BBHC, INC. - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________
FORM
10-Q
______________
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2009
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 No.000-51883
______________
MagneGas
Corporation
(Exact
name of registrant as specified in its charter)
______________
Delaware | 26-0250418 | |||
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
150 Rainville
Rd
Tarpon
Springs, FL 34689
|
34689
|
|
(Address of principal executive offices) | (Zip Code) |
(Former name, former address, if
changed since last report)
Tel:
(727) 934-3448
(Registrant’s
telephone number)
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 during the preceding
12 months (or for such shorter period that the issuer 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 (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o 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.
Large
accelerated filer o
|
Non-accelerated
filer o
|
Accelerated
filer o (do not
check if smaller reporting company)
|
Smaller
reporting company x
|
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
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of November 12, 2009: 104,519,395 shares of common
stock.
i
TABLE
OF CONTENTS
Page Number | ||
PART
I - FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements
|
3 |
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
14 |
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
18 |
Item
4.
|
Controls
and Procedures
|
19 |
PART
II -OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings.
|
19 |
Item
1A.
|
Risk
Factors
|
19 |
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
20 |
Item
3.
|
Defaults
Upon Senior Securities.
|
20 |
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
20 |
Item
5.
|
Other
Information.
|
20 |
Item
6.
|
Exhibits
|
20 |
20 | ||
SIGNATURES
|
21 |
ii
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Financial
Statements
MagneGas
Corporation
(A Development
Stage Enterprise)
As of September
30, 2009 (unaudited) and December 31, 2008
And for the
Three and Nine Months Ended September 30, 2009 (unaudited), 2008 (unaudited)
and
for the period
December 9, 2005 (date of inception) through September 30, 2009
(unaudited)
Contents
Financial
Statements:
|
Page Number |
Balance
Sheets September 30, 2009 (unaudited) and December 31, 2008
(audited)
|
F-2
|
Statements
of Operations (unaudited)
|
F-3
|
Statements
of Changes in Stockholders’ Equity (unaudited)
|
F-4
|
Statements
of Cash Flows (unaudited)
|
F-5
|
Notes
to Financial Statements (unaudited)
|
F-6
through F-13
|
F-1
MagneGas
Corporation
|
||||||||
(A
Development Stage Enterprise)
|
||||||||
Balance
Sheets
|
||||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
(audited)
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 6,680 | $ | 160 | ||||
Accounts receivable, net of allowance for doubtful accounts of
$300
|
1,366 | 2,398 | ||||||
Inventory,
at cost
|
8,755 | 4,860 | ||||||
Total
Current Assets
|
16,801 | 7,418 | ||||||
Intangible
assets, net of accumulated amortization
|
674,539 | 720,889 | ||||||
TOTAL
ASSETS
|
$ | 691,340 | $ | 728,307 | ||||
LIABILITIES
AND STOCKHOLDER'S DEFICIT
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
81,251 | $ | 109,739 | |||||
Accrued
expenses
|
41,617 | 15,000 | ||||||
Deferred
revenue
|
100,000 | - | ||||||
Due
to affiliate
|
10,000 | 10,000 | ||||||
Note
payable to related party
|
127,437 | 89,978 | ||||||
TOTAL
LIABILITIES
|
360,305 | 224,717 | ||||||
Stockholders'
Deficit
|
||||||||
Preferred
stock: $0.001 par; 10,000,000 authorized; 2,000 issued and
outstanding
|
2 | 2 | ||||||
Common
stock: $0.001 par; 900,000,000 authorized; 104,119,395 issued
and outstanding
|
104,119 | 99,445 | ||||||
Additional
paid-in capital
|
2,617,785 | 1,892,373 | ||||||
Unearned
stock compensation
|
(73,333 | ) | (88,333 | ) | ||||
Accumulated
deficit during development stage
|
(2,317,538 | ) | (1,399,897 | ) | ||||
TOTAL
STOCKHOLDERS' EQUITY
|
331,035 | 503,590 | ||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 691,340 | $ | 728,307 | ||||
The accompanying
notes are an integral part of these financial statements.
F-2
MagneGas
Corporation
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended
September 30, 2009 and 2008
For the period December 9, 2005 (date of
inception) to September 30, 2009
(unaudited)
Three
Months Ended
|
Nine
months ended
|
through
|
||||||||||||||||||
September
30,
|
September
30,
|
September
30,
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
||||||||||||||||
Revenue
|
$ | 1,300 | $ | 1,072 | $ | 5,351 | $ | 9,151 | $ | 17,576 | ||||||||||
Cost
of Sales
|
888 | 1,102 | 4,436 | 9,146 | 14,784 | |||||||||||||||
Gross
Profit
|
412 | (30 | ) | 915 | 5 | 2,792 | ||||||||||||||
Operating
Expenses:
|
||||||||||||||||||||
Advertising
|
17,927 | 157 | 52,699 | 3,042 | 60,702 | |||||||||||||||
Selling
|
161 | 7,690 | 29,801 | 30,693 | 61,096 | |||||||||||||||
Technical
|
9,607 | 17,942 | 21,126 | 53,622 | 108,821 | |||||||||||||||
Professional
|
56,069 | 37,590 | 97,668 | 102,392 | 427,482 | |||||||||||||||
Rent
and overhead
|
30,607 | 18,593 | 55,830 | 27,073 | 101,881 | |||||||||||||||
Office
administration
|
18,734 | 178 | 23,793 | 685 | 45,484 | |||||||||||||||
Investor
Relations
|
1,289 | - | 6,972 | - | 11,387 | |||||||||||||||
Stock-based
comp
|
343,928 | 405,000 | 570,256 | 551,667 | 1,428,423 | |||||||||||||||
Research
and develop
|
4,093 | 1,102 | 19,246 | 3,102 | 22,637 | |||||||||||||||
Amortization
|
12,116 | 1,666 | 36,350 | 4,964 | 43,154 | |||||||||||||||
Total
Operating Expenses
|
494,531 | 489,918 | 913,741 | 777,240 | 2,311,067 | |||||||||||||||
Operating
Loss
|
(494,119 | ) | (489,948 | ) | (912,826 | ) | (777,235 | ) | (2,308,275 | ) | ||||||||||
Other
(Income) and Expense
|
||||||||||||||||||||
Interest
expense
|
1,367 | 473 | 4,815 | 983 | 6,506 | |||||||||||||||
Sale
of Asset(s)
|
- | - | - | 2,757 | 2,757 | |||||||||||||||
Total
Other
|
1,367 | 473 | 4,815 | 3,740 | 9,263 | |||||||||||||||
Net
Loss
|
$ | (495,486 | ) | $ | (490,421 | ) | $ | (917,641 | ) | $ | (780,975 | ) | $ | (2,317,538 | ) | |||||
Loss
per share, basic and diluted
|
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||
Weighted
average number of common shares
|
102,385,101 | 68,106,161 | 101,500,511 | 67,992,378 | ||||||||||||||||
The accompanying
notes are an integral part of these financial statements.
F-3
MagneGas
Corporation
|
||||||||||||||||||||||||||||||||
(A
Development Stage Enterprise)
|
||||||||||||||||||||||||||||||||
Statement
of Changes in Stockholders' Equity
|
||||||||||||||||||||||||||||||||
And
for the period December 9, 2005 (date of inception) to September 30,
2009
|
||||||||||||||||||||||||||||||||
Deficit
|
||||||||||||||||||||||||||||||||
Additional
|
Unearned
|
During
|
||||||||||||||||||||||||||||||
Preferred
|
Common
|
Paid
in
|
Stock
|
Development
|
Total
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Comp
|
Stage
|
Equity
|
|||||||||||||||||||||||||
Stock
issued on acceptance of incorporation expenses, December 9,
2005
|
100,000 | $ | 100 | $ | 100 | |||||||||||||||||||||||||||
Net
loss
|
(400 | ) | (400 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2005
|
- | - | 100,000 | 100 | - | - | (400 | ) | (300 | ) | ||||||||||||||||||||||
Net
loss
|
(1,450 | ) | (1,450 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2006
|
- | - | 100,000 | 100 | - | - | (1,850 | ) | (1,750 | ) | ||||||||||||||||||||||
Acquisition
of controlling interest; payment of liabilities; April 2,
2007
|
2,500 | 2,500 | ||||||||||||||||||||||||||||||
Issuance
of preferred stock to founders; valued at par; May 4, 2007
|
2,000 | 2 | - | (2 | ) | - | ||||||||||||||||||||||||||
Issuance
of stock to founders; valued at par; May 12, 2007
|
67,052,000 | 67,052 | (67,052 | ) | - | |||||||||||||||||||||||||||
Issuance
of stock for services, valued at $1 per share; May 12,
2007
|
245,000 | 245 | 244,755 | 245,000 | ||||||||||||||||||||||||||||
Issuance
of stock for services, valued at $1 per share; October 1,
2007
|
85,000 | 85 | 84,915 | 85,000 | ||||||||||||||||||||||||||||
Stock
issued for cash:
|
||||||||||||||||||||||||||||||||
June
12, 2007 ($1 per share)
|
30,000 | 30 | 29,970 | 30,000 | ||||||||||||||||||||||||||||
August
28, 2007 ($1 per share)
|
13,000 | 13 | 12,987 | 13,000 | ||||||||||||||||||||||||||||
September
17, 2007 ($1 per share)
|
54,000 | 54 | 53,946 | 54,000 | ||||||||||||||||||||||||||||
October
11, 2007 ($1 per share)
|
60,500 | 61 | 60,439 | 60,500 | ||||||||||||||||||||||||||||
Net
loss
|
(420,621 | ) | (420,621 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2007
|
2,000 | 2 | 67,639,500 | 67,640 | 422,458 | - | (422,471 | ) | 67,629 | |||||||||||||||||||||||
Issuance
of stock for license, valued at $1 per share; February 15,
2008
|
100,000 | 100 | 99,900 | 100,000 | ||||||||||||||||||||||||||||
Issuance
of stock under 5 year consulting agreement, valued at $1 per share, May
31, 2008
|
100,000 | 100 | 99,900 | (100,000 | ) | - | ||||||||||||||||||||||||||
Recognized
for period
|
11,667 | 11,667 | ||||||||||||||||||||||||||||||
Issuance
of stock for services, valued at fair market value:
|
F-4
February
15, 2008 ($1 per share)
|
145,000 | 145 | 144,855 | 145,000 | ||||||||||||||||||||||||||||
July
28, 2008 ($1 per share)
|
400,000 | 400 | 399,600 | 400,000 | ||||||||||||||||||||||||||||
October
3, 2008 ($.02 per share)
|
385,000 | 385 | 18,865 | 19,250 | ||||||||||||||||||||||||||||
October
3, 2008 ($.02 per share)
|
210,000 | 210 | 3,990 | 4,200 | ||||||||||||||||||||||||||||
October
21, 2008 ($.02 per share)
|
15,000 | 15 | 285 | 300 | ||||||||||||||||||||||||||||
November
4, 2008 ($.15 per share)
|
105,000 | 105 | 15,645 | 15,750 | ||||||||||||||||||||||||||||
December
3, 2008 ($.06 per share)
|
283,333 | 283 | 16,717 | 17,000 | ||||||||||||||||||||||||||||
December
29, 2008 ($.021 per share)
|
30,000,000 | 30,000 | 597,000 | 627,000 | ||||||||||||||||||||||||||||
Stock
issued for cash:
|
||||||||||||||||||||||||||||||||
May
31, 2008 ($1 per share)
|
12,000 | 12 | 11,988 | 12,000 | ||||||||||||||||||||||||||||
September
4, 2008 ($1 per share)
|
50,000 | 50 | 49,950 | 50,000 | ||||||||||||||||||||||||||||
Waiver
of related party expense
|
11,220 | 11,220 | ||||||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||
Net
loss
|
(977,426 | ) | (977,426 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2008
|
2,000 | 2 | 99,444,833 | 99,445 | 1,892,373 | (88,333 | ) | (1,399,897 | ) | 503,590 | ||||||||||||||||||||||
Compensation
recognized under consulting agreement (May 31, 2008)
|
15,000 | 15,000 | ||||||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||
Waiver
of related party expense (unaudited)
|
16,830 | 16,830 | ||||||||||||||||||||||||||||||
Stock
issued for cash:
|
- | |||||||||||||||||||||||||||||||
March
17, 2009 ($.05 per share)
|
200,000 | 200 | 9,800 | 10,000 | ||||||||||||||||||||||||||||
May
6, 2009 ($.08 per share)
|
275,000 | 275 | 21,725 | 22,000 | ||||||||||||||||||||||||||||
May
18, 2009 ($.15 per share)
|
167,000 | 167 | 24,833 | 25,000 | ||||||||||||||||||||||||||||
June
5, 2009 ($.21 per share)
|
154,763 | 155 | 31,845 | 32,000 | ||||||||||||||||||||||||||||
June
22, 2009 ($.26 per share)
|
38,500 | 39 | 9,961 | 10,000 | ||||||||||||||||||||||||||||
July
31, 2009 ($.056 per share)
|
356,799 | 357 | 19,643 | 20,000 | ||||||||||||||||||||||||||||
August
17, 2009 ($.10 per share)
|
30,000 | 30 | 2,970 | 3,000 | ||||||||||||||||||||||||||||
September
3, 2009 ($.082 per share)
|
220,000 | 220 | 17,780 | 18,000 | ||||||||||||||||||||||||||||
September
24, 2009 ($.09 per share)
|
200,000 | 200 | 17,800 | 18,000 | ||||||||||||||||||||||||||||
Issuance
of stock for services, valued at fair market value:
|
||||||||||||||||||||||||||||||||
January
21, 2009 ($.04 per share)
|
199,000 | 199 | 7,761 | 7,960 | ||||||||||||||||||||||||||||
March
26, 2009 ($.067 per share)
|
1,320,000 | 1,320 | 86,760 | 88,080 | ||||||||||||||||||||||||||||
April
1, 2009 ($.08 per share)
|
101,500 | 101 | 27,399 | 27,500 | ||||||||||||||||||||||||||||
May
26, 2009 ($.20 per share)
|
445,000 | 445 | 88,555 | 89,000 | ||||||||||||||||||||||||||||
July
17, 2009 ($.18 per share)
|
150,000 | 150 | 26,850 | 27,000 | ||||||||||||||||||||||||||||
July
30, 2009 ($.18 per share)
|
42,000 | 42 | 10,458 | 10,500 | ||||||||||||||||||||||||||||
August
24, 2009 ($.44 per share)
|
235,000 | 234 | 102,466 | 102,700 | ||||||||||||||||||||||||||||
September
2, 2009 ($.42 per share)
|
255,000 | 255 | 106,845 | 107,100 | ||||||||||||||||||||||||||||
September
24, 2009 ($.32 per share)
|
285,000 | 285 | 90,915 | 91,200 | ||||||||||||||||||||||||||||
Options
issued for services (unaudited)
|
4,216 | 4,216 | ||||||||||||||||||||||||||||||
Net
Loss (unaudited)
|
(917,641 | ) | (917,641 | ) | ||||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||
Balance
at September 30, 2009
|
2,000 | $ | 2 | 104,119,395 | $ | 104,119 | $ | 2,617,785 | $ | (73,333 | ) | $ | (2,317,538 | ) | $ | 331,035 | ||||||||||||||||
The accompanying
notes are an integral part of these financial statements.
F-5
MagneGas
Corporation
|
||||||||||||
(A
Development Stage Enterprise)
|
||||||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||||||
For
the Nine Months Ended September 30, 2009 and 2008
|
||||||||||||
For
the period December 9, 2005 (date of inception) to September 30,
2009
|
||||||||||||
(unaudited)
|
||||||||||||
Nine
Months Ended
|
||||||||||||
September
30,
|
Inception
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
loss
|
$
|
(917,641
|
)
|
$
|
(780,975
|
)
|
$
|
(2,317,538
|
)
|
|||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Depreciation
and amortization
|
36,350
|
4,964
|
43,134
|
|||||||||
Stock
compensation
|
570,256
|
551,667
|
1,513,523
|
|||||||||
Waiver
of related party expenses
|
16,830
|
5,610
|
28,050
|
|||||||||
Loss on
sale of asset
|
-
|
2,757
|
12,757
|
|||||||||
Bad
debts
|
300
|
-
|
300
|
|||||||||
Changes
in operating assets:
|
||||||||||||
Accounts
Receivable
|
732
|
(1,247
|
)
|
(1,646
|
)
|
|||||||
Inventory
|
(3,895
|
)
|
(5,139
|
)
|
(8,755
|
)
|
||||||
Prepaid
& other current assets
|
-
|
2,000
|
-
|
|||||||||
Accounts
Payable
|
(28,488
|
)
|
49,953
|
81,251
|
||||||||
Accrued
Expenses
|
36,617
|
(2,001
|
)
|
41,617
|
||||||||
Deferred
revenue
|
100,000
|
-
|
100,000
|
|||||||||
Total
adjustments to net income
|
728,702
|
608,564
|
1,810,231
|
|||||||||
Net
cash (used in) operating activities
|
(188,939
|
)
|
(172,411
|
)
|
(507,307
|
)
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Acquisition
of equipment
|
-
|
-
|
(5,200
|
)
|
||||||||
Proceeds
from sale of asset
|
-
|
1,750
|
1,750
|
|||||||||
Net
cash flows (used in) investing activities
|
-
|
1,750
|
(3,450
|
)
|
||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Capital
contribution; pay down of liabilities at acquisition
|
-
|
-
|
2,500
|
|||||||||
Advance
from affiliate
|
-
|
-
|
10,000
|
|||||||||
Advances
from related party
|
4,865
|
-
|
4,865
|
|||||||||
Proceeds
from note payable to related party
|
111,000
|
70,100
|
197,100
|
|||||||||
Repayments
on notes payable from related party
|
(72,000
|
)
|
-
|
(72,000
|
)
|
|||||||
Interest
accrued on affiliate notes and advances
|
(6,406
|
)
|
983
|
(2,528
|
)
|
|||||||
Proceeds
from issuance of common stock
|
158,000
|
62,000
|
377,500
|
|||||||||
Net
cash flows provided by investing activities
|
195,459
|
133,083
|
517,437
|
|||||||||
Net
increase (decrease) in cash
|
6,520
|
(37,578
|
)
|
6,680
|
||||||||
Cash -
beginning balance
|
160
|
76,232
|
-
|
|||||||||
CASH
BALANCE - END OF PERIOD
|
$
|
6,680
|
$
|
38,654
|
$
|
6,680
|
||||||
Supplemental
disclosure of cash flow information and non cash investing and financing
activities:
|
||||||||||||
Interest
paid
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Taxes
paid
|
$
|
-
|
$
|
-
|
$
|
-
|
The accompanying
notes are an integral part of these financial statements.
F-6
MagneGas
Corporation
(A
Development Stage Enterprise)
Notes
to Financial Statements
(unaudited)
Three
and Nine Months Ended September 30, 2009, 2008 and
for
the period December 9, 2005 (date of inception) through September 30,
2009
1. Background
Information
MagneGas
Corporation (the “Company”), formerly 4307, Inc., was organized in the state of
Delaware on December 9, 2005.
On April
2, 2007 (the "Effective Date"), pursuant to the terms of a Stock Purchase
Agreement, Clean Energies Tech Co. purchased a total of 100,000 shares (100%) of
the issued and outstanding common stock of the Company from the sole officer,
director and shareholder of the Company, for an aggregate of $30,000 in cash and
the assumption of liabilities ($2,500). The total of 100,000 shares represented
all of the shares of outstanding common stock of the Company at the time of
transfer.
Prior to
the above transaction, Clean Energies Tech Co and the Company were essentially
shell companies that were unrelated, with no assets, minimal liabilities, and no
operations. As a result, the 100% change in control was recorded as a
private equity transaction, and no goodwill was recorded, as no assets were
acquired and minimal liabilities were assumed. On May 12, 2007,
subsequent to the date of purchase, 67,052,000 shares of common stock were
issued to founding members of the organization. As the company determined
that the shares had no value, stock and additional paid in capital were
increased and decreased, respectively, by the par value of the stock
issued.
Since the
acquisition, the Company has adopted the operating plan and mission which is to
provide services in cleaning and converting contaminated waste. A process has
been developed which transforms contaminated waste through a proprietary
incandescent machine. The result of the product is to carbonize waste for normal
disposal. A by-product of this process will produce an alternative MagneGas
source.
2. Development
Stage Enterprise
The
Company has been in the development stage since its formation on December 9,
2005. It has primarily engaged in raising capital to carry out its
business plan, as described above. The Company expects to continue to incur
significant operating losses and to generate negative cash flow from operating
activities while it develops its customer base and establishes itself in the
marketplace. The Company's ability to eliminate operating losses and
to generate positive cash flow from operations in the future will depend upon a
variety of factors, many of which it is unable to control. If the
Company is unable to implement its business plan successfully, it may not be
able to eliminate operating losses, generate positive cash flow, or achieve or
sustain profitability, which would materially adversely affect its business,
operations, and financial results, as well as its ability to make payments on
any obligations it may incur.
3. Going
Concern
The
accompanying unaudited financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern.
The
Company incurred a net loss of $495,486, $917,461 and $2,317,538 for the three
and nine months ended September 30, 2009 and for the period December 9, 2005
(date of inception) through the period ended September 30, 2009,
respectively. As of September 30, 2009 the Company had minimal cash
with which to satisfy any future cash requirements. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern.
The Company depends upon capital to be derived from future financing activities
such as subsequent offerings of its common stock, debt financing or grant
funding in order to operate and grow the business. There can be no
assurance that the Company will be successful in raising such capital or
grants. The key factors that are not within the Company's control and
that may have a direct bearing on operating results include, but are not limited
to, acceptance of the Company's business plan, the ability to raise capital in
the future, the ability to expand its customer base, and the ability to hire key
employees to build and manufacture such proprietary machines to provide
services. There may be other risks and circumstances that management
may be unable to predict.
The
unaudited financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
F-7
4. Summary
of Significant Accounting Policies
The
significant accounting policies followed are:
Basis
of Presentation
In the
opinion of management, all adjustments consisting of normal recurring
adjustments necessary for a fair statement of (a) the result of operations for
the three and nine month periods ended September 30, 2009, 2008 and the period
December 9, 2005 (date of inception) through September 30, 2009; (b) the
financial position at September 30, 2009, and (c) cash flows for the nine month
period ended September 30, 2009, 2008 and the period December 9, 2005 (date of
inception) through September 30, 2009, have been made.
The
unaudited financial statement and notes are presented as permitted by Form 10-Q.
Accordingly, certain information and note disclosures normally included in the
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted. The accompanying
unaudited financial statements should be read in conjunction with the financial
statements for the years ended December 31, 2008 and 2007 and notes thereto in
the Company’s annual report on Form 10-K for the year ended December 31, 2008,
filed with the Securities and Exchange Commission. Operating results for the
three and nine months ended September 30, 2009 and 2008 and for the period
December 9, 2005 (date of inception) to September 30, 2009 is not necessarily
indicative of the results that may be expected for the entire year.
Use
of Estimates
The
Company prepares its financial statements in conformity with generally accepted
accounting principles in the United States of America. These principals require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management believes that these estimates
are reasonable and have been discussed with the Board of Directors; however,
actual results could differ from those estimates.
Variable
Interest Entities
The
Company considers the consolidation of entities to which the usual condition
(ownership of a majority voting interest) of consolidation does not apply,
focusing on controlling financial interests that may be achieved through
arrangements that do not involve voting interest. If an enterprise
holds a majority of the variable interests of an entity, it would be considered
the primary beneficiary. The primary beneficiary is generally
required to consolidate assets, liabilities and non-controlling interests at
fair value (or at historical cost if the entity is a related party) and
subsequently account for the variable interest as if it were consolidated based
on a majority voting interest. The Company has investments in
joint ventures that are in development of the MagneGas technology, however the
Company is not identified as a primary beneficiary; therefore no consolidation
is required and the investments are listed at their cost.
Financial
Instruments
The
Company’s balance sheets include the following financial instruments: cash,
accounts receivable, inventory, accounts payable and note payable to
stockholder. The carrying amounts of current assets and current liabilities
approximate their fair value because of the relatively short period of time
between the origination of these instruments and their expected realization. The
carrying values of the note payable to stockholder approximates fair
value based on borrowing rates currently available to the Company for
instruments with similar terms and remaining maturities.
Cash
and Cash Equivalents
The
majority of cash is maintained with a major financial institution in the United
States. Deposits with this bank may exceed the amount of insurance
provided on such deposits. Generally, these deposits may be redeemed
on demand and, therefore, bear minimal risk. The Company considers
all highly liquid investments purchased with an original maturity of six months
or less to be cash equivalents.
Accounts
Receivable, Credit and Revenue Recognition
Accounts
receivable consist of amounts due for the delivery of MagneGas sales to
customers. Revenue for metal-cutting fuel is recognized when
shipments are made to customers. The Company recognizes a sale when the product
has been shipped and risk of loss has passed to the customer. An allowance
for doubtful accounts is considered to be established for any amounts that may
not be recoverable, which is based on an analysis of the Company’s customer
credit worthiness, and current economic trends. Based on management’s
review of accounts receivable, no allowance for doubtful accounts was considered
necessary. Receivables are determined to be past due, based on
payment terms of original invoices. The Company does not typically
charge interest on past due receivables.
Inventories
Inventories
are stated at the lower of standard cost or market, which approximates actual
cost. Cost is determined using the first-in, first-out
method. Inventory is comprised of filled cylinders of MagneGas and
accessories (regulators and tips) available for sale.
F-8
Property,
Equipment and Intangible Assets
Equipment
is stated at cost. Depreciation is computed by the straight-line
method over estimated useful lives (five years for
equipment). The carrying amount of all long-lived assets is
evaluated periodically to determine if adjustment to the depreciation and
amortization period or the unamortized balance is warranted. Based upon its most
recent analysis, the Company believes that no impairment of equipment existed at
December 31, 2008. Currently there is no equipment
capitalized.
During
2008, the Company recorded an intangible license for $727,000 related to the
Company's acquisition of patent rights and certain other intellectual property,
secured from a company related by common management. The Company valued the
license based on the value of the stock issued, as the Company believes that
this is the more reliable measurement. The intellectual property
consists primarily of patents and patent applications, which the Company has
estimated has a useful life of fifteen years.
Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for
impairment whenever facts and circumstances indicate that the carrying value may
not be recoverable. When required impairment losses on assets to be
held and used are recognized based on the fair value of the
asset. The fair value is determined based on estimates of future cash
flows, market value of similar assets, if available, or independent appraisals,
if required. If the carrying amount of the long-lived asset is not
recoverable from its undiscounted cash flows, an impairment loss is recognized
for the difference between the carrying amount and fair value of the
asset. When fair values are not available, the Company estimates fair
value using the expected future cash flows discounted at a rate commensurate
with the risk associated with the recovery of the assets. The Company
did not recognize any impairment losses for any periods presented.
Share-Based
Compensation
All
share-based payments to employees, including grants of employee stock options
are recognized as compensation expense in the financial statements
based on their fair values. That expense is recognized over the requisite
service period, the period during which an employee is required to provide
services in exchange for the award, (usually the vesting period). The Company
had no common stock options or common stock equivalents granted or outstanding
for all periods presented
The
Company issues restricted stock to consultants for various services Cost
for these transactions are measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. The value of the common stock is measured at the
earlier of (i) the date at which a firm commitment for performance by the
counterparty to earn the equity instruments is reached or (ii) the date at which
the counterparty's performance is complete. The Company
recognized consulting expenses and a corresponding increase to additional
paid-in-capital related to stock issued for services. Stock
compensation for the three and nine months ended September 30, 2009 and 2008,
were issued to consultants for past services provided, accordingly, all shares
issued are fully vested, and there is no unrecognized compensation associated
with these transactions. In May 2008 the Company entered into a
consulting agreement for services to be rendered over a five year
period. The consulting expense is to be recognized ratably over the
requisite service period.
Shipping
Costs
The
Company includes shipping costs and freight-in costs in cost of goods
sold. Total freight-in included in cost of goods sold expense was
$219, $0, $649, $0 and $649 for the three and nine months ended September 30,
2009, 2008 and for the period December 9, 2005 (date of inception) through
September 30, 2009, respectively..
Advertising
Costs
Advertising
costs have been occurred for the promotion of the existing technology generally
technical demonstrations. The costs of advertising are expensed as
incurred. Advertising expenses are included in the Company’s operating
expenses.
Research
and Development
The
Company expenses research and development costs when
incurred. Indirect costs related to research and developments are
allocated based on percentage usage to the research and
development.
Income
Taxes
The
Company accounts for income taxes under the liability method. Deferred tax
assets and liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purpose, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
Earnings
(Loss) Per Share
Basic
earnings (loss) per share calculations are determined by dividing net income
(loss) by the weighted average number of shares outstanding during the year.
Diluted earnings (loss) per share calculations are determined by dividing net
income (loss) by the weighted average number of shares. There are no share
equivalents and, thus, anti-dilution issues are not applicable.
F-9
Subsequent
Events
These
interim condensed financial statements were approved by management and were
issued on November 12, 2009. Subsequent events have been evaluated through this
date.
5. Recently
Issued Accounting Pronouncements
We have
reviewed accounting pronouncements and interpretations thereof that have
effectiveness dates during the periods reported and in future periods. We
believe that the following impending standards may have an impact on our future
filings. The applicability of any standard is subject to the formal
review of our financial management and certain standards are under
consideration.
In
June 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-01, Topic 105 — Generally Accepted Accounting Principles —
amendments based on Statement of Financial Accounting Standards No. 168,
The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles. This ASU reflected the issuance of FASB
Statement No. 168. This Accounting Standards Update amends the FASB
Accounting Standards Codification for the issuance of FASB Statement
No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of
Generally Accepted Accounting Principles. This Accounting Standards Update
includes Statement 168 in its entirety, including the accounting standards
update instructions contained in Appendix B of the Statement. The
Codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. The Codification is
effective for interim and annual periods ending after September 15, 2009,
and as of the effective date, all existing accounting standard documents will be
superseded. The Codification is effective for us in the third quarter of 2009,
and accordingly, our Quarterly Report on Form 10-Q for the quarter ending
September 30, 2009 and all subsequent public filings will reference the
Codification as the sole source of authoritative literature.
In
June 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-02, Omnibus
Update—Amendments to Various Topics for Technical Corrections. This
omnibus ASU detailed amendments to various topics for technical corrections. The
adoption of ASU 2009-02 will not have a material impact on our condensed
financial statements.
In
August 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-03, SEC Update —
Amendments to Various Topics Containing SEC Staff Accounting Bulletins.
This ASU updated cross-references to Codification text. The adoption of
ASU 2009-03 will not have a material impact on our condensed financial
statements.
In
August 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-04, Accounting
for Redeemable Equity Instruments — Amendment to Section 480-10-S99.
This ASU represents an update to Section 480-10-S99, Distinguishing Liabilities from
Equity, per Emerging Issues Task Force Topic D-98, “Classification and
Measurement of Redeemable Securities.” The adoption of ASU 2009-04 will not have
a material impact on our condensed financial statements.
In
August 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-05, Fair Value
Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value.
This Accounting Standards Update amends Subtopic 820-10, Fair Value
Measurements and Disclosures - Overall, to provide guidance on the fair value
measurement of liabilities. The adoption of ASU 2009-05 is not expected to have
a material impact on our condensed financial statements.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-06, Implementation Guidance on
Accounting for Uncertainty in Income Taxes and Disclosure Amendments for
Nonpublic Entities. This Accounting Standards Update provides additional
implementation guidance on accounting for uncertainty in income taxes and
eliminates the disclosures.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-07, Technical
Corrections to SEC Paragraphs. This Accounting Standards Update corrected
SEC paragraphs in response to comment letters. The adoption of ASU 2009-07 will
not have material impact on our condensed financial statements.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-08, Earnings Per
Share Amendments to Section 260-10-S99. This Codification Update
represents technical corrections to Topic 260-10-S99, Earnings per Share, based
on EITF Topic D-53, Computation of Earnings Per Share for a Period that Includes
a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock
and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the
Redemption or Induced Conversion of Preferred Stock. The adoption of ASU 2009-08
will not have material impact on our condensed financial
statements.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-09, Accounting
for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based
Payments to Non-Employees. This Accounting Standards Update represents a
correction to Section 323-10-S99-4,
F-10
Accounting
by an Investor for Stock-Based Compensation Granted to Employees of an Equity
Method Investee. Section 323-10-S99-4 was originally entered into the
Codification incorrectly. The adoption of ASU 2009-09 will not have material
impact on our condensed financial statements.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-10, Financial
Services-Brokers and Dealers: Investments-Other, Amendment to Subtopic
940-325. This Accounting Standards Update codifies the Observer comment
in paragraph 17 of EITF 02-3, Issues Involved in Accounting for Derivative
Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and
Risk Management. The adoption of ASU 2009-10 will not have material impact on
our condensed financial statements.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-11, Extractive
Activities-Oil and Gas, Amendment to Section 932-10-S99. This
Accounting Standards Update represents a technical correction to the SEC
Observer comment in EITF 90-22, Accounting for Gas-Balancing Arrangements. The
adoption of ASU 2009-11 will not have material impact on our condensed financial
statements.
In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-12, Fair Value Measurements and Disclosures (Topic 820),
Investments in Certain Entities that Calculate Net Asset Value per Share (or Its
Equivalent). This Accounting Standards Update amends Subtopic 820-10, Fair Value
Measurements and Disclosures Overall, to provide guidance on the fair value
measurement of investments in certain entities that calculate net asset value
per share (or its equivalent). The adoption of ASU 2009-12 will not have
material impact on our condensed financial statements.
6. Property,
Equipment and Intangible Assets
There
were no capitalized equipment as of September 30, 2009. Equipment
sold in 2008 resulted in a loss of $2,757. Depreciation of equipment
was $0, $520 and $693 for the nine months ended September 30, 2009, 2008 and for
the period December 9, 2005 (date of inception) through September 30, 2009,
respectively.
The
Company owns certain rights and licenses of intellectual property.
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
(audited)
|
|||||||
Intangible
Assets
|
$ | 727,000 | $ | 727,000 | ||||
Less: Accumulated
Amortization
|
52,461 | 6,111 | ||||||
$ | 674,539 | $ | 720,889 | |||||
2009
|
$ | 12,117 | ||||||
2010
|
48,467 | |||||||
2011
|
48,467 | |||||||
2012
|
48,467 | |||||||
2013
|
48,467 | |||||||
thereafter
|
468,554 | |||||||
$ | 674,539 |
Amortization
expense was $12,116, $1,666, $36,350, $4,444, and $42,461 for the three and nine
months ended September 30, 2009, 2009 and the period December 9, 2005 (date of
inception) through September 30, 2009, respectively.
7. Related
Party Transactions
The
Company entered into an agreement with a company, Hyfuels, Inc.,(the worldwide
intellectual property owner) which secures intellectual property
licensing for North, South, Central America and all Caribbean Islands ("the
Territories"),. Dr. Ruggero Santilli, Chief Executive Officer,
Chairman of the Board and Chief Scientist of MagneGas Corporation, is also the
Chief Executive Officer, Chief Scientist and President of Hyfuels, Inc so as to
expedite the patent work on behalf of both MagneGas Corporation and Hyfuels,
Inc. It should be noted that Dr. Santilli is not and never has
been a stockholder of Hyfuels, Inc. and is lending his knowledge and expertise
for the mutually beneficial advancement of this technology. This
intellectual property consists of all relevant patents, patent applications,
trademarks and domain names. The agreement became effective February
2008, when the Company issued 100,000 shares of common stock valued at $1.00 per
share. The term of the license agreement is in perpetuity for the
above territories with the exception of (i) bankruptcy or insolvency of the
Company (ii) the filing of the Company of a petition for bankruptcy (iii) the
making by the Company of the assignment of the license for the benefit of
creditors (iv) the appointment of a receiver of the Company or any of its assets
which appointment shall not be vacated within 60 days thereafter (v) the filing
of any other petition for the relief from creditors based upon the alleged
bankruptcy or insolvency of the Company which shall not be dismissed within 60
days thereafter. Additionally, the agreement triggered a 5 year consulting
agreement with Dr. Santilli, whose knowledge and expertise of the
technology is essential in the development of the MagneGas product.
The terms of the consulting agreement consist of issuance of common
stock (100,000 shares) and payment of $5,000 per month to Dr. Santilli,
upon the determination by the Board of Directors of MagneGas Corporation of
achieving adequate funding. On December 29, 2008 the company
exercised their purchase option to acquire the intellectual property which
includes all possible inventions, discoveries and intellectual right of the
MagneGas Technology, for 30,000,000 common shares with a market value of
$627,000 at the time of the purchase option. The Company is
continuing to seek opportunities for expansion of its intellectual property
rights into other areas of the world excluding Europe.
In 2007
an advance in the amount of $10,000 was made by a company owned by a
shareholder, for initial deposit for services. As of September 30,
2009, the amount remains as a payable to the affiliate. There are no
repayment terms to this advance and the amount is payable upon
demand.
F-11
In
January 2008, the Company received $30,000 from a shareholder in exchange for an
unsecured promissory note to a shareholder. During 2008
additional funds were contributed for the purposes of operating capital, under
the same terms of the original shareholder note. The total of these
notes were $125,100 plus accrued interest. These promissory notes
have no repayment date; however it is payable within 30 days of written
demand. Payment is to include accrued simple interest at
4%.
During
the normal course of operations, business expenses have been paid by a
shareholder. These advances are short-term in nature and the expenses
are typically reimbursed within a reasonable period. These advances
are non-interest bearing and have no repayment date. As of September
30, 2009 the amounts due from advances was $2,187.
Beginning
April 2008 the Company entered into a month-to-month lease, at a monthly rate of
$2,500 per month for facilities to occupy approximately 3,000 square feet of a
6,000 square foot building and the use of certain equipment and utilities, as
needed. The facility allows for expansion needs. The
lease is held by a Company that is effectively controlled by
Dr. Santilli.
The use
of an initial small production refinery has been contributed by
Dr. Ruggero Santilli, Chief Executive Officer, Chief Scientist, and
Chairman of the Board. The computed fair value of this month to month
rental agreement is $1,870 per month and has been charged to equipment rental
expense in the operating expenses. To reflect the contributed value,
the corresponding entry has been charged to additional paid in capital, and
is included in the statement of stockholders’ equity. Total
contributed value was $5,610 and $16,830 for the three and nine months ended
September 30, 2009 and $28,050 for the period December 9, 2005 (date of
inception) through September 30, 2009.
The
amounts and terms of the above transactions may not necessarily be indicative of
the amounts and terms that would have been incurred had comparable transactions
been entered into with independent third parties.
8. Income
Tax
The
Company has not recognized an income tax benefit for its operating start-up
losses generated since inception based on uncertainties concerning its ability
to generate taxable income in future periods. The tax benefit for the
periods presented is offset by a valuation allowance established against
deferred tax assets arising from operating losses and other temporary
differences, the realization of which could not be considered more likely than
not. In future periods, tax benefits and related deferred tax assets
will be recognized when management considers realization of such amounts to be
more likely than not. As of December 31, 2008, the Company incurred
start-up losses of approximately $90,600. These losses are
capitalized as start-up costs for tax purposes, to be amortized when the Company
commences business operations.
9. Equity
The
company has two classifications of stock:
Preferred
Stock includes 10,000,000 shares authorized at a par value of
$0.001. Preferred Stock has been issued as Series A Preferred
Stock. Preferred Stock has liquidation and dividend rights over
Common Stock, which is not in excess of its par value. The preferred
stock has no conversion rights or mandatory redemption features. Each
share of Preferred Stock is entitled to 100,000 votes.
Common
Stock includes 900,000,000 shares authorized at a par value of
$0.001. The holders of Common Stock and the equivalent Preferred
Stock, voting together, shall appoint the members of the Board of the
Directors. Each share of Common Stock is entitled to one
vote.
During
the nine month period ended September 30, 2009, the company issued 3,032,500
common shares to various consultants, valued at fair
market. During the nine month period ending September 30, 2009,
the Company sold 1,642,062 common shares at the prevailing market quotation
share price for $158,000 in cash.
During
the quarter ended June 30, 2009 the Company issued subscription agreements for
the purchase of shares of common stock which included warrants to purchase an
additional 854,763 common shares at the fair market value of the shares at the
date of the subscription agreement. If the warrants are to be
exercised, the proceeds would amount to $131,000. There have been no
excises of the warrants as of September 30, 2009.
Additionally
warrants were issued to a service provider, vesting over a one year period,
exercisable at the fair market price at the date of the
agreement. A total of 340,000 warrants, vesting on the
quarterly periods through February 15, 2010 were valued at $8,432 and will be
recognized ratably over the vesting period. Stock-based compensation
was charged for the recognized portion of the warrants, in the amount of $2,108
and $4,216 for the three and nine month period ended September 30,
2009.
F-12
The
following assumptions were used in the valuation calculation:
Dividend
rate
|
0.000 | % | ||
Risk-free
interest rate
|
1.440 | % | ||
Expected
lives
|
2.0 | |||
Expected
price volatility
|
110.862 | % | ||
Forfeiture
Rate
|
0.000 | % |
10. Subsequent
Events
The
Company is currently in negotiations with companies to expanded territories in
the development of the MagneGas technologies. As of September
30, 2009, there are agreements in principle, with completion upon transfer of
title.
Jeruz Magnegas Pvt. Limited:
On March
26, 2009 the Company entered into contract with HyFuels, Inc to permanently
transfer to Magnegas Corporation in its totality and irrevocably the entirety of
the assets owned by HyFuels, Inc in Jeruz Magnegas Pvt.
Limited. Jeruz Magnegas Pvt. Limited is an India based
corporation (located at 8/A, Ground Floor"KARP House", Lal Darwaja, Surat: 395
008, India) that owns all Intellectual Property rights (patents, patent
applications, trademark, domain names and technical know-how) for the Magnegas
Technology for India, Pakistan, Bangladesh and Sri Lanka only. The
assets transferred from HyFuels, Inc to Magnegas Corporation are as
follows:
1.
|
12.5%
equity shares of Jeruz Magnegas Pvt, Limited in the existing issued and
paid up capital of Jeruz Magnegas Pvt. Limited;
|
2.
|
5%
royalties on sales of Magnegas equipment made by Jeruz Magnegas Pvt.
Limited.
|
The
consideration to be paid for the Purchased Assets the Purchaser, MagneGas,
is 1,000,000 (one million) restricted shares of common stock. As
of September 30, 2009, the terms of this agreement were not satisfied and the
shares were not issued, rendering the agreement null and void. It was
determined by the Board of Directors that there were certain liabilities
associated with share ownership of a company domiciled in India and these
liabilities could not be properly assessed to the satisfaction of the
Board. In addition, the royalty terms were not satisfactory,
requiring a royalty on sales after direct expenses, versus a royalty on gross
sales. Negotiation is currently underway to restructure this
agreement without equity participation due to the inherent risk to Magnegas
Corporation of the share ownership, instead including better royalty
terms. As of November 12, 2009, this negotiation has not been
completed and the Company can make no assessment as to the expected outcome of
the negotiation.
Magnegas
Israel LLC
Magnegas
Israel LLC issued Magnegas Corp a minority share interest of 20% of their issued
and outstanding stock. We have no common directors or officers in this company
and are unrelated. Magnegas Israel LLC owns the intellectual property
rights for Magnegas for Israel. Magnegas Israel LLC
has no assets or cash at this time. The completion of this
transaction will be completed within a reasonable time, at which time the
Company will recognize an investment in the venture.
We
currently have no written agreement with this company and it is intended that
MagneGas, in exchange for the 20% interest, will advise the Israel Company and
additionally provide manufacturing support. Magnegas Israel, LLC is
seeking funding to complete the purchase of a demonstration Magnegas
refinery. As of November 12, 2009, this funding has not been
secured.
Philippine
and Vietnam Market
On July
7, 2009 the Company signed definitive Asset Purchase and Distribution agreements
with American Investments, Inc for the purchase of a $1.2million Magnegas
Refinery and the granting of exclusive distribution rights for the Philippine
and Vietnam markets. In June 2009, MagneGas received $100,000 as down-payment on
the equipment purchase order. The signed agreement calls for an
additional $390,000 is due on December 1, 2009, the anticipated commencement of
construction. The balance of $710,000 is due prior to the final delivery of the
refinery. Due to the extreme natural weather conditions
(hurricane, flooding) encountered in the Philippines, it is uncertain if the
original time schedule is to be renegotiated.
11. Contingencies
From time
to time the Company may be a party to litigation matters involving claims
against the Company. Management believes that there are no current matters
that would have a material effect on the Company’s financial position or results
of operations.
F-13
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operation or
Plan of Operation.
|
Cautionary Notice Regarding
Forward Looking Statements
The
information contained in Item 2 contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results may
materially differ from those projected in the forward-looking statements as a
result of certain risks and uncertainties set forth in this report. Although
management believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual results
will not be different from expectations expressed in this report.
We desire
to take advantage of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. This filing contains a number of forward-looking
statements which reflect management’s current views and expectations with
respect to our business, strategies, products, future results and events, and
financial performance. All statements made in this filing other than statements
of historical fact, including statements addressing operating performance,
events, or developments which management expects or anticipates will or may
occur in the future, including statements related to distributor channels,
volume growth, revenues, profitability, new products, adequacy of funds from
operations, statements expressing general optimism about future operating
results, and non-historical information, are forward looking statements. In
particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,”
“may,” variations of such words, and similar expressions identify
forward-looking statements, but are not the exclusive means of identifying such
statements, and their absence does not mean that the statement is not
forward-looking. These forward-looking statements are subject to certain risks
and uncertainties, including those discussed below. Our actual results,
performance or achievements could differ materially from historical results as
well as those expressed in, anticipated, or implied by these forward-looking
statements. We do not undertake any obligation to revise these forward-looking
statements to reflect any future events or circumstances.
Readers
should not place undue reliance on these forward-looking statements, which are
based on management’s current expectations and projections about future events,
are not guarantees of future performance, are subject to risks, uncertainties
and assumptions (including those described below), and apply only as of the date
of this filing. Our actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements. Factors which could cause or contribute to such differences include,
but are not limited to, the risks to be discussed in our Annual Report on form
10-K and in the press releases and other communications to shareholders issued
by us from time to time which attempt to advise interested parties of the risks
and factors which may affect our business. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events, or otherwise.
Plan of
Operations
Due to
the current state of the economy and financial markets, it is been difficult for
the Company to achieve its Plan of Operation, primarily due to lack of capital
to finance the Plan. As a result, the Company is extending the Plan
to cover a 24 month period. During the next twenty four months, we
expect to take the following steps in connection with the further development of
our business and the implementation of our plan of
operations:
Overall
Plan
Our
overall plan of operation for the next twenty four months is to aggressively
seek revenue through the sale of Magnegas for metal working, hydrogen for
various industrial uses and equipment sales for the processing of liquid waste.
We will pursue worldwide distributors of equipment sales and fuel (with the
exception of Europe). In addition, the plan is to install several
Plasma Arc Flow Industrial demonstration centers strategically located
throughout the United States. These centers will be used to produce fuel
to sell to market and to promote equipment sales. One will be installed
in a municipal sewage treatment facility to process sludge or sewage, one will
be built and used as a refinery for the metal cutting fuel market, one will be
developed for converting solar or wind power to hydrogen and several will be
built and used to produce fuel for the automotive market. These
refineries will be used to promote our core business strategy. During
the next twenty four months, we intend to pursue private equity financing in
combination with federal and state grant funding, for up to $10 million in
various phases using our shares of common stock and through federal and state
funds available for renewable energy as part of the Stimulus
program. We will pursue the acquisition of a metal cutting and
welding fuel distribution company to accelerate our market
penetration. In addition, we will conduct research and development
for the catalytic liquefaction of Magnegas, the industrial membrane separation
of hydrogen, the use of Magnegas as an additive to clean coal exhaust and the
installation of a pilot refinery utilizing the synergies of wind power or solar
power to produce fuel with our technology. We will also pursue all needed
federal, state and local regulatory permits necessary to implement our
operational plan.
Fourth Quarter
2009
We will
continue our efforts in selling MagneGas in the metal cutting
market. We will use established relationships with existing metal
cutting fuel wholesalers to distribute MagneGas for this
market.
14
We will
fulfill fuel orders from our Pennsylvania, Kentucky and Tampa distributors and
will pursue agreements with additional metal cutting fuel distributors
throughout the United States. We will aggressively pursue equity
and grant financing to obtain sufficient capital to allow us to purchase a fuel
distributor in our market, construct refineries and conduct research and
development. We intend to actively recruit new board members,
corporate and manufacturing staff with appropriate experience. In
addition, we will attempt to aggressively expand our world-wide market reach
(excluding Europe) through new and existing relationships with fuel
distributors, liquid waste and environmental companies.
We
anticipate the commencement of our manufacturing of our first MagneGas
PlasmaArcFlow for commercial installation, in fulfillment of our Philippines
contract after receipt of the next installment payment
due.
First
Quarter 2010
We plan
to begin construction of one PlasmaArcFlow demonstration center to process
sludge or sewage at a local municipality. We will continue to
aggressively pursue MagneGas sales for the metal cutting market through
wholesalers, trade events and from our marketing and sales consultants. We
intend to continue to actively recruit new board members with appropriate
experience and hire a corporate and operational staff. We expect to
complete the first phase of our capital raise and to identify potential
acquisitions in our market. We will conduct additional research and
development as outlined above. We plan to conduct a demonstration at
a local car dealership, turning a car dealer into a fuel producer by using
automotive liquid waste to produce fuel on site.
We expect
the work in process of our Philippines PlasmaArcFlow to be completed and in
quality control testing. Delivery and installation is anticipated for
the fourth quarter 2009 or first quarter 2010.
Second
Quarter 2010
We plan
to install our Plasma Arc Flow demonstration center at a local Florida sewage
treatment facility to process human sludge or sewage. We plan to begin
construction of our refinery for the metal working market. We plan to
aggressively pursue MagneGas sales for the metal cutting market through a
marketing plan that fully leverages our demonstration centers and we will hire
additional operational staff and manufacturing staff in anticipation of new
sales and will expand our current facility to accommodate our space
needs. We will continue our research and development
efforts.
Third
Quarter 2010
We
anticipate that we can complete construction of our metal cutting fuel refinery
and will begin construction of a third refinery converting solar or wind
power to hydrogen with a location to be determined. By the second
quarter of 2010, we anticipate being fully operational with two refineries
located in the United States and we will begin distribution of fuel through our
Philippine distributor. We plan to continue sales of MagneGas in the
metal cutting market. We will aggressively pursue our marketing and sales
plan to fully leverage our demonstration centers. We expect to obtain
several service contracts during this quarter as potential customers view
firsthand the operation of our equipment at an industrial level. We plan to
continue to hire operational staff and manufacturing staff in anticipation of
new sales.
Fourth
Quarter 2010 through Fourth Quarter 2011
We plan
to complete construction of the refinery converting solar or wind power to fuel
and intend to complete several additional refineries converting liquid waste to
fuel for the automotive market. The plan of the Company is to launch
the automotive market by turning car dealers into fuel
producers. Each car dealer disposes of large volumes of liquid waste
in the form of used motor oil, used antifreeze and other waste. This
waste can be used to produce fuel, and that fuel can be sold for use in bi-fuel
automobiles. Several refineries will be built for these markets and will be
strategically placed at car dealers throughout the United States.
The
current state of the economy and financial markets has made it difficult for us
to achieve our past operational plans and the Company can make no assurance that
we will achieve our operational plan in the future.
The
foregoing represents our best estimate of our current planning, and is based on
a reasonable assessment of funds we expect to become
available. However, our plans may vary significantly depending upon
the amount of funds raised and status of our business plan. In the event we are
not successful in reaching our initial revenue targets, additional funds will be
required and we would then not be able to proceed with our business plan as
anticipated. Should this occur, we would likely seek additional financing to
support the continued operation of our business.
The
Company has financed its operations primarily through cash generated
by the sale of stock through a private offering. We believe we can
not currently satisfy our cash requirements for the next twelve months with our
current cash and expected revenues from our private placement and
sales. However, management plans to increase revenue and obtain
additional financing in order to sustain operations for at least the next twelve
months. We have already sold shares to support our continued operations.
However, completion of our plan of operation is subject to attaining adequate
revenue. We cannot assure investors that adequate revenues will be generated.
15
In the
absence of our projected revenues, we may be unable to proceed with our plan of
operations. Even without significant revenues within the next twelve months, we
still anticipate being able to continue with our present activities, but we will
require financing to potentially achieve our goal of profit, revenue and
growth.
In the
event we are not successful in reaching our initial revenue targets, additional
funds will be required, and we would then not be able to proceed with our
business plan for the development and marketing of our core services. Should
this occur, we would likely seek additional financing to support the continued
operation of our business. We anticipate that depending on market conditions and
our plan of operations, we would incur operating losses in the foreseeable
future. We base this expectation, in part, on the fact that we may not be able
to generate enough gross profit from our services to cover our operating
expenses. Consequently, there is substantial doubt about the Company’s ability
to continue to operate as a going concern.
As
reflected in the unaudited financial statements, we are in the development
stage, and have an accumulated deficit from inception of $2,317,538 and have a
negative cash flow from operations of $507,307 from inception. This raises
substantial doubt about its ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company's
ability to raise additional capital and implement its business plan. The
unaudited financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
At
September 30, 2009 the Company had minimal cash resources to meet current
obligations. The Company may rely upon the issuance of common stock
and additional capital contributions from shareholders to fund administrative
expenses until operations generate cash flows sufficient to support the on-going
business.
Management
believes that actions presently being taken to obtain additional funding and
implement its strategic plans provide the opportunity for the Company to
continue as a going concern. We anticipate that we will require approximately
$10,000,000 to fund our plan of operations.
In effort
to achieve revenue plans we have been concentrating on selling MagneGas as a
metal cutting fuel. We have received firm orders from several entities for the
Magnegas produced from non-hazardous waste. We have an additional
non-binding letter of intent to process liquid waste based on proposals and our
demonstrations. The non-binding letter of intent includes the
installation of a plant scale test at a local sewage treatment facility
processing sludge. To fund operations, the Company has raised
$377,500, since inception, in cash proceeds via sales of common stock to date
and raised an additional $197,100 in cash proceeds from a shareholder loans
since inception. Additionally, to deliver on the metal cutting gas
orders we have the commitment of six persons dedicated to the fulfillment of
orders and it is headed by a well known industry consultant, whom we have named
as president to help develop operating guidelines as well as being instrumental
in the marketing and development of our brand offering.
To expand
understanding of our efforts and progress in generating revenue:
Metal Cutting
Magnegas: Marketing efforts are being concentrated on
industry wholesalers to utilize their established customer base and distribution
channels. Our current operations in new facilities (previously
disclosed month to month agreement) have been set up for
expansion. We estimate current facilities have capacity for 400-500
bottles to be processed per week. Our new facilities allow us the
flexibility to ramp up for greater volume, as market interest is anticipated to
increase.
In April
of 2009, the Company established a relationship with Crumpton Welding Supply in
Florida to distribute Magnegas at each of their four
locations. In order to better support this relationship, the
Company hired an outside sales representative as an independent contractor to
partner with Crumpton to generate sales in their territory. In
addition, the Company has a relationship with a small distributor, Boca
Industries in Atlanta, Georgia. Boca Industries has closed their
Atlanta location and is in the process of relocating to North Carolina and as a
result will no longer be distributing fuel to the Atlanta based market. The
Company will revisit the relationship with Boca after they have moved to their
new location. The Company also established a relationship with York Welding
Supply in Pennsylvania and Holston Gas Company in Kentucky to distribute
fuel. The Company has identified two additional independent sales
representatives to support these relationships
Letter of Intent: A
non-binding letter of intent was agreed, in principal with a local
municipality's water treatment facility. Our existing prototype
equipment is being modified for the specifics required for this
project. The initial fuel generated from this project will be
sold in the metal cutting market. At this time we are unable to accurately
estimate the volume that will be processed. Upon completion of
the 12 month test the contract will be evaluated and subject to renegotiation.
No date has been determined when this project is to commence and funding will be
required to implement this project as per our plan of operations.
16
Results of
Operations
For
the three and nine months ended September 30, 2009, 2008 and for the period
December 9, 2005 (date of inception) through September 30, 2009.
Selected
Historical Data
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues
|
$ |
1,300
|
$ |
1,072
|
$ |
5,351
|
$ |
9,151
|
||||||||
Gross
Profit
|
412
|
(30
|
)
|
915
|
5
|
|||||||||||
Operating
Expenses
|
494,531
|
489,918
|
913,741
|
777,240
|
||||||||||||
Net
Loss
|
$ |
(495,486
|
)
|
$ |
(490,421
|
)
|
$ |
(917,641
|
)
|
$ |
(780,975
|
)
|
Revenues
For the
three and nine months ended September 30, 2009 and 2008 we generated
revenues of $1,300, $1,072, $5,351, and $9,151, respectively from our metal
cutting fuel sales operations. The year-to-date decrease was
due to the general economic conditions as it affects almost all production and
construction areas, creating inconsistent orders. The results of our
marketing have not generated the revenue we had anticipated, believed to be due
to the economy and the target market channels inability to commit funds for new
technology and capital expenditures.
Operating
Expenses
Operating
costs were incurred in the amount of $494,531, $489,918, $913,741 and $777,240
for the three and nine months ended September 30, 2009 and 2009. The
increase was attributable to the issuance of common stock for
services. The Company has been allocating resources, primarily
through the issuance of stock in payment, for advertising and promotion of the
technology. Professional fees also remain a significant portion of
the operating expenses due to public filing requirements. The
major expenses incurred have been for professional and non-cash stock based
compensation and account for the variances in costs from comparative prior year
costs.
Net Loss
Net
losses incurred in all periods presented have been primarily due to the
operating costs. These expenses resulted in the net losses in the
amount of $495,486, $490,421, $917,641 and $780,975 for the three and nine
months end September 30, 2009 and 2008 respectively. The Company
incurred net losses of $2,317,538 for the period December 9, 2005 (date of
inception) through September 30, 2009, respectively. The increase in
the year over year net loss was due primarily from general and administrative
expenses, particularly professional services and stock-based payments for
advertising. At this time, normal costs of public
filing will continue and it is not known when significant revenues will occur to
off-set these expenses.
Liquidity and Capital
Resources
The
Company is currently financing its operations primarily through cash generated
by the sale of stock through a private offering. We believe we can
not currently satisfy our cash requirements for the next twelve months with our
current cash and expected revenues from our private placement and
sales. However, management plans to increase revenue and obtain
additional financing in order to sustain operations for at least the next twelve
months. We have already sold shares to support our continued operations.
However, completion of our plan of operation is subject to attaining adequate
revenue. We cannot assure investors that adequate revenues will be generated. In
the absence of our projected revenues, we may be unable to proceed with our plan
of operations. Even without significant revenues within the next twelve months,
we still anticipate being able to continue with our present activities, but we
may require financing to potentially achieve our goal of profit, revenue and
growth.
In the
event we are not successful in reaching our initial revenue targets, additional
funds may be required, and we would then not be able to proceed with our
business plan for the development and marketing of our core services. Should
this occur, we would likely seek additional financing to support the continued
operation of our business. We anticipate that depending on market conditions and
our plan of operations, we would incur operating losses in the foreseeable
future. We base this expectation, in part, on the fact that we may not be able
to generate enough gross profit from our services to cover our operating
expenses. Consequently, there is substantial doubt about the Company’s ability
to continue to operate as a going concern.
As
reflected in the unaudited financial statements, we are in the development
stage, and have an accumulated deficit from inception of $2,317,538 and have a
negative cash flow from operations of $507,307 from inception. This raises
substantial doubt about its ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company's
ability to raise additional capital and implement its business plan. The
unaudited financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
17
At
September 30, 2009 the Company had minimal cash to meet current
obligations. The Company may rely upon the issuance of common stock
and additional capital contributions from shareholders to fund administrative
expenses until operations generate cash flows sufficient to support the on-going
business.
Management
believes that actions presently being taken to obtain additional funding and
implement its strategic plans provide the opportunity for the Company to
continue as a going concern
Subsequent
Events
The
Company is currently in negotiations with companies to expanded territories in
the development of the MagneGas technologies. As of September
30, 2009, there are agreements in principle, with completion upon transfer of
title.
The
events subsequent to the date of our report are detailed in the notes to the
unaudited financial statements.
Recent Accounting
Pronouncements
We have
reviewed accounting pronouncements and interpretations thereof that have
effectiveness dates during the periods reported and in future periods. The
Company has carefully considered the new pronouncements that alter previous
generally accepted accounting principles and does not believe that any new or
modified principles will have a material impact on the corporation’s reported
financial position or operations in the near term. The applicability
of any standard is subject to the formal review of our financial management and
certain standards are under consideration. Those standards have been
addressed in the notes to the unaudited financial statement and in our Annual
Report, filed on Form 10-K for the period ended December 31, 2008.
Critical Accounting
Policies
The
Company’s significant accounting policies are presented in the Company’s notes
to financial statements for the period ended September 30, 2009 and fiscal year
ended December 31, 2008, which are contained in the Company’s 2008 Annual Report
on Form 10-K. The significant accounting policies that are most critical and aid
in fully understanding and evaluating the reported financial results include the
following:
The
Company prepares its financial statements in conformity with generally accepted
accounting principles in the United States of America. These principals require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management believes that these estimates
are reasonable and have been discussed with the Board of Directors; however,
actual results could differ from those estimates.
The
Company issues restricted stock to consultants for various
services. Cost for these transactions are measured at the fair value
of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable. The value of the
common stock is measured at the earlier of (i) the date at which a firm
commitment for performance by the counterparty to earn the equity instruments is
reached or (ii) the date at which the counterparty's performance is
complete.
Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for
impairment whenever facts and circumstances indicate that the carrying value may
not be recoverable. When required impairment losses on assets to be
held and used are recognized based on the fair value of the
asset. The fair value is determined based on estimates of future cash
flows, market value of similar assets, if available, or independent appraisals,
if required. If the carrying amount of the long-lived asset is not
recoverable from its undiscounted cash flows, an impairment loss is recognized
for the difference between the carrying amount and fair value of the
asset. When fair values are not available, the Company estimates fair
value using the expected future cash flows discounted at a rate commensurate
with the risk associated with the recovery of the assets. We did not
recognize any impairment losses for any periods presented.
Off-Balance Sheet
Arrangements
We have
no off-balance sheet arrangements.
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
We are a
Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
18
Item
4.
|
Controls
and Procedures.
|
Evaluation of disclosure
controls and procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (Exchange
Act), as of September 30, 2009. Based on this evaluation, our principal
executive officer and principal financial officer have concluded that our
disclosure controls and procedures as of the end of such periods are not
effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and that our disclosure and controls are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure
The
company has limited resources and as a result, a material weakness in financial
reporting currently exists. Those weaknesses include: Lack of
Effective Corporate Governance Policies and Procedures. We do not have effective
policies regarding the independence of or directors and do not have independent
directors. The lack of independent directors means that there is no effective
review, authorization, or oversight of management or management’s actions by
persons that were not involved in approving or executing those actions. We have
no conflicts of interest policies and there is no provision for the review and
approval of transactions between the Company and interested members of
management.
Lack of
Effective Policies Regarding the General Accounting System. We do not have any
documented processes for the input, accumulation, or testing of financial data
that would provide assurance that all transactions are accurately and timely
recorded or that the financial reports will be prepared on a periodic
basis.
Management
has determined that the Company does not have the financial resources or
personnel to address any of the material weaknesses identified or to conduct a
more robust evaluation of its controls. As resources become available,
management will develop and implement remedial actions to address the material
weaknesses it has identified.
A
material weakness is a deficiency (within the meaning of the Public Company
Accounting Oversight Board (PCAOB Auditing Standard 5) or combination of
deficiencies in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the Company's annual or
interim financial statements will not be prevented or detected on a timely
basis. Management has determined that a material weakness exists due
to a lack of segregation of duties, resulting from the Company's limited
resources.
The
Company’s management, including the President (Principal Executive Officer),
Director, and Chief Financial Officer (Principal Accounting and Financial
Officer), confirm that there was no change in the Company’s internal control
over financial reporting during the quarter ended September 30, 2009 that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
We are
currently not involved in any litigation that we believe could have a material
adverse effect on our financial condition or results of operations. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our companies or our subsidiaries’ officers or
directors in their capacities as such, in which an adverse decision could have a
material adverse effect.
Item
1A. Risk Factors.
We
believe there are no changes that constitute material changes from the risk
factors previously disclosed in the Company’s 2008 Annual Report filed on Form
10-K.
Item
2. Unregistered Sales of Equity Securities
and Use of Proceeds.
None
19
Item
3. Defaults Upon Senior
Securities.
None
Item
4. Submission of Matters to a Vote of
Security Holders.
No matter
was submitted during the quarter ending September 30, 2009, covered by this
report to a vote of our shareholders, through the solicitation of proxies or
otherwise.
Item
5. Other Information.
None
Item
6. Exhibits
Exhibit
Number
|
Exhibit
Title
|
||
31.1
|
Certification
of Dr. Ruggero Santilli pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
||
31.2
|
Certification
of Luisa Ingargiola, pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
||
32.1
|
Certification
of Dr. Rugerro Maria Santilli pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
||
32.2
|
Certification
of Luisa Ingargiola, pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
20
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
MagneGas Corporation | ||||
By:
|
/s/ Dr. Ruggero Maria Santilli
|
|||
Dr. Ruggero Maria Santilli
|
||||
Chief
Executive Officer
|
||||
Dated:
|
November
16, 2009
|
21