**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 June 30, 2008




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 ororganization)
            
            (I.R.S.
                Employer Identification No.)





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





**(203)
      221-2690**


(Registrant’s
      telephone number, including area code)





**N/A**


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




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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, 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 registrant’s classes of common
      stock, as of the latest practicable date: As of August 5, 2008, there were
      7,502,703 shares of common stock outstanding, excluding 168,592 shares held
      in
      treasury.





**GSV,
      INC. AND SUBSIDIARIES**




**INDEX
      TO FORM 10-Q**





Page
              NumberPART
                I. FINANCIAL INFORMATION
            3Item
                1. Financial Statements (unaudited):
            3Condensed
                Consolidated Balance Sheets at June 30, 2008 and December 31,
                2007
            3Condensed
                Consolidated Statements of  Income for the Six Months and Three
                Months ended June 30, 2008 and 2007
            4Condensed
                Consolidated Statements of Cash Flows for the Six Months ended June
                30,
                2008 and 2007
            6Notes
                to Unaudited Condensed Consolidated Financial Statements
            7Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            11Item
                4T. Controls and Procedures
            19PART
                II. OTHER INFORMATION
            20Item
                6. Exhibits
            20SIGNATURES
            21





2





**PART
      I. FINANCIAL INFORMATION**




**Item
      1. Financial Statements**


**GSV,
        Inc.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS - UNAUDITED**
 June
                      30,
                    2008
                  
                  December
                      31,
                    2007ASSETSCURRENT
                      ASSETSCash
                      and cash equivalents
                  
                  $
                  545,803
                  
                  $
                  398,261Accounts
                      receivable and other current assets
                  
                  
                  270,503
                  
                  
                  170,094Total
                      current assets
                  
                  
                  816,306
                  
                  
                  568,355INVESTMENTS:Internet
                      related
                  
                  
                  50,000
                  
                  
                  50,000Oil
                      and gas wells, net of accumulated depletion
                    of$1,017,474
                      at June 30, 2008 and $977,225 at December 31,
                      2007
                  
                  
                  2,426,996
                  
                  
                  45,578Geologic
                      studies
                  
                  
                  —
                  
                  
                  2,316,7212,476,996
                  
                  
                  2,412,299Total
                      assets
                  
                  $
                  3,293,303
                  
                  $
                  2,980,654LIABILITIES
                      AND STOCKHOLDERS' EQUITYCURRENT
                      LIABILITIESAccounts
                      payable
                  
                  $
                  67,306
                  
                  $
                  98,030Current
                      portion of long-term debt
                  
                  
                  326,193
                  
                  
                  558,125Other
                      current liabilities
                  
                  
                  125,966
                  
                  
                  106,352Accrued
                      interest
                  
                  
                  76,483
                  
                  
                  121,899Total
                      current liabilities
                  
                  
                  595,948
                  
                  
                  884,405LONG-TERM
                      DEBT, LESS CURRENT PORTION
                  
                  
                  283,097
                  
                  
                  178,125Total
                      liabilities
                  
                  
                  879,045
                  
                  
                  1,062,530STOCKHOLDERS'
                      EQUITYSeries
                      B preferred stock: $0.001 par value; 1,500,000
                  
                  
                  1,500
                  
                  
                  1,500shares
                      authorized, issued andoustandingSeries
                      C preferred stock: $ 0.001 par value; 200,000
                  
                  
                  200
                  
                  
                  200shares
                      authorized, issued and outstandingCommon
                      stock: $0.001 par value; 75,000,000 shares
                  
                  
                  7,671
                  
                  
                  7,671authorized;
                      7,671,303 shares issued and outstandingAdditional
                      paid-in capital
                  
                  
                  41,048,955
                  
                  
                  41,048,955Treasury
                      stock (168,592 shares) - at cost
                  
                  
                  (558,998
                  )
                  
                  (558,998
                  )Accumulated
                      deficit
                  
                  
                  (38,085,070
                  )
                  
                  (38,581,204
                  )Total
                      stockholders' equity
                  
                  
                  2,414,257
                  
                  
                  1,918,124Total
                      liabilities and stockholders' equity
                  
                  $
                  3,293,303
                  
                  $
                  2,980,654
  The
          accompanying notes are an integral part of the financial
          statements.
  3
 
 **GSV,
        Inc.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED**
 
 For
                  the six months ended June 30,2008
              
              2007Revenues
                  from oil and gas investments
              
              $
              812,692
              
              $
              355,112General
                  and administrative expenses
              
              
              319,656
              
              
              241,556Income from
                  operations
              
              
              493,036
              
              
              113,556Interest
                  expense
              
              
              (20,766
              )
              
              (28,469
              )Gain on settlement of indebtedness
              
              
              23,863
              
              
              —NET
                  INCOME
              
              $
              496,133
              
              $
              85,087Net
                  income per common share:Basic
              
              $
              0.07
              
              $
              0.01Diluted
              
              $
              0.05
              
              $
              0.01Weighted
                  average common sharesBasic
              
              
              7,502,703
              
              
              7,502,703Diluted
              
              
              10,285,560
              
              
              10,285,560
 The
          accompanying notes are an integral part of the financial
          statements.
  4
 
 **GSV,
        Inc.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED**
 
 For
                  the three months ended June 30,2008
              
              2007Revenues
                  from oil and gas investments
              
              $
              458,149
              
              $
              204,969General
                  and administrative expenses
              
              
              179,742
              
              
              129,402Income
                  from operations
              
              
              278,407
              
              
              75,567Interest
                  expense
              
              
              (10,183
              )
              
              (14,234
              )NET
                  INCOME
              
              $
              268,224
              
              $
              61,333Net
                  income per common share:Basic
              
              $
              0.04
              
              $
              0.01Diluted
              
              $
              0.03
              
              $
              0.01Weighted
                  average common shares outstanding:Basic
              
              
              7,502,703
              
              
              7,502,703Diluted
              
              
              10,285,560
              
              
              10,285,560
 The
          accompanying notes are an integral part of the financial
          statements.
  5
 
 **GSV,
        Inc.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED**
 
 For
                  the six months ended June 30,2008
              
              2007OPERATING
                  ACTIVITIESNet
                  income
              
              $
              496,133
              
              $
              85,087Adjustments
                  to reconcile net incometo
                  net cash flows provided by operating activities:Depreciation
              
              
              —
              
              
              1,500Gain
                on settlement
                of indebtedness
              
              
              (23,863
              )
              
              —Depletion
              
              
              40,251
              
              
              88,752Changes
                  in operating assets and liabilitiesAccount
                  receivable and other current assets
              
              
              (100,409
              )
              
              (80,719
              )Accounts
                  payable and other current liabilities
              
              
              (56,526
              )
              
              80,364Net
                  cash provided by operating activities
              
              
              355,586
              
              
              174,985INVESTING
                  ACTIVITIESInvestments
                  in oil and gas wells
              
              
              (104,948
              )
              
              (22,813
              )Net
                  cash used by investing activities
              
              
              (104,948
              )
              
              (22,813
              )FINANCING
                  ACTIVITIESRepayment
                  of long-term debt
              
              
              (103,096
              )
              
              —Net
                  cash used by financing activities
              
              
              (103,096
              )
              
              —Net change
                  in cash
              
              
              147,542
              
              
              152,172CASH
                  AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              398,261
              
              
              38,260CASH
                  AND CASH EQUIVALENTS, END OF YEAR
              
              $
              545,803
              
              $
              190,432SUPPLEMENTAL
                  INFORMATIONCash
                  paid for interest
              
              $
              60,216
              
              $
              —
 The
          accompanying notes are an integral part of the financial
          statements.


6





**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. The Company
      also has limited internet related investments.





2.
      Basis
      of Presentation





The
      accompanying condensed consolidated financial statements have been prepared
      pursuant to the rules and regulations of the Securities and Exchange Commission
      for interim financial reporting. Accordingly, certain information and notes
      required by accounting principles generally accepted in the United States of
      America for complete financial statements are not included. These financial
      statements should be read in conjunction with the financial statements and
      accompanying notes for the year ended December 31, 2007, included in the
      Company’s Annual Report on Form 10-KSB as filed with the Securities and Exchange
      Commission. In the opinion of management, the accompanying financial statements
      include all adjustments (consisting primarily of normal recurring accruals)
      that
      the Company considers necessary for a fair presentation of its financial
      position, results of operations and cash flows. Results for interim periods
      are
      not necessarily indicative of the results that may be achieved for the full
      year.





The
      Company has incurred substantial operating losses, resulting in an accumulated
      deficit of $38,085,070 as of June 30, 2008. 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




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value,
      establishes a framework for measuring the fair value of assets and liabilities,
      and expands disclosure requirements regarding the fair value measurement. SFAS
      157 does not expand the use of fair value measurements. This statement, as
      issued, is effective for financial statements issued for fiscal years beginning
      after November 15, 2007, and interim periods within those fiscal years. FASB
      Staff Position (“FSP”) FAS No. 157-2 was issued in February 2008 and deferred
      the effective date of SFAS 157 for nonfinancial assets and liabilities to fiscal
      years beginning after November 2008. As such, the Company adopted SFAS 157
      as of
      January 1, 2008 for financial assets and liabilities only. There was no
      significant effect on the Company’s financial statements. The Company does not
      believe that the application of SFAS 157 to non-financial assets and liabilities
      will significantly affect its financial statements.


7




In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for
      Financial Assets and Liabilities—including an amendment of FASB Statement
      No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value
      accounting but does not affect existing standards which require assets or
      liabilities to be carried at fair value. The objective of SFAS 159 is to
      improve financial reporting by providing companies with the opportunity to
      mitigate volatility in reported earnings caused by measuring related assets
      and
      liabilities differently without having to apply complex hedge accounting
      provisions. Under SFAS 159, a company may elect to use fair value to
      measure eligible items at specified election dates and report unrealized gains
      and losses on items for which the fair value option has been elected in earnings
      at each subsequent reporting date. Eligible items include, but are not limited
      to, accounts receivable, accounts payable, and issued debt. If elected,
      SFAS 159 is effective for fiscal years beginning after November 15,
      2007. The Company has not elected to measure any additional assets or
      liabilities at fair value that are not already measured at fair value under
      existing standards.




As
      of
      June 30, 2008, the Company’s financial assets included an investment in an
      internet related company. This investment is carried at cost and reviewed
      periodically for impairment. In connection therewith, fair value is estimated
      under FAS 157 based on third party valuation models (i.e., Level 2 as defined
      under SFAS 157) and compared to cost. There was no impairment loss during the
      quarter ended June 30, 2008.




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations *”* (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements
      for how an acquirer recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, any non-controlling
      interest in the acquiree and the goodwill acquired. SFAS 141(R) also
      establishes disclosure requirements to enable the evaluation of the nature
      and
      financial effects of the business combination. SFAS 141(R) is effective for
      fiscal years beginning after December 15, 2008. The Company will apply the
      provisions of SFAS 141(R) to any acquisition after January 1, 2009.




In
      December 2007, the FASB issued SFAS No. 160, “Accounting for Noncontrolling
      Interests.” SFAS 160 clarifies the classification of noncontrolling interests in
      consolidated balance sheets and reporting transactions between the reporting
      entity and holders of noncontrolling interests. Under this statement,
      noncontrolling interests are considered equity and reported as an element of
      consolidated equity. Further, net income encompasses all consolidated
      subsidiaries with disclosure of the attribution of net income between
      controlling and noncontrolling interests. SFAS No. 160 is effective
      prospectively for fiscal years beginning after December 15, 2008. Currently,
      there are no noncontrolling interests in any of the Company’s
      subsidiaries.


8




4.
      Investments




Internet
      Related




The
      Company has made investments in four internet-related companies that have been
      accounted for using the cost method. Such investments are reviewed periodically
      for impairment. Impaired investments have been written down to a nominal amount.




Louisiana
      Oil and Gas Wells




The
      Company has working interests in two oil and gas wells in Louisiana. An
      independent reserve study, effective January 2008, estimated that the remaining
      reserve in the wells including PDP and PDNP, net of expenses and discounted
      at
      10%, was $985,829. In June 2008 the well that had been producing oil and gas
      started to produce some water, and production of oil and gas from the well
      has
      fallen as a result. In
      any
      event, the Company fully expects to recover the carrying value of this
      asset.




Texas
      Oil
      and Gas Wells




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 June 30,
      2008.





On
      October 5, 2006, the Company announced the successful completion of drilling
      in
      the first prospect, located in Liberty County, Texas. The pipeline tie-in of
      the
“Friendswood No. 2 RE” gas well was completed successfully in June 2007. On or
      about September 14, 2007, efforts to increase the pressure of the flow of gas
      from the well were successful and the sale of gas through the pipeline
      commenced. On February 4, 2008, fracturing of the well was completed
      successfully. All 1150 bbls of frac water have been recovered, and the well
      has
      been tested at various pressures. On February 21, 2008, the well was put back
      on
      line full-time. Since then, it has produced around 350 - 400 mcf per day, up
      from about 60 mcf per day prior to fracturing. The well continues to produce
      a
      small amount of water, up to about 20 bbls per day.





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 about $15,000 in this re-entry
      and $23,948 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 are
      approximately 7.9 BCF gross and approximately 660 mcf net for the adjusted
      revenue interest of the Company in this prospect. As
      of
      July 1, 2008, the estimated reserve in this prospect, including PDP and PDNP
      net
      of expenses and discounted at 10%, was$3,855,000.The prospect also has a nominal amount of oil. According to the report
      it
      may take up to 5 additional wells to tap the reserves. Century Royalty and
      its
      partners are preparing to commence drilling a second well near “Friendswood No.
      2 RE” in the near future. Timing of work on the second well is dependent on
      securing sufficient financing. 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.




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 the beginning of March
      2007. Pipeline tie-in was completed in February 2008 and sales began shortly
      thereafter. The Company started to receive proceeds from these sales in April
      2008. The Company is currently awaiting the completion of an independent
      engineering report to establish the estimated size and projected cash flow
      to be
      generated by the well.


9





Another
      well, “Strong No. 1”, was commenced in June 2008 in the SE Cleveland Prospect in
      Liberty County, Texas. The expected dry hole cost of the well is around
      $3,300,000 and the expected cost after completion is around $5,000,000. The
      Company’s working interest share through Century Royalty is 2.00%. In 2008,
      the Company has invested $66,000 in this well.





When
      the
      engineering report on the “Shirley Gay No. 1” well and “Strong No. 1” well
      becomes available the Company will adjust the value of the oil and gas reserves
      accordingly.





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 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. This amendment had no effect on the financial statements as of June
      30, 2008 or for the periods then ended.




5.
      Net
      Income Per Common Share





Basic
      earnings per share is computed by dividing net income by the weighted average
      number of common shares outstanding at period end. Diluted earnings per share
      is
      computed by dividing net income by the weighted average number of common shares
      and dilutive potential common shares outstanding.




A
      summary
      of the denominators used to compute basic and dilutive earnings per share
      follow:




March
                31 and  June 30,2008
            
            2007Weighted
                average shares outstanding - used to compute basic earnings per
                share
            
            
            7,502,703
            
            
            7,502,703Dilution
                applicable to:Warrant
            
            
            1,142,857
            
            
            1,142,857Convertible
                note payable
            
            
            140,000
            
            
            140,000Series
                B Preferred Stock
            
            
            1,500,000
            
            
            1,500,000Weighted
                average shares outstanding - used to compute diluted earnings per
                share
            
            
            10,285,560
            
            
            10,285,560




6.
      Lease
      Termination and Issuance of Series C Preferred Stock





On
      January 9, 2008, the Company entered into an agreement, dated as of January
      3,
      2008, with 116 Newark Avenue Corporation (“116 Newark”) to amend and restate the
      terms of a promissory note issued to 116 Newark dated as of November 30, 2005.
      Pursuant to the agreement, the Company paid all accrued and unpaid interest
      on
      the promissory note through the date of the agreement, and the original note
      was
      amended and restated in a substitute note with a maturity date of December
      20,
      2009. The Company agreed to pay the substitute note’s outstanding principal
      balance of $356,249 in 24 consecutive monthly installments of $14,844, each
      payable on or before the 20th day of the month, beginning in January 2008.
      The
      amended note was non-interest bearing, therefore, the Company
      discounted the note at its original interest rate of 7 percent resulting in
      a
      gain on settlement of indebtedness of $23,863. Payment and performance under
      the
      substitute note has been guaranteed by Polystick and secured by a pledge
      agreement between Polystick and 116 Newark pursuant to which Polystick has
      pledged 356,249 shares of the Company’s Series B Preferred Stock to 116
      Newark.




7.
        Income
        Taxes
  Income
        taxes otherwise required to be provided for all periods presented have been
        eliminated as a result of net operating loss carryover benefits
        realized.


10


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**




**Overview**





Since
      July 2003 our business operations have been focused on managing our existing
      investments in oil and gas assets and entering into new investments in this
      industry. From June 2001 to July 2003, our business operations included managing
      our existing investments and entering into new business operations through
      acquisitions or mergers.




Prior
      to
      June 2001, we had sought to identify and develop attractive early stage Internet
      companies in exchange for equity positions in such companies. We have since
      made
      substantial write downs of these investments to more accurately reflect current
      market valuations, and these investments do not represent a significant asset.
      As of December 31, 2007, these investments were valued at approximately 1.7%
      of
      the total of our assets. We are continuing to investigate whether or not there
      are any business prospects through which material value can be realized from
      the
      remaining Internet investments.




We
      hold
      working interests in two oil and gas wells in the state of Louisiana. An
      independent reserve study, effective January 2008, estimated that the remaining
      reserve in the wells, including PDP and PDNP, net of expenses and discounted
      at
      10%, was $985,829. In June 2008 the well that had been producing oil and gas
      started to produce some water, and production of oil and gas from the well
      has
      fallen as a result. In
      any
      event, we fully expect to recover the carrying value of this
      asset.





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




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%.




Our
      wholly-owned subsidiary 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.




On
      October 5, 2006, we announced the successful completion of drilling in the
      first
      prospect, located in Liberty County, Texas. The pipeline tie-in of the
“Friendswood No. 2 RE” gas well was completed successfully in June 2007. On or
      about September 14, 2007, efforts to increase the pressure of the flow of gas
      from the well were successful and the sale of gas through the pipeline
      commenced. On February 4, 2008, we successfully completed fracturing of the
      well. All 1150 bbls of frac water have been recovered, and the well has been
      tested at various pressures. On February 21, 2008, the well was put back on
      line
      full-time. Since then, it has produced around 350 - 400 mcf per day, up from
      about 60 mcf per day prior to fracturing. The well continues to produce a small
      amount of water, up to about 20 bbls per day.


11





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, we invested $15,000 in this re-entry.





In
      July
      2008 we received an independent engineering report for the East Wilcox prospect.
      According to the report the total reserves in the prospect are approximately
      7.9
      BCF gross and approximately 660 mcf net for our adjusted revenue interest in
      this prospect. The prospect also has a nominal amount of oil. According to
      the
      report it may take up to 5 additional wells to tap the reserves. Century Royalty
      and its partners are 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.





Another
      well, “Strong No. 1”, was commenced in June 2008 in the SE Cleveland Prospect in
      Liberty County, Texas. The expected dry hole cost of the well is around
      $3,300,000 and the expected cost after completion is around $5,000,000. GSV’s
      working interest share through Century Royalty is 2.00%.





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.




When
      the
      engineering report on the “Shirley Gay No. 1” well and “Strong No. 1” well
      becomes available we will adjust the value of the geological studies
      accordingly.




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. 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 July
      31, 2008, 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.


12




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




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




In
      June
      2001, we sublet to Nekema.com our former offices in Jersey City, New Jersey
      through December 31, 2008. The rent on the sublease was guaranteed by Lumbermens
      Mutual Casualty Company, d/b/a Kemper Insurance Company, until May 2003. In
      September 2002 Nekema ceased business operations and defaulted on the sublease.
      Kemper Insurance Company made all payments of rent due under the sublease
      through May 2003. We ceased paying rent under the lease for this space in July
      2003. On May 5, 2004 we filed a proof of claim against Nekema’s estate in the
      United States Bankruptcy Court for the Southern District of New York. The proof
      of claim was for the total sum of $421,455.15 as permitted by law and the court
      approved a settlement of $363,048.88. On November 15, 2005, the trustee in
      the
      bankruptcy filed a notice of filing of final accounts. On February 15, 2006,
      we
      received $22,300.77 in settlement of our claim.




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


13





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 July 31, 2008, the Series C
      convertible preferred stock owned by 116 Newark was convertible into 200,000
      shares of common stock.




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




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




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




**Results
      of Operations**




Three
      Months Ended June 30, 2008 compared to Three Months Ended June 30,
      2007




Revenues:
      Revenues for the quarter increased by $253,180 or 123.5%, to $458,19 in 2008
      from $204,969 in 2007. This increase was due to increased production and
      increased oil and gas prices.




General
      and administrative: General and administrative expenses consist primarily of
      payroll and payroll related expenses for administrative, information technology,
      accounting, and management personnel, legal fees, depletion and
      general corporate expenses. General and administrative expenses increased by
      $50,340 or 38.9%, to $179,742 in the quarter ended June 30, 2008 from $129,402
      in the quarter ended June 30, 2007, primarily as a result of an increase
      in fees for legal and consulting services which was offset by a decrease in
      depletion of the wells in Louisiana.




Interest
      expense: Interest expense for the quarter ended June 30, 2008 was $10,183 and
      for the quarter ended June 30, 2007 was $14,234. The decrease is a result of
      the
      reduction in outstanding debt.




14


Net
      Income: Net Income increased by $206,891 from net income of $61,333 in the
      second quarter of 2007, or $0.01 per basic and diluted common share, to net
      income of $268,224 in the second quarter of 2008, or $0.04 per basic and
      $0.03 per diluted common share.




Six
      months ended June 30, 2008 compared to six months ended June 30,
      2007




Revenues:
      Revenues for the period increased by $457,580, or128.9%, to $812,692 in 2008
      from $355,112 in 2007. This increase was due to the commencement of production
      from the Friendswood No. 2 RE and Shirley Gay wells, the increase in production
      from the Louisiana well and the increase in oil and gas prices.




General
      and administrative: General and administrative expenses consist primarily of
      payroll and payroll related expenses for administrative, information technology,
      accounting, and management personnel, legal fees, depletion and general
      corporate expenses. General and administrative expenses increased by $78,100,
      or
      32.3%, to $319,656 in the six months ended June 30, 2008 from $241,556 in the
      six months ended June 30, 2007, primarily as a result of increases in depletion
      and fees for legal and consulting services .




Interest
      expense: Interest expense for the six months ended June 30, 2008 was $20,766
      and
      for the six months ended June 30, 2007 was $28,469. The decrease is a result
      of
      the reduction in outstanding debt.




Net
      Income: Income from operations increased by $411,046 from income of $85,087
      in
      the first six months of 2007, or $0.01 per basic and diluted common share,
      to
      income of $496,133 in the first six months of 2008, or $0.07 per basic and
      $0.05
      per diluted common share.




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




**Liquidity
      and Capital Resources**




Net
      cash
      provided by operations increased by 103.2%, or $180,601, from $174,985 for
      the
      six months ended June 30, 2007, to $355,586 for the six months ended June 30,
      2008. The increase was due primarily to an increase in revenues from the
      wells.





Net
      cash
      used in investing activities during the six months ended June 30, 2008, was
      ($104,948), as compared to $22,813 in the corresponding period of the prior
      year. The increase relates to the verification by an independent reserve
      engineering report of the reserves in the East Wilcox prospect that resulted
      in
      the reclassification of an asset from “geological studies” to “oil and gas
      wells, net of accumulated depletion” as well as additional investments in Texas
      wells.




Net
      cash
      used by financing activities during the six months ended June 30, 2008, was
      $(103,096), as compared to $0 used by financing activities in the prior year.
      The cash used in 2008 was attributable to a repayment of principal on notes
      payable.




In
      2003,
      we issued to Polystick 4,500,000 shares of common stock and 1,500,000 shares
      of
      Series B convertible preferred stock valued at $2,625,000 to acquire assets
      in a
      non-cash transaction.




On
      February 11, 2004, we borrowed $25,000 from Brooks Station Holdings, Inc.,
      a
      private investment corporation (“Brooks Station”). In partial consideration for
      the loan, we issued 100,000 shares of common stock to Brooks Station. On March
      18, 2004, we borrowed another $25,000 from Brooks Station and in partial
      consideration for the loan issued another 100,000 shares of common stock to
      Brooks Station. Each loan was evidenced by a promissory note bearing interest
      at
      8% per annum secured by a lien on all of our assets. On September 20, 2004,
      we
      negotiated an extension of the maturity of the notes from their original
      maturity date of September 1, 2004 to March 1, 2005. On March 10, 2005, we
      repaid the note issued on February 11, 2004 and negotiated an extension of
      the
      maturity of the note dated March 18, 2004 to September 1, 2005. We also extended
      to the same date the maturity of an 8% secured promissory note we issued to
      Brooks Station on July 21, 2003 in the principal amount of $200,000. On August
      31, 2005, we repaid the March 18, 2004 note and negotiated an extension of
      the
      maturity date of the July 21, 2003 note to March 1, 2006. On March 20, 2006,
      we
      repaid $20,000 of the accrued and unpaid interest on the July 21, 2003 note
      and
      negotiated an extension of the maturity date of the note to September 1, 2006.
      On September 20, 2006, we negotiated an extension of the maturity date of the
      note to March 1, 2007. On March 1, 2007, we negotiated an extension of the
      maturity date of the note to September 1, 2007. On September 6, 2007, we repaid
      $20,000 of the accrued and unpaid interest on the note and $20,000 of the
      principal balance of the note and negotiated an extension of the maturity date
      of the note to March 1, 2008. On March 13, 2008, we repaid $20,000 of the
      accrued and unpaid interest on the note and $10,000 of the principal balance
      of
      the note and negotiated an extension of the maturity date of the note to
      September 1, 2008. On May 13, 2008, we entered into an amended and restated
      promissory note, dated as of March 11, 2008. The amended and restated note
      restates a promissory note made by the Company in favor of Brooks Station on
      July 21, 2003 to conform the terms of the instrument to an amendment agreement
      entered into by the parties as of March 11, 2008. The amended and restated
      note
      has a principal amount of $160,000 and accrued interest of $22,533.33, bears
      interest at a rate of 8% per annum and matures on September 1, 2008. The amended
      and restated note is secured by a lien on all of the Company’s
      assets.


15




On
      May
      11, 2004, we sold a convertible promissory note in the principal amount of
      $200,000 and a warrant to purchase up to 1,142,857 shares of our common stock
      at
      a price of $.70 per share to D. Emerald Investments Ltd., a private investment
      corporation (“Emerald”). The note bears interest at the rate of 8% per annum and
      is convertible into shares of our common stock at a price of $.70 per share.
      The
      aggregate purchase price of these securities was $200,000. In connection with
      the sale of these securities we agreed that if Emerald exercises the warrant
      in
      full and converts the convertible note in full, then, at Emerald’s request, we
      will appoint a person designated by Emerald to our Board of Directors and,
      in
      addition, for so long as Emerald holds at least eighty-five percent (85%) of
      the
      common stock issued upon such exercise and conversion, we will nominate such
      person (or a different person designated by Emerald) to be reelected to the
      Board of Directors in connection with any meeting of our stockholders at which
      directors are to be elected. We also agreed that within 120 days of the exercise
      of the warrant and/or conversion of the note for an aggregate of at least
      428,572 shares of common stock (subject to adjustment for dilutive events as
      set
      forth in the warrant and the note) we will register all of the shares issuable
      upon conversion of the note and exercise of the warrant under the Securities
      Act
      of 1933. Additionally, we granted Emerald rights to have the shares included
      in
      other registration statements we may file for the public offering of our
      securities for cash proceeds. In 2004, we recorded an expense of $129,000 for
      the value of the warrants and the conversion feature of the note calculated
      using the Black-Scholes method.




Our
      principal stockholder, Polystick, entered into a guaranty and a pledge agreement
      with Emerald under which Polystick pledged 200,000 shares of our Series B
      convertible preferred stock as collateral security for the note. Polystick
      also
      entered into a voting agreement with Emerald under which Polystick agreed that
      if we fail to fully and timely fulfill our obligations to appoint or nominate
      a
      representative for election to our board of directors, then, at Emerald’s
      request, Polystick will vote its shares of Series B convertible preferred stock
      in favor of a nominee designated by Emerald in any election of directors
      occurring during such time and for so long as Emerald holds at least 85% of
      the
      common stock issued upon exercise of the warrant and conversion of the note.
      Polystick also agreed that, provided that Polystick continues to have the right
      to designate and elect three directors to the Company’s board of directors under
      the terms of the Series B convertible preferred stock, any such nominee will
      count as one of such directors. Additionally, Polystick agreed to use all its
      power and authority as provided by our by-laws and the Series B convertible
      preferred stock to convene, at Emerald’s request, meetings of stockholders as
      may be necessary to elect Emerald’s nominee to the board of
      directors.




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 has been amended and restated in a substitute
      note
      with a maturity date of July 10, 2009 and the original warrant has been 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 Preferred Stock to Emerald.


16




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




We
      believe that our existing capital resources will enable us to maintain our
      operations at existing levels for at least the next 12 months, assuming that
      we
      can extend the maturities of the notes we issued to Brooks Station and Emerald
      beyond the next 12 months. However, it is difficult to project our capital
      needs. We cannot assure you that any additional financing or other sources
      of
      capital will be available to us upon acceptable terms, if at all. The inability
      to obtain additional financing, when needed, would have a material adverse
      effect on our business, financial condition and operating results.




**Critical
      Accounting Policies and Use of Estimates**




The
      Company’s discussion and analysis of financial condition and results of
      operations are based on the condensed financial statements. The preparation
      of
      these financial statements requires the Company to make estimates and judgments
      that affect the amounts reported in them. The Company’s critical accounting
      policies and estimates include those related to oil and natural gas activities,
      full cost method, proved oil and natural gas reserves, depletion reserves,
      future development and abandonment costs, asset retirement obligations, and
      valuation of investment in non-publicly traded companies. The Company bases
      its
      estimates on historical experience and on various other assumptions that
      management believes to be reasonable under the circumstances. Actual results
      may
      differ from these estimates under different assumptions or conditions. For
      additional information about the Company’s critical accounting policies and
      estimates, see Note 2 to the financial statements included in the Company’s Form
      10-KSB for the year ended December 31, 2007. There were no significant changes
      in critical accounting policies and estimates during the three months ended
      June
      30, 2008.


17





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




**Off-Balance
      Sheet Arrangements**




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





**Tabular
      Disclosure of Contractual Obligations**





The
      following summarizes the Company’s estimated contractual obligations at June 30,
      2008, and the effect such obligations are expected to have on its liquidity
      and
      cash flows in the future periods.





Payments
                due by periodContractual
                Obligations
            
            Total
            
            Less
                than
              1
                year
            
            1-3
                years
            
            3-5years
            
            More
                than
              5
                yearsLong-term
                Debt Obligations
            
            $
            609,290
            
            $
            326,193
            
            $
            283,097
            
            
            0
            
            
            0Capital
                (Finance) Lease Obligations
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Operating
                Lease Obligations
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Purchase
                Obligations
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Other
                Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
                GAAP
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Total
            
            $
            609,290
            
            $
            326,193
            
            $
            283,097
            
            
            0
            
            
            0





**Forward-Looking
      Statements**




Some
      of
      the statements in this report are forward-looking statements that involve risks
      and uncertainties. These forward-looking statements include statements about
      our
      plans, objectives, expectations, intentions and assumptions that are not
      statements of historical fact. You can identify these statements by the
      following words:


-
      “may”


-
      “will”


-
      “should”


-
      “estimates”


-
      “plans”


-
      “expects”


-
      “believes”


-
      “intends”


and
      similar expressions. We cannot guarantee our future results, performance or
      achievements. Our actual results and the timing of corporate events may differ
      significantly from the expectations discussed in the forward-looking statements.
      You are cautioned not to place undue reliance on any forward- looking
      statements. Potential risks and uncertainties that could affect our future
      operating results include, but are not limited to, our limited operating
      history, history of losses, need to raise additional capital, the high risk
      nature of our business, and other risks described in our Annual Report on Form
      10-KSB for the year ended December 31, 2007.


18




**Item
      4T. Controls and Procedures**




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




*Changes
      in Internal Control over Financial Reporting.* There
      has been no change in our internal control over financial reporting, known
      to
      the chief executive officer and chief financial officer, that occurred during
      the quarter ended June 30, 2008, that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.





19


**PART
      II. OTHER INFORMATION**







**Item
      6. Exhibits**




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.




20


**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:
                August 12, 2008By:
            /s/
              Gilad GatGilad
                Gat
              Chief
                Executive Officer
              (principal
                executive officer)
              Chief
                Financial Officer
              (principal financial and accounting officer)





21


**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.




22