its working interest in these two prospects to 11.918%. There has been no change
in the working interest from December 31, 2007 to March 31, 2009.





On
October 5, 2006, the Company announced the successful completion of drilling in
the first prospect, located in Liberty County, Texas. The pipeline tie-in of the
“Friendswood No. 2 RE” gas well was completed successfully in June 2007. On or
about September 14, 2007, efforts to increase the pressure of the flow of gas
from the well were successful and the sale of gas through the pipeline
commenced. On February 4, 2008, fracturing of the well was completed
successfully. On February 21, 2008, the well was put back on line full-time. The
well is currently producing around 150-200 million cubic feet (“Mcf”) of gas a
day. An independent reserve study, effective January 1, 2009, estimated that the
remaining reserve in the well, including PDP and PDNP, net of expenses and
discounted at 10%, was $19,420.





In June
2008, the working interest partnership started to drill a re-entry into an
existing well, targeting some oil sands in the area covered in the East Wilcox
prospect. However, after encountering some old drill bits and other debris in
the hole, it was decided to secure additional financing and then drill a new
well. In 2008, the Company invested approximately $21,000 in this re-entry and
approximately $51,000 in continuing development of this prospect.





In July
2008 the Company received an independent engineering report for the East Wilcox
prospect. According to the report the total reserves in the prospect were
approximately 7.9 billion cubic feet (“bcf”) gross and approximately 660 Mcf net
for the adjusted revenue interest of the Company in this prospect. The prospect
also had a nominal amount of oil. According to the report it might take up to 5
additional wells to tap the reserves. Century Royalty and its partners have been
preparing to commence drilling a second well near “Friendswood No. 2 RE” in the
near future. Based on this report, an asset previously classified as “geological
studies” on the balance sheet was reclassified as “oil and gas wells, net of
accumulated depletion.” Depletion commenced on the reclassified asset of
$2,316,721. An updated report effective as of January 1, 2009 gave the well
significantly lower reserves of 1.42 thousand barrels ("mbbl") of oil and 114.53
Mcf of gas gross and 0.12 mbbl of oil and 9.55 Mcf of gas net for the Company’s
interest. The report estimated that the reserves, net of expenses and discounted
at 10%, were worth $19,420. The reason for the significant reduction was the
lack of success in fracing the well and increasing the flow of
gas.


7





Shirley
Gay No. 1 and Strong No. 1





In
October 2006, the Company granted one of the members of the Texas working
interest partnership the right to drill a well based on the geological seismic
data that Century Royalty holds. In return, the Company received a 2% carried
interest in the proposed well until completion, and a 2% working interest
thereafter. The “Shirley Gay No. 1” well was completed in March 2007. Pipeline
tie-in was completed in February 2008 and sales began shortly thereafter. The
Company started to receive proceeds from these sales in April 2008. An
independent reserve study, effective January 1, 2009, estimated that the
remaining reserve in the wells including PDP and PDNP, net of expenses and
discounted at 10%, was $36,350.





Another
well, “Strong No. 1”, was commenced in June 2008 in the SE Cleveland Prospect in
Liberty County, Texas. After several attempts to perforate the well at different
depths the operator decided not to complete the well and to plug it. The
Company’s working interest share through Century Royalty is 2.00%. The Company
invested $110,946 in this well in 2008.





On June
30, 2008, Cybershop, LLC (“Cybershop”), a wholly owned subsidiary of the
Company, entered into an agreement dated as of June 30, 2008 with B & L Oil
Company, Inc. (“B & L”) and Randall Petroleum Corp. (“Randall”) to amend the
terms of an acquisition agreement dated April 7, 1999, by and among B & L,
Randall and Polystick U.S. Corp. (“Polystick”). (B & L, Randall and
Polystick had formed Century Royalty pursuant to the acquisition agreement and
Cybershop succeeded to Polystick’s interests under the acquisition agreement and
in Century Royalty in 2003.) In the amendment, the parties agreed to terminate
the back-in after payout due B & L and Randall under Article VI of the
acquisition agreement. The parties also agreed that each will have the right to
participate in any prospect generated and proposed in the HLM Project in Liberty
and Montgomery Counties, Texas (except the East Wilcox Prospect, the
“Friendswood No. 2 RE” well, the Nickel Prospect and the “Shirley Gay No. 1”
well), as follows: B & L - an undivided 1/3rd interest; Randall - an
undivided 1/3rd interest; and the Company - an undivided 1/3rd interest.
During
the quarter ended March 31, 2009 the working interest partnership secured leases
to drill additional prospects.The
Company's expenses related to securing leases totaled $57,930 in 2008 and
$18,093 in the quarter ended March 31, 2009.


5. Net
Income Per Common Share





Basic
(loss) or earnings per share is computed by dividing net (loss) income by the
weighted average number of common shares outstanding. Diluted (loss) earnings
per share is computed by dividing net (loss) income by the weighted average
number of common shares and dilutive potential common shares
outstanding.





A summary
of the denominators used to compute basic and diluted (loss) earnings per share
follow:





March 31,2009
                
                
                2008Weighted
      average shares outstanding - used to compute basic earnings per
      share
                
                
                7,502,703
                
                
                
                7,502,703Dilution
      applicable to:Warrant
                
                
                —
                
                
                
                1,142,857Convertible
      note payable
                
                
                —
                
                
                
                386,097Series
      B Preferred Stock
                
                
                —
                
                
                
                1,500,000Series
      C Preferred Stock
                
                
                —
                
                
                
                200,000Weighted
      average shares outstanding - used to compute diluted earnings per
      share
                
                
                7,502,703
                
                
                
                10,731,657





6.
Amendment of Note Issued to Brooks Station Holdings, Inc.





On April
16, 2009, the Company and Brooks Station Holdings, Inc. (“Brooks Station”)
entered into an agreement dated April 16, 2009 (the “Waiver and Extension
Agreement”), pursuant to which the Company and Brooks Station agreed to amend
and restate the terms of an amended and restated 8% promissory note in the
principal amount of $150,000 (the “Second Amended and Restated Note”) in the
form of a substitute note (the “Third Amended and Restated Note”) dated as of
March 1, 2009. Pursuant to the Waiver and Extension Agreement, Brooks Station
agreed to extend the maturity date of the Second Amended and Restated Note from
March 1, 2009, to September 1, 2009, and to waive any claim against the Company
or its assets arising from the Company’s failure to repay the Second Amended and
Restated





8




Note on
the maturity date. Also, pursuant to the Waiver and Extension Agreement, the
Company and Brooks Station agreed to amend a security agreement between them to
provide that Brooks Station’s security interest in the Company’s assets would
continue to support the Company’s obligations under the Third Amended and
Restated Note.





Contemporaneously
with the execution of the Waiver and Extension Agreement, GSV paid Brooks
Station $10,000 of the principal balance of the Second Amended and Restated
Note, thus reducing the outstanding principal balance of the Third Amended and
Restated Note to $140,000. As of March 31, 2009, the accrued and unpaid interest
of the Third Amended and Restated Note was $18,778.





7. Income
Taxes





Income
tax benefits for 2009 have been fully offset by an increase in the related
deferred income tax asset valuation allowance because they are not expected to
be realized.  Income taxes otherwise required to be provided for 2008
have been eliminated as a result of net operating loss carryover benefits
realized.


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. 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
written these investments down to $0 to more accurately reflect current market
valuations.





We hold
working interests in two oil and gas wells in the state of Louisiana. An
independent reserve study, effective January 2009, estimated that the remaining
reserve in the wells, including PDP and PDNP, net of expenses and discounted at
10%, was $69,050. In June 2008 the well that had been producing oil and gas
started to produce some water, and by the fourth quarter of 2008 the rising
water level had caused production to decrease significantly.





Through
our subsidiary Cybershop, LLC, a New Jersey limited liability company
(“Cybershop”), we own interests in certain oil and gas properties in Texas and
an interest in Century Royalty LLC (“Century Royalty”), a Texas limited
liability company that manages the oil and gas properties in Texas. Cybershop
also holds a portion of our interests in the oil and gas wells in Louisiana and
Century Royalty also holds the rights to certain geologic studies. Century
Royalty was a member of a working interest partnership that identified several
prospects derived from the geological studies and was working towards drilling
these prospects. Century Royalty had a carried interest with this partnership of
20% for the first well drilled in the first 5 prospects or $1.25 million of
investment, whichever came first. Century Royalty continues to have a 20%
participation interest in all subsequent wells drilled in the first 5 prospects.
As these joint interest partnership agreements have expired, they relate only to
prospects for which leases had already been taken and not expired at the time
the agreements expired. Due to the existence of these revenue overrides, the
operations of Century Royalty are included in the accompanying statements of
income.





On June
28, 2006, the working interest partnership of which Century Royalty was a member
commenced drilling on one of the prospects and planned to drill on a second
prospect once the first was completed. The costs of drilling these prospects
were expected to exceed Century Royalty’s carried interest in the working
interest partnership. On June 20, 2006, we agreed to contribute a maximum of
$100,000 towards the drilling of these two prospects and decrease our working
interest in these two prospects to 11.918%.





On
October 5, 2006, we announced the successful completion of drilling in the first
prospect, located in Liberty County, Texas. The pipeline tie-in of the
“Friendswood No. 2 RE” gas well was completed successfully in June 2007. On or
about September 14, 2007, efforts to increase the pressure of the flow of gas
from the well were successful and the sale of gas through the pipeline
commenced. On February 4, 2008, we successfully completed fracing of the well.
On February 21, 2008, the well was put back on line full-time. It is currently
producing around 150-200 million cubic feet (“Mcf”) of gas per day, up from
about 60 Mcf per day prior to fracing. The well continues to produce a small
amount of water, up to about 20 bbls per day.





In June
2008, the working interest partnership started to drill a re-entry into an
existing well, targeting some oil sands in the area covered in the East Wilcox
prospect. However after encountering some old drill bits and other debris in the
hole, it was decided to secure additional financing and then drill a new well.
We invested about $21,000 in this re-entry and approximately $51,000 in
continuing development of this prospect in 2008.





Cybershop
entered into an agreement dated as of June 30, 2008, with B & L and Randall
Petroleum Corp. to amend the terms of an acquisition agreement dated April 7,
1999, by and among B & L, Randall and Polystick U.S. Corp. (“Polystick”). (B
& L, Randall and Polystick had formed Century Royalty pursuant to the
acquisition agreement and Cybershop succeeded to Polystick’s interests under the
acquisition agreement and in Century Royalty in 2003.) In the amendment, the
parties agreed to terminate the back-in after payout due B & L and Randall
under Article VI of the acquisition agreement. The parties also agreed that each
will have the right to participate in any prospect generated and proposed in the
HLM Project in Liberty and Montgomery Counties, Texas (except the East Wilcox
Prospect, the “Friendswood No. 2 RE” well, the Nickel Prospect and the “Shirley
Gay No. 1” well), as follows: B & L - an undivided 1/3rd interest; Randall -
an undivided 1/3rd interest; and GSV - an undivided 1/3rd interest.





In July
2008 we received an independent engineering report for the East Wilcox prospect.
According to the report the total reserves in the prospect were approximately
7.9 billion cubic feet (“bcf”) gross and approximately 660 Mcf net for our
adjusted revenue interest in this prospect. The prospect also had a nominal
amount of oil. According to the report it might take up to 5 additional wells to
tap the reserves. Century Royalty and its partners have been preparing to
commence drilling a second well near “Friendswood No. 2 RE” in the near future.
Based on this report, an asset previously classified as “geological studies” on
the balance sheet was reclassified as “oil and gas wells, net of accumulated
depletion.” Depletion has commenced on the reclassified asset of $2,316,721. An
updated report effective as of January 1, 2009 gave the well significantly lower
reserves of 1.42 mbbl of oil and 114.53 Mcf of gas gross and 0.12 mbbl of oil
and 9.55 Mcf of gas net for our interest. The report estimated that the
reserves, net of expenses and discounted at 10%, were worth $19,420. The reason
for the significant reduction was the lack of success in fracing the well and
increasing the flow of gas.


10





In
October 2006, we granted one of the members of the Texas working interest
partnership the right to drill a well based on the geological seismic data that
Century Royalty holds. In return, we received a 2% carried interest in the
proposed well until completion, and a 2% working interest thereafter. The
“Shirley Gay No. 1” well was completed in the beginning of March 2007. Pipeline
tie-in was completed in February 2008 and sales began shortly thereafter. We
started to receive proceeds from these sales in April 2008. According to an
independent engineering report effective as of January 1, 2009, the reserves in
the well are 13.88 mbbl of oil and 438.5 Mcf of gas gross and 0.21 mbbl of oil
and 6.58 Mcf of gas net for our adjusted revenue interest in the prospect. The
report estimated that the reserves, net of expenses and discounted at 10%, were
worth $36,350.





Another
well, “Strong No. 1”, was commenced in June 2008 in the SE Cleveland Prospect in
Liberty County, Texas. Our working interest share through Century Royalty is
2.00%. After several attempts to perforate the well at different depths the
operator decided not to complete the well and to plug it. We invested $110,946
in this well in 2008.





Our
management has little practical experience in the oil and gas industry. Our
management relies to a great extent on the employees of Century Royalty to
monitor and implement strategy with respect to our oil and gas assets. Our
management’s inexperience may detrimentally affect our operations and results
because, for example, it could prevent us from taking advantage of opportunities
that arise on a timely basis or cause us to take actions that a more experienced
management team might determine are not in our best interests. We are currently
seeking to engage additional professional managers to assist in extracting value
from the properties.





Our
principal stockholder is Polystick, which holds 1,500,000 shares of our Series B
convertible 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. Polystick has the right to elect two additional persons to our
board of directors but has not yet done so.





Each
share of Series B convertible preferred stock is convertible at any time at the
holder’s option into a number of shares of common stock equal to $1.00 divided
by the conversion price then in effect. The terms upon which the Series B
convertible preferred stock may be converted into common stock are set forth in
the Certificate of Designations, Preferences and Rights of Series B convertible
preferred stock filed by the Company with the Secretary of State of the State of
Delaware on July 18, 2003 (“Series B Certificate of Designations”). As of April
30, 2009, the Series B convertible preferred stock owned by Polystick was
convertible into 1,500,000 shares of common stock.





No
dividends are payable on the Series B convertible preferred stock, except that
in the event dividends are declared with respect to the common stock each holder
of shares of Series B convertible preferred stock will be entitled to receive an
amount equal to the amount of dividends that would have been paid on the shares
of common stock issuable upon conversion of such shares of Series B convertible
preferred stock had such shares of Series B convertible preferred stock been
converted into common stock immediately before the dividend was
declared.





Upon any
Liquidation Event, as defined in the Series B Certificate of Designations, the
holders of the outstanding Series B convertible preferred stock will be
entitled, before any distribution or payment is made to any holder of common
stock or any other Junior Stock (as defined in the Series B Certificate of
Designations), to be paid an amount equal to $1.00 per share plus the amount of
any declared and unpaid dividends thereon. If upon any Liquidation Event our net
assets distributable among the holders of the Series B convertible preferred
stock are insufficient to permit the payment in full of such preferential amount
to the holders of the Series B convertible preferred stock, then our net assets
will be distributed ratably among the holders of the Series B convertible
preferred stock in proportion to the amounts they otherwise would have been
entitled to receive.





The
Series B Certificate of Designations provides that so long as any shares of
Series B convertible preferred stock are outstanding, we will not, without the
written approval of the holders of at least a majority of the then-outstanding
Series B convertible preferred stock, increase the maximum number of directors
constituting our board of directors to more than seven. The Series B Certificate
of Designations also provides that, so long as any shares of Series B
convertible preferred stock are outstanding, the holders of the Series B
convertible preferred stock, voting separately as a class, will be entitled to
designate and elect three of the members of our board of directors. Also, a
vacancy in any directorship elected by the holders of the Series B convertible
preferred stock may be filled only by vote or written consent of the
holders of at least a majority of the then outstanding shares of Series B
convertible preferred stock. The Series B convertible preferred stock has no
other voting rights except as provided by applicable law.





11




On
January 3, 2006, we entered into a Termination, Settlement and Release Agreement
with 116 Newark Avenue Corporation (“116 Newark”), dated as of November 30,
2005, pursuant to which we agreed to terminate the lease for our former offices
in Jersey City, New Jersey. Under the terms of the agreement, we paid 116 Newark
$70,000 in cash, issued a promissory note in the principal amount of $356,249.04
and 200,000 shares of Series C preferred stock to 116 Newark and reimbursed 116
Newark for $10,000 of its legal fees. The promissory note bears interest at a
rate of 7% per annum and is secured by a pledge agreement between Polystick and
116 Newark pursuant to which Polystick has pledged 356,249 shares of our Series
B convertible preferred stock that it holds to 116 Newark. On January 9, 2008,
we entered into an agreement, dated as of January 3, 2008, with 116 Newark to
amend and restate the terms of the promissory note. Pursuant to the agreement,
we paid all accrued and unpaid interest on the promissory note through the date
of the agreement, and the original note was amended and restated in a substitute
note with a maturity date of December 20, 2009. We agreed to pay the substitute
note’s outstanding principal balance of $356,249.04 in 24 consecutive monthly
installments of $14,843.71, each payable on or before the 20th day of the month,
beginning in January 2008. The substitute note will not accrue interest, except
that if any monthly installment is not received by 116 Newark within ten days of
its applicable monthly installment date (the “Trigger Date”) then (i) interest
at the rate of 7% per annum shall be deemed to have begun to accrue from the
date of the agreement on the then unpaid principal balance of the substitute
note, and shall continue to accrue until all principal and accrued interest on
the substitute note is paid in full; (ii) all interest that is accrued and
unpaid as of the Trigger Date shall be immediately due and payable on the
Trigger Date; and (iii) with each monthly installment following the Trigger
Date, we will pay all then accrued and unpaid interest on the unpaid principal
balance of the substitute note through the relevant monthly installment date.
Payment and performance under the substitute note has been guaranteed by
Polystick and secured by a pledge agreement between Polystick and 116 Newark
pursuant to which Polystick has pledged 356,249 shares of our Series B
convertible preferred stock to 116 Newark. We have not made any installment
payments on the substitute note following the installment payment that was due
on or before January 20, 2009. We are negotiating with 116 Newark to restructure
this obligation.





Each
share of Series C preferred stock is convertible at any time into a number of
shares of common stock equal to $1.00 divided by the conversion rate then in
effect. The terms upon which the Series C convertible preferred stock may be
converted into common stock are set forth in the Certificate of Designations,
Preferences and Rights of Series C convertible preferred stock filed by the
Company with the Secretary of State of the State of Delaware on January 3, 2006
(“Series C Certificate of Designations”). As of April 30, 2009, the Series C
convertible preferred stock owned by 116 Newark was convertible into 200,000
shares of common stock.





No
dividends are payable on the Series C convertible preferred stock.





Upon any
Liquidation Event, as defined in the Series C Certificate of Designations, the
holders of the outstanding Series C convertible preferred stock will be
entitled, before any distribution or payment is made to any holder of common
stock or any other Junior Stock (as defined in the Series C Certificate of
Designations), to be paid an amount equal to $1.00 per share. If upon any
Liquidation Event our net assets distributable among the holders of the Series C
convertible preferred stock are insufficient to permit the payment in full of
such preferential amount to the holders of the Series C convertible preferred
stock, then our net assets will be distributed ratably among the holders of the
Series C convertible preferred stock in proportion to the amounts they otherwise
would have been entitled to receive.





The
Series C Certificate of Designations provides that so long as any shares of
Series C convertible preferred stock are outstanding, we will not, without the
written approval of the holders of at least a majority of the then-outstanding
Series C convertible preferred stock, (i) issue any additional shares of Series
C convertible preferred stock, or (ii) issue any Senior Stock or Parity Stock
(as such terms are defined in the Series C Certificate of Designations), unless
such Senior Stock or Parity Stock is to be issued in exchange for (A) cash or
services rendered or to be rendered by parties who are not Affiliates (as
defined in the Series C Certificate of Designations) of the Company, in either
case having a value greater than the aggregate liquidation preference of such
Senior Stock or Parity Stock, or (B) equity securities or assets of one or more
businesses that are not Affiliates of the Company, in either case having a value
that is equal to or greater than the aggregate liquidation preference of such
Senior Stock or Parity Stock. The Series C convertible preferred stock has no
other voting rights except as provided by applicable law.





Results
of Operations





Three
Months Ended March 31, 2009 compared to Three Months Ended March 31,
2008





Revenues:
Revenues for the quarter decreased by $351,383 or 99.1%, to $3,160 in 2008 from
$354,543 in 2008. This decrease was due to the decrease in production from the
Louisiana well and a decrease in oil and gas prices.


12





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 $82,713 or
54.7%, to $68,433 in the quarter ended March 31, 2009, from $151,146 in the
quarter ended March 31, 2008, primarily as a result of a decrease in fees for
legal, accounting and consulting services and a decrease in
depletion.




Interest
expense: Interest expense for the quarter ended March 31, 2009, was $9,759 and
for the quarter ended March 31, 2008 was $10,583. The decrease is a result of
the reduction in outstanding debt.




Net Loss:
Net loss increased by $291,709 from net income of $216,677 in the first quarter
of 2008, or $0.03 per basic and diluted common share, to net loss of $75,032 in
the first quarter of 2009, or $(0.01) per basic and diluted common share. 
The change was due to the decrease in revenues.





Income
taxes otherwise required to be provided for all periods presented have been
eliminated as a result of net operating loss carryover benefits
realized.





Liquidity
and Capital Resources





Net cash
provided by operations decreased by $208,615, from $122,100 for the three months
ended March 31, 2008, to $(86,515) for the three months ended March 31, 2009.
The decrease was due primarily to a decrease in revenues from the
wells.





Net cash
used by investing activities during the three months ended March 31, 2009, was
$18,924, as compared to $34,654 in the corresponding period of the prior year.
The decrease relates to a lower amount of investments in Texas
wells.





Net cash
used by financing activities during the three months ended March 31, 2009, was
$22,084, as compared to $61,548 used by financing activities in the same period
of the prior year. The decrease was a result of lower repayment of
debt.





On April
16, 2009, we entered into an agreement dated April 16, 2009 (the “Waiver and
Extension Agreement”) with Brooks Station Holdings, Inc. (“Brooks Station”)
pursuant to which we and Brooks Station agreed to amend and restate the terms of
an amended and restated 8% promissory note in the principal amount of $150,000
(the “Second Amended and Restated Note”) in the form of a substitute note (the
“Third Amended and Restated Note”) dated as of March 1, 2009. Pursuant to the
Waiver and Extension Agreement, Brooks Station agreed to extend the maturity
date of the Second Amended and Restated Note from March 1, 2009, to September 1,
2009, and to waive any claim against us or our assets arising from our failure
to repay the Second Amended and Restated Note on the maturity date. Also,
pursuant to the Waiver and Extension Agreement, we and Brooks Station agreed to
amend a security agreement between us to provide that Brooks Station’s security
interest in our assets would continue to support our obligations under the Third
Amended and Restated Note.





Contemporaneously
with the execution of the Waiver and Extension Agreement, we paid Brooks Station
$10,000 of the principal balance of the Second Amended and Restated Note, thus
reducing the outstanding principal balance of the Third Amended and Restated
Note to $140,000. As of March 1, 2009, the accrued and unpaid interest of the
Third Amended and Restated Note was $18,778. The Third Amended and Restated Note
provides that upon the occurrence of an event of default, all amounts remaining
unpaid on the Third Amended and Restated Note shall become immediately due and
payable. Events of default include our application for appointment of a
receiver, our admission in writing of our inability to pay our debts as they
become due, our making of a general assignment for the benefit of creditors, the
filing against us of an involuntary petition in bankruptcy or other insolvency
proceeding, or a petition or an answer seeking reorganization or an arrangement
with creditors, our filing of an application for judicial dissolution or the
entry of an order, judgment or decree by any court of competent jurisdiction
approving a petition seeking reorganization of our company or all or a
substantial part of our properties or assets or appointing a receiver, trustee
or liquidator for our company.





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.


13





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.





Since the
date we originally issued the note and warrant to Emerald, we entered into a
series of agreements with Emerald extending the maturity date of the note and
the expiration date of the warrant. Most recently, on July 1, 2008, we entered
into an agreement dated as of May 10, 2008 pursuant to which we and Emerald
agreed to further extend and renew the note and warrant. Under the terms of the
agreement, the original note was amended and restated in a substitute note with
a maturity date of July 10, 2009 and the original warrant was amended and
restated in a substitute warrant with an expiration date of May 10, 2009. The
substitute note bears interest at the rate of 8% per annum, payable quarterly in
arrears. On May 10, 2008, there was $64,000 of interest accrued on the
substitute note. Principal and accrued interest on the substitute note is
convertible at a price of $.70 per share at any time prior to July 10, 2009. The
substitute note provides that if the principal and interest due on the maturity
date is not paid, the substitute note will bear interest at a default rate of
12% per annum. Upon the occurrence of an event of default, Emerald may, at its
sole option, declare the entire principal amount of the substitute note and any
interest due thereon immediately due and payable. Events of default include
failure to pay the principal amount on the maturity date or any interest when
due, commencement by us or against us of any proceeding or other action relating
to bankruptcy or reorganization, our breach or failure to perform or observe any
obligation contained in the substitute note, the purchase agreement or
substitute warrant or our failure to ensure that any conversion of the
substitute note is effected upon request. Payment and performance under the
substitute note continues to be guaranteed by Polystick and secured by a pledge
agreement between Polystick and Emerald pursuant to which Polystick has pledged
200,000 shares of our Series B convertible preferred stock to
Emerald.





On
January 3, 2006, we entered into a Termination, Settlement and Release Agreement
with 116 Newark Avenue Corporation, dated as of November 30, 2005, pursuant to
which we agreed to terminate the lease for our former offices in Jersey City,
New Jersey. Under the terms of the agreement, we paid 116 Newark $70,000 in
cash, issued a promissory note in the principal amount of $356,249.04 and
200,000 shares of Series C convertible preferred stock to 116 Newark and
reimbursed 116 Newark for $10,000 of its legal fees. The promissory note matured
on November 29, 2007 and bore interest at a rate of 7% per annum. Payment and
performance under the promissory note was guaranteed by Polystick and secured by
a pledge agreement between Polystick and 116 Newark pursuant to which Polystick
pledged 356,249 shares of our Series B convertible preferred stock that it holds
to 116 Newark. 116 Newark has the right to include any shares of common stock
received upon conversion of the Series C convertible preferred stock and upon
conversion of the pledged shares as part of any registration statement that we
may file in connection with any public offering of our securities (excluding
registration statements on Forms S-4 and S-8). On January 9, 2008, we entered
into an agreement, dated as of January 3, 2008, with 116 Newark to amend and
restate the terms of the promissory note. Pursuant to the agreement, we paid all
accrued and unpaid interest on the promissory note through the date of the
agreement, and the original note was amended and restated in a substitute note
with a maturity date of December 20, 2009. We agreed to pay the substitute
note’s outstanding principal balance of $356,249.04 in 24 consecutive monthly
installments of $14,843.71, each payable on or before the 20th day of the month,
beginning in January 2008. The substitute note will not accrue interest, except
that if any monthly installment is not received by 116 Newark within ten days of
its applicable monthly installment date (the “Trigger Date”) then (i) interest
at the rate of 7% per annum shall be deemed to have begun to accrue from the
date of the agreement on the then unpaid principal balance of the substitute
note, and shall continue to accrue until all principal and accrued interest on
the substitute note is paid in full; and (ii) all interest that is accrued and
unpaid as of the Trigger Date shall be immediately due and payable on the
Trigger Date; and (iii) with each monthly installment following the Trigger
Date, we will pay all then accrued and unpaid interest on the unpaid principal
balance of the substitute note through the relevant monthly installment date.
Payment and performance under the substitute note has been guaranteed by
Polystick and secured by a pledge agreement between Polystick and 116 Newark
pursuant to which Polystick has pledged 356,249 shares of our Series B
convertible preferred stock to 116 Newark. We have not made any installment
payments on the substitute note following the installment payment that was due
on or before January 20, 2009. We are negotiating with 116 Newark to restructure
this obligation.





We
believe that our existing capital resources will enable us to maintain our
operations at existing levels for at least the next 3 months, assuming that we
can extend the maturities of the notes we issued to Brooks Station and Emerald
beyond the next 12 months and renegotiate the note we issued to 116 Newark.
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. If we are unable to obtain additional
financing, when needed, it would have a material adverse effect on our business,
financial condition and operating results.





14





Critical
Accounting Policies and Use of Estimates





The
Company’s discussion and analysis of financial condition and results of
operations are based on the condensed financial statements. The preparation of
these financial statements requires the Company to make estimates and judgments
that affect the amounts reported in them. The Company’s critical accounting
policies and estimates include those related to oil and natural gas activities,
full cost method, proved oil and natural gas reserves, depletion reserves,
future development and abandonment costs, asset retirement obligations, and
valuation of investment in non-publicly traded companies. The Company bases its
estimates on historical experience and on various other assumptions that
management believes to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions. For
additional information about the Company’s critical accounting policies and
estimates, see Note 2 to the financial statements included in the Company’s Form
10-K for the year ended December 31, 2008. There were no significant changes in
critical accounting policies and estimates during the three months ended March
31, 2009.




New
accounting pronouncements and the Company’s assessment of their impact on the
financial statements are disclosed in Note 2 to the notes to consolidated
financial statements contained herein.





Off-Balance
Sheet Arrangements





We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future material effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.





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-K for the year ended December 31, 2008.





Item
4T. Controls and Procedures





Evaluation of Disclosure Controls
and Procedures. Our management, including our chief executive officer and
chief financial officer, evaluated the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that
evaluation, our management, including our chief executive officer and chief
financial officer, concluded that our disclosure controls and procedures as of
the end of the period covered by this report were effective such that the
information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and (ii) accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding
disclosure. A controls system cannot provide absolute assurance, however, that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.


15





Changes in Internal Control over
Financial Reporting. There has been no change in our internal control
over financial reporting, known to the chief executive officer and chief
financial officer, that occurred during the quarter ended March 31, 2009, that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.


16


PART
II. OTHER INFORMATION





Item
6. Exhibits




Exhibit No.
              
              Description31.1
              
              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.


17





SIGNATURES





In
accordance with the requirements of the Exchange Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Date:
      May 15, 2009By:
              /s/ Gilad GatGilad
      Gat
                Chief
      Executive Officer
                (principal
      executive officer)
                Chief
      Financial Officer
                (principal financial and accounting officer)


18





EXHIBIT INDEX




Exhibit No.
              
              Description31.1
              
              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.


19