UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
______________
Amendment No. 1
FORM 10-QSB
______________
x
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the quarterly period ended
March 31,
2007
o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period from
______________ to ______________
Commission File
No. 000-51883
______________
MagneGas Corporation
(Exact name of small business issuer as
specified in its charter)
______________
Delaware
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(State or other jurisdiction
of
incorporation or
organization)
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(I.R.S. Employer Identification
No.)
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35246 US
Highway 19 North,
#311
Palm Harbor, Florida
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34684
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(Address of principal executive
offices)
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(Zip
Code)
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4307, Inc., 4400 Route 9 South,
#1000, Freehold, New
Jersey
07728
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(Former name,
former address, if changed since last report)
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Tel: (727)
934-9593
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(Issuer’s telephone
number)
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Check whether the issuer (1) has filed
all reports required to be filed by Section 13 or 15(d) of the 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
Check whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13, or 15(d) of
the Exchange Act subsequent to the distribution of securities under a plan
confirmed by a court. Yes o No 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 May 17, 2007: 67,397,000
shares of common stock.
Transitional Small Business Disclosure
Format (check one): Yes o No x
TABLE OF CONTENTS
PART I - FINANCIAL
INFORMATION
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Item 1. Financial
Statements
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Item 2. Management’s
Discussion and Analysis or Plan of Operation
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Item 3. Controls and
Procedures
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PART II -OTHER
INFORMATION
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Item 1. Legal
Proceedings.
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Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.
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Item 3. Defaults Upon Senior
Securities.
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Item 4. Submission of
Matters to a Vote of Security Holders.
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Item 5. Other
Information.
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Item 6. Exhibits and Reports
of Form 8-K.
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SIGNATURES
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Form 10- QSB/A
Amendment No.1
Explanatory Note
The purpose of this amendment No.1 on
Form 10-QSB (this “Amendment”) of MagneGas
Corporation is to amend the Quarterly Report on Form 10-QSB (the “Original Report”) for the period
ended March 31, 2007, which was originally filed with the Securities and
Exchange Commission on May 18, 2007. We are filing this amendment to clarify
as a subsequent event an acquisition transaction. Additionally we
also clarify the terms of a license agreement and disclose stock issued
subsequent to March 31, 2007 as disclosed in footnote 10 to the financial
statements, as well as the voting rights of the preferred and common
shareholders as disclosed in footnote 8 to the financial
statements. Lastly, certain significant accounting polices were
updated in footnote 5 to the financial statements. Except for the
amended language in footnotes 5, 8 and 10 referred above, no other information
in the Original Report is amended by this Amendment.
This Amendment sets forth the Original
Report in its entirety. Accordingly, other than the items
indicated above, this Amendment does not reflect events occurring after the
filing of the Original Report or modify or update those
disclosures. Information not affected by the restatement is unchanged
and reflects the disclosure made at the time of the Original Report with the
Securities and Exchange Commission. Accordingly, this Amendment
should be read in conjunction with the Company's filings made with the
Securities and Exchange Commission subsequent to the filing of the Original
Report. The following items have been amended as a result of the
restatement:
·
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Part I, Item
1: Unaudited Financial Statements (Disclosures indicated
above)
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·
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Part I, Item
2: Management's Discussion and Analysis of Financial
Condition and Results of
Operations;
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·
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Part II, Item
6: Exhibits and Reports of Form
8-K
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Pursuant to Exchange Act Rule 12b-15,
the Company is also including currently dated Sarbanes Oxley Act Section 302 and
Section 906 certifications of the principal executive and financial officers,
which certifications are attached to this Amendment No. 1. This
Amendment No. 1 speaks as of the original date of the filing date of this
Report, except for certifications, which speak as of their respective dates and
the filing date of this Amendment No.1. Concurrently with the
filing of this Amendment No.1, we are filing an Amendment No. 1 on Form
10-QSB/A to our Quarterly Report on Form
10-QSB for the quarter ended June 30, 2007 and
September 30, 2007.
PART I - FINANCIAL
INFORMATION
Item
1. Financial
Statements
Financial Statements
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31,
2007
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
Financial Statements
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31,
2007
Contents
Financial
Statements:
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Balance
Sheet (unaudited)
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F-1
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Statements of
Operations (unaudited)
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F-2
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Statements of Changes in
Stockholder’s Deficit (unaudited)
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F-3
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Statements of Cash
Flows (unaudited)
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F-4
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Notes to Financial Statements
(unaudited)
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F-5-F-9
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MagneGas
Corporation
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(A Development Stage Enterprise and Wholly-Owned Subsidiary of
Clean Energies Tech Co.)
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BALANCE
SHEET
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As of March 31,
2007
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(unaudited)
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3/31/07
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ASSETS
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CURRENT
ASSETS
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LIABILITIES AND STOCKHOLDER'S
DEFICIT
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Preferred Stock - Par value
$0.001;
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None issued and
outstanding
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Common Stock - Par value
$0.001;
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Issued and Outstanding:
100,000
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Additional Paid-In
Capital
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Accumulated Deficit during
development stage
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Total Stockholder's
Deficit
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TOTAL LIABILITIES AND
STOCKHOLDER’S DEFICIT
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The accompanying notes are an integral
part of these unaudited financial statements.
MagneGas
Corporation.
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(A Development Stage Enterprise and Wholly-Owned Subsidiary of
Clean Energies Tech Co.)
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STATEMENT OF
OPERATIONS
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For the quarters ended March 31,
2007, 2006 and
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and for the period December 9, 2005 (date of inception) to
March 31,
2007
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(unaudited)
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Three Months
Ending
March 31, 2007
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Three Months
Ending
March 31,
2006
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December 9, 2005 (date of
inception) to March 31, 2007
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$ |
- |
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$ |
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$ |
- |
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- |
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- |
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- |
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- |
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- |
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- |
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GENERAL AND ADMINISTRATIVE
EXPENSES
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750 |
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300 |
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2,600 |
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$ |
(750 |
) |
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$ |
(300 |
) |
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$ |
(2,600 |
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Loss per share, basic and
diluted
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$ |
(0.01 |
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$ |
(0.00 |
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$ |
(0.03 |
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Basic and diluted weighted average
number of common shares
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100,000 |
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100,000 |
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100,000 |
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The accompanying notes are an integral
part of these unaudited financial statements.
MagneGas
Corporation
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(A Development Stage Enterprise and Wholly-Owned Subsidiary of
Clean Energies Tech Co.)
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STATEMENT OF CHANGES IN
STOCKHOLDER'S DEFICIT
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For the period December 9, 2005 (date of inception) to
March 31,
2007
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(unaudited)
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ACCUM.
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DEFICIT
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COMMON
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DURING
DEVELOPMENT
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TOTAL
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SHARES
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STOCK
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STAGE
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DEFICIT
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Stock issued on acceptance
of
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100,000 |
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$ |
100 |
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$ |
- |
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$ |
100 |
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- |
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- |
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(400
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) |
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(400
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100,000 |
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100 |
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(400
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) |
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(300
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- |
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- |
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(1,450
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) |
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(1,450
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100,000 |
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100 |
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(1,850
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(1,750
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- |
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- |
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(750
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(750
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100,000 |
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$ |
100 |
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$ |
(2,600 |
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$ |
(2,500 |
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The accompanying notes are an integral
part of these unaudited financial statements.
MagneGas
Corporation
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(A Development Stage Enterprise and Wholly-Owned Subsidiary of
Clean Energies Tech Co.)
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STATEMENTS OF CASH
FLOWS
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For the quarters ended March 31,
2007, 2006
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And for the period December 9, 2005 (date of inception) to
March 31,
2007
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(unaudited)
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Three Months
Ending
March 31,
2007
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Three Months
Ending
March 31,
2006
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December 9, 2005 (date of
inception) to March 31, 2007
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CASH FLOWS FROM OPERATING
ACTIVITIES
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$ |
(750 |
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(300
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$ |
(2,600 |
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Stock issued as
compensation
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- |
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100 |
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Increase in Accrued
Expenses
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750 |
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300 |
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2,500 |
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Total adjustments to net
income
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750 |
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300 |
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2,600 |
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Net cash provided by (used in)
operating activities
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- |
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- |
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- |
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CASH FLOWS FROM INVESTING
ACTIVITIES
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Net cash flows provided by (used
in) investing activities
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- |
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- |
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- |
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CASH FLOWS FROM FINANCING
ACTIVITIES
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- |
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- |
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- |
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Net cash flows provided by (used
in) investing activities
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- |
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- |
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- |
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Net increase (decrease) in
cash
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- |
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- |
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- |
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- |
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- |
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- |
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CASH BALANCE - END OF
PERIOD
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$ |
- |
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- |
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$ |
- |
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The accompanying notes are an integral
part of these unaudited financial statements.
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
Notes to Financial
Statements
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31, 2007
1. Background
Information
MagneGas Corporation (the “Company”),
formerly 4307, Inc., was organized in the state of Delaware on December 9, 2005
for the purpose of locating and negotiating with a business entity for a
combination.
2. Business
Operations
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
produces an alternative fuel source. The technology related to
this process has been licensed in perpetuity from a Company related by common
management (see note 10)
3. 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 in the
Business Operations. 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.
4. 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 $750
and $2,600 for the three months ended March 31, 2007 and for the period December
9, 2005 (date of inception) through the period ended March 31, 2007,
respectively. As of March 31, 2007, the Company had $0 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 or debt financing in order to
operate and grow the business. There can be no assurance that the
Company will be successful in raising such capital. 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.
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
Notes to Financial
Statements
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31, 2007
5. Summary of Significant
Accounting Policies
The significant accounting policies
followed are:
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 month periods ended
March 31, 2007, 2006 and the period December 9, 2005 (date of
inception) through March 31, 2007; (b) the financial position at March 31, 2007,
and (c) cash flows for the three month periods ended March 31, 2007,
2006 and the period December 9, 2005 (date of inception) through
March 31, 2007, have been made.
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 condensed 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 principals generally accepted in the United States of America have been omitted. The accompanying
financial statements should be read in conjunction with the financial statements
for the years ended December 31, 2006 and 2005 and notes thereto in the
Company’s annual report on Form 10KSB for the year ended December 31, 2006, filed with the Securities and Exchange
Commission on March 19,
2007. Operating results for
the quarters Ended March31, 2007, 2006 and for the period December 9, 2005 (date
of inception) to March 31, 2007 are not necessarily indicative of the results
that may be expected for the entire year.
The Company expects to issue restricted
stock to consultants for various services. For these transactions the
Company will follow the guidance in EITF 96-18 "Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring or in
Conjunction with Selling Goods or 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. For the periods ended
March 31, 2007 and 2006 and for the period December 9, 2005 (date of inception)
through March 31, 2007, the Company issued no stock for services and,
accordingly, no compensation expense was recorded for these
periods.
In December 2004, the Financial
Accounting Standards Board (FASB) issued Statement of Accounting Standards
(SFAS) No. 123 (Revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R
requires all share-based payments to employees, including grants of employee
stock options to be recognized as compensation expense in the financial
statements based on their fair values. That expense is recognized over the
period during which an employee is required to provide services in exchange for
the award, known as the requisite service period (usually the vesting period).
The Company had no common stock options or common stock equivalents granted or
outstanding for all periods presented.
The Company accounts for income taxes
under SFAS No. 109, “Accounting for Income Taxes,” which requires use of the
liability method. SFAS No. 109 provides that 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.
The Company follows SFAS No. 128,
“Earnings 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 period. Diluted earnings (loss) per share
calculations are determined by dividing net income (loss) by the weighted
average number of shares plus the effect of the dilutive potential common shares
outstanding during the period using the treasury stock method. There are no
share equivalents for any periods presented and, thus, anti-dilution issues are
not applicable.
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
Notes to Financial
Statements
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31, 2007
6. Recently Issued
Accounting Pronouncements
In March 2006, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No.
156, “Accounting for Servicing of Financial Assets - an amendment of FASB No.
140” (SFAS 156”). SFAS 156 requires an entity to recognize a servicing asset or
liability each time it undertakes an obligation to service a financial asset by
entering into a servicing contract in specified situations, such servicing
assets or liabilities would be initially measured at fair value, if practicable
and subsequently measured at amortized value or fair value based upon an
election of the reporting entity. SFAS 156 also specifies certain financial
statement presentation and disclosures in connection with servicing assets and
liabilities. SFAS 156 is effective for fiscal years beginning after September 15, 2006 and may be adopted earlier but only if
the adoption is in the first quarter of the fiscal year. The Company does not
expect the adoption of SFAS No. 156 to have a material impact on its financial
condition or results of its operations.
In September 2006, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements.” SFAS No. 157 clarifies the
principle that fair value should be based on the assumptions market participants
would use when pricing an asset or liability and establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions.
Under the standard, fair value measurements would be separately disclosed by
level within the fair hierarchy. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal
years, with early adoption permitted. The Company does not expect the adoption
of SFAS No. 157 to have a material impact on its financial condition or results
of its operations.
In February 2007, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities.” SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities 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. SFAS No. 159 is effective for financial statements issued for fiscal
years beginning after November 15,
2007 and
interim periods within those fiscal years, with early adoption permitted. The
Company does not expect the adoption of SFAS No. 159 to have a material impact
on its financial condition or results of its operations.
In September 2006, the Securities and
Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements When Quantifying Current
Year Misstatements.” SAB No. 108 requires analysis of misstatements using both
an income statement (rollover) approach and a balance sheet (iron curtain)
approach in assessing materiality and provides a one-time cumulative effect
transition adjustment. SAB No. 108 is effective for our 2006 annual financial
statements. The adoption of SAB No. 108 has not had a material impact on the
financial statements.
In July 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 48 (“FIN 48”), Accounting
for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109,
Accounting for Income Taxes. FIN 48 clarifies the accounting for income taxes by
prescribing the minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48 also provides
guidance on de-recognition, measurement, classification, interest and penalties,
accounting in interim periods, disclosure and transition. In addition, FIN 48
clearly scopes out income taxes from Financial Accounting Standards Board
Statement No. 5, Accounting for Contingencies. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company adopted FIN 48 on January
1, 2007. There was no material impact on the overall results of operations, cash
flows, or financial position from the adoption of FIN 48.
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
Notes to Financial
Statements
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31, 2007
7. Income
Tax
There is no current or deferred income
tax expense or benefit allocated to continuing operations for the quarters ended
March 31, 2007 and 2006. The Company has provided a full valuation allowance
related to the realization of the deferred tax asset. The valuation allowance is
based on evidence that the deferred tax asset will more likely than not, not be
realized. Such valuation allowance may be increased or decreased in the future
based on the likelihood of achieving future taxable
earnings.
8. Common Stock
The company has two classifications of
stock:
Preferred stock includes 10,000,000
shares authorized at a par value of $0.001, of which none are issued or
outstanding at March 31, 2007. 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 100,000,000 shares
authorized at a par value of $0.001, of which 100,000 shares have been issued
for the amount of $100 on December 9, 2005 in acceptance of the incorporation
expenses for the Company. 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.
9. Legal Matters
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.
10. Subsequent Events
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 Michael Raleigh, 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 required 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 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 biogas source. The technology related to
this process has been licensed in perpetuity from a Company related by common
management (see below).
MagneGas Corporation
(A Development Stage Enterprise and Wholly-Owned Subsidiary of Clean
Energies Tech Co.)
Notes to Financial
Statements
As of March 31, 2007
And for the Quarters Ended March31,
2007, 2006 and for the period December 9, 2005 (date of inception) to March 31, 2007
10. Subsequent Events
(continued)
In April 2007 the Company reached a
tentative agreement with a company, Hyfuels, Inc., which will secure
intellectual property licensing for North, South, Central America and all
Caribbean Islands ("the Territories"), effective upon
funding. Dr. Ruggero Santilli, is the Chief Executive Officer,
Chairman of the Board and Chief Scientist of MagneGas Corporation, and 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 will become effective upon the Company's
issuance of 100,000 shares of common stock, which is expected to occur in 2008.
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 will trigger a 5 year consulting
agreement with Dr. Santilli, who is an executive for both MagneGas
and Hyfuels, Inc., terms to be defined, with the inventor and owner of the
intellectual property. The terms of the consulting agreement will be
determined within a reasonable period of time after the issuance of the above
shares of stock. The company will have the right to exercise a
purchase option to acquire the intellectual property, within 5 years of the
funding, at a defined purchase price of $30,000,000, which was determined by
mutual consent.
In May
2007, the Company issued 245,000 shares of common stock at one dollar per share
for certain services. The Company valued the shares at $1.00 per
share, based on the expected proceeds of a pending private placement of its
stock.
Item 2. Management’s Discussion
and Analysis or Plan of Operation
Cautionary
Notice Regarding Forward Looking Statements
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-KSB 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
Operation
The Registrant has located a merger
candidate for the purpose of a merger, as indicated in the subsequent event
note. The successor registrant may have chosen to raise funds from a private
offering of its securities under Rule 506 of Regulation D. There is no assurance
the registrant would obtain any such equity funding.
During the next twelve 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 twelve months is to install three Plasma Arc Flow demonstration
centers. One will be installed in a municipal sewage treatment
facility to process sludge, one will be installed in a dairy or hog farm to
process manure and one will be installed at a bio-diesel refinery to convert
glycerin into biogas. These demonstration centers will be used to
promote our core business and provide proof of principal for the feasibility of
our technology. In addition, during the next twelve months, we
will close our Private Placement Offering, file our SB2 report and pursue equity
financing through a public offering.
Second Quarter 2007
We will complete
negotiations of a contract with the city of Dunedin Florida to create a
PlasmaArcFlow center to process waste into biogas. We will attend
various industry conferences to promote our technology and design a marketing
strategy. We will prepare and begin our Private Placement
Offering.
Third Quarter 2007
We will complete
construction of a Plasma Arc Flow demonstration center for the city of
Dunedin Florida. We will
also identify a dairy or hog farmer that will partner with us for a grant
application to the state of Florida to convert animal
waste to biogas and we will identify a bio-diesel refinery that will partner
with us to convert glycerin to biogas. We will attend various
industry conferences to promote our technology and design a marketing strategy
that will be implemented jointly within the installation of our Dunedin
project. We will complete our Private Placement
Offering. We believe this strategy will be an important part of our
early growth.
Fourth Quarter 2007
We will complete testing and
installation of our Plasma Arc Flow demonstration center for the city of
Dunedin Florida. We will also begin
construction of our Plasma Arc Flow demonstration center to convert farm animal
waste to biogas and our Plasma Arc Flow demonstration center to convert glycerin
to biogas. We will launch our new marketing plan, which will fully
leverage our new Dunedin Florida demonstration center. We
intend to raise additional funds through debt or equity financing and government
grants to support our efforts.
First Quarter 2008
We will begin operation of our
Plasma Arc Flow demonstration center in Dunedin Florida. We will also complete
construction and testing of our Plasma Arc Flow demonstration center for farm
animal waste and glycerin. We will aggressively pursue our marketing
and sales plan to fully leverage our Dunedin Florida demonstration center and will begin our
funding through a public offering to finance ongoing projects and provide
working capital. We expect to complete our first sales and service
transactions during this quarter and will begin earning income from our
Dunedin Florida project. We intend to actively recruit
new board members with appropriate experience and hire a corporate staff
including a new chief financial officer with public accounting
experience. We will seek a broker-dealer partner.
The foregoing represents our best
estimate of our current planning, and is based on a reasonable assessment of
funds we expect to be 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 may 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.
Results of
Operations
The Company did not have any operating
income from inception through March 31, 2007. For the quarters ended March 31, 2007
and 2006, the registrant recognized a net loss of $750 and $600 respectively,
and for the period from inception through March 31, 2007, the registrant
recognized a net loss of $2,600. Expenses for the quarter were comprised of
costs mainly associated with legal, accounting and office.
Liquidity
and Capital Resources
At March 31, 2007 the Company had no capital resources
and will rely upon the issuance of common stock and additional capital
contributions from shareholders to fund administrative expenses pending
acquisition of an operating company.
The Company will be 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 generate revenue and obtain additional financing in order to sustain
operations for at least the next twelve months. 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 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 $2,600 and have no cash flow from operations 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 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 March 31, 2007 the Company had $0
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
commence.
In regards to the technology license,
the company has no obligation to purchase the intellectual property
patents. However, in the event such a purchase becomes advantageous
MagneGas Corporation will solely negotiate the purchase via payment entirely in
authorized common stock. The company has no need to purchase said intellectual
property at this time. Liquidity has not been impacted in any way
prior to the agreement and there is no liquidity impact upon the signing of the
license agreement.
Management believes that actions
presently being taken to obtain additional funding and implement its strategic
plans provide the opportunity the Company to continue as a going
concern
Subsequent
Event
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 Michael Raleigh, 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 required 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 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 biogas source. The technology related to
this process has been licensed in perpetuity from a Company related by common
management (see below).
In April 2007 the Company reached a
tentative agreement with a company, Hyfuels, Inc., which will secure
intellectual property licensing for North, South, Central America and all
Caribbean Islands ("the Territories"), effective upon
funding. Dr. Ruggero Santilli, is the Chief Executive Officer,
Chairman of the Board and Chief Scientist of MagneGas Corporation, and 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 will become effective upon the Company's
issuance of 100,000 shares of common stock, which is expected to occur in 2008.
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 will trigger a 5 year consulting
agreement with Dr. Santilli, who is an executive for both MagneGas
and Hyfuels, Inc., terms to be defined, with the inventor and owner of the
intellectual property. The terms of the consulting agreement will be
determined within a reasonable period of time after the issuance of the above
shares of stock. The company will have the right to exercise a
purchase option to acquire the intellectual property, within 5 years of the
funding, at a defined purchase price of $30,000,000, which was determined by
mutual consent.
In May
2007, the Company issued 245,000 shares of common stock at one dollar per share
for certain services. The Company valued the shares at $1.00 per
share, based on the expected proceeds of a pending private placement of its
stock.
Recent
Accounting Pronouncements
In March 2006, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No.
156, “Accounting for Servicing of Financial Assets - an amendment of FASB No.
140” (SFAS 156”). SFAS 156 requires an entity to recognize a servicing asset or
liability each time it undertakes an obligation to service a financial asset by
entering into a servicing contract in specified situations, such servicing
assets or liabilities would be initially measured at fair value, if practicable
and subsequently measured at amortized value or fair value based upon an
election of the reporting entity. SFAS 156 also specifies certain financial
statement presentation and disclosures in connection with servicing assets and
liabilities. SFAS 156 is effective for fiscal years beginning after September 15, 2006 and may be adopted earlier but only if
the adoption is in the first quarter of the fiscal year. The Company does not
expect the adoption of SFAS No. 156 to have a material impact on its financial
condition or results of its operations.
In September 2006, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements.” SFAS No. 157 clarifies the
principle that fair value should be based on the assumptions market participants
would use when pricing an asset or liability and establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions.
Under the standard, fair value measurements would be separately disclosed by
level within the fair hierarchy. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal
years, with early adoption permitted. The Company does not expect the adoption
of SFAS No. 157 to have a material impact on its financial condition or results
of its operations.
In February 2007, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities.” SFAS No. 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities 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. SFAS No. 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal
years, with early adoption permitted. The Company does not expect the adoption
of SFAS No. 159 to have a material impact on its financial condition or results
of its operations.
In September 2006, the Securities and
Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements When Quantifying Current
Year Misstatements.” SAB No. 108 requires analysis of misstatements using both
an income statement (rollover) approach and a balance sheet (iron curtain)
approach in assessing materiality and provides a one-time cumulative effect
transition adjustment. SAB No. 108 is effective for our 2006 annual financial
statements. The adoption of SAB No. 108 has not had a material impact on the
financial statements.
In July 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 48 (“FIN 48”), Accounting
for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109,
Accounting for Income Taxes. FIN 48 clarifies the accounting for income taxes by
prescribing the minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48 also provides
guidance on de-recognition, measurement, classification, interest and penalties,
accounting in interim periods, disclosure and transition. In addition, FIN 48
clearly scopes out income taxes from Financial Accounting Standards Board
Statement No. 5, Accounting for Contingencies. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company adopted FIN 48 on January
1, 2007. There was no material impact on the overall results of operations, cash
flows, or financial position from the adoption of FIN 48.
Critical
Accounting Policies
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 issued restricted stock to
consultants for various services (see Note 10). For these
transactions the Company will follow the guidance in EITF 96-18 "Accounting for
Equity Instruments that are Issued to Other than Employees for Acquiring or in
Conjunction with Selling Goods or 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. For the periods ended
March 31, 2007, 2006 and for the period December 9, 2005 (date of inception)
through March 31, 2007, the Company issued no stock for services and,
accordingly, no compensation expense was recorded for these
periods.
Off-Balance
Sheet Arrangements
We have no off-balance sheet
arrangements.
Item
3. 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) and Rule 15d-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (Exchange Act), as of March 31,
2007. Based on this evaluation, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures
were 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 is a reporting shell with
limited resources. As a result, a material weakness in financial reporting
currently exists.
A material weakness is a control
deficiency (within the meaning of the Public Company Accounting Oversight Board
(PCAOB) auditing standard 2.) or combination of control deficiencies that result
in more than remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or
detected. 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 March 31, 2007 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 a party to any
pending legal proceedings and no such actions by, or to the best of our
knowledge, against us have been threatened.
Item
2. Unregistered Sales of
Equity Securities and Use of Proceeds.
In May 2007, we issued 67,052,000
shares to founding contributors. The founding shares were issued
based on verbal agreement to persons or corporations who assisted in the
development of the technology and the shares were valued at par
value. These shares of our common stock qualified for exemption under
Section 4(2) of the Securities Act of 1933 and such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act.
In May 2007 we issued 245,000 shares of
our common stock to the seven shareholders for services
rendered. These shares were valued at $1.00 per shares for a total of
$245,000. Such shares were issued in reliance on the exemption under Section
4(2) of the Securities Act of 1933 and such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act.
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 March 31,
2007, 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 and Reports of
Form 8-K.
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(a)
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Reports on Form 8-K and Form
8K-A
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(b)
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Exhibits
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Exhibit
Number
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Exhibit
Title
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3.1
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Certificate of
Incorporation*
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3.3
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By-Laws
*
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31.1
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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.
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32.1
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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.
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*Incorporated by reference to
Exhibit 3.2 to our registration statement on Form 10-SB filed on
April 3,
2006 (File no:
000-51883)
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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
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By:
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/s/ Dr. Ruggero Maria Santilli
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Dr. Ruggero Maria Santilli
Chief Executive
Officer
Chief Financial
Officer
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Dated:
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September 19,
2008
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