SOURCE: MagneGas Corporation

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November 15, 2017 07:30 ET

MagneGas Provides Business Update for the Third Quarter of 2017; Metal Cutting Fuel and Welding Supply Revenues Increases 30%

TAMPA, FL--(Marketwired - November 15, 2017) - MagneGas Corporation ("MagneGas" or the "Company") (NASDAQ: MNGA), a leading clean technology company in the renewable resources and environmental solutions industries, today announced financial results and provided a business update for the third quarter ending September 30, 2017.

Ermanno Santilli, Chief Executive Officer of MagneGas, stated, "This quarter we achieved a 30% increase in metal cutting fuel and welding supply revenues versus the same period last year. If it wasn't for the damaging hurricanes that paralyzed much of the gulf coast of Florida in early September, we believe our sales would have been significantly higher. We also had a one-time unit sale last year of $361,150 which effected our year-over-year comparison. Revenues actually increased 30% when unit sales are excluded from the prior year. We have already booked $3.5 million in gasification unit sales in October and we are on pace to dramatically increase metal cutting fuel and welding supply revenues in the fourth quarter of 2017. As a result, we are on track to generate more revenue in the fourth quarter of 2017 alone, than in any full fiscal year in our corporate history."

"Our continued growth in metal cutting and welding supply sales is primarily due to the successful expansions into two new locations in Lakeland and Sarasota, as well as scaling the revenues in Clearwater, Florida. We also succeeded in launching our industrial sales division in the summer. We saw strong potential as we brought on an experienced industrial sales team, which has since exceeded all our internal expectations. Our strategy has been to first present our MagneGas2® product to new clients, and then broaden these relationships with additional product sales. We have been able to successfully cross-sell high margin industrial gas and welding products into these new industrials clients which provides MagneGas with significant growth opportunities."

"This month, we announced that all three of our largest MagneGas distributors, Holston Gases, Haun Welding Supply and AWISCO, have agreed to significant increases in MagneGas2® purchases to meet increased end market demand. As part of the agreement, the distributors have agreed to minimum purchases to maintain areas of preferential treatment, which, based on current projections, would represent a minimum two-fold increase in sales from these distributors beginning in the fourth quarter of 2017. We have focused our initial efforts on the Eastern U.S., and this increase in product demand is a clear indication that we are penetrating the market, and our technology is winning market acceptance. Our dramatic reductions in production costs associated with the switch to Butanol as a feedstock, coupled with lower delivery costs, have enabled our Company to serve the growing market demand with a significant improvement in our bottom line. Price reductions in MagneGas2® come at a time when acetylene prices have spiked due to supply restrictions associated with the recent hurricanes, further enhancing the market response. We will look to further leverage this success as we significantly expand our existing distributor relationships and add additional distributors in targeted territories in the coming year."

"Internationally, we are aggressively expanding sales of our gasification and sterilization units. In October, we signed a $0.5 million consulting agreement with an option to increase this agreement to $1.0 million, with our European partner. Recently, we announced that we have sold two gasification units to produce MagneGas2® for a total of $3.5 million in Europe, with delivery expected in the first quarter of 2018. We have been working closely with our European partners and have identified numerous opportunities for our proprietary gasification and sterilization technologies across Europe. Importantly, our partners have existing facilities we can utilize for testing both solid and liquid waste streams. The European market is particularly receptive to both the environmental and economic advantages of our technology. There is significant pent up demand in Europe, due to the regulatory environment and other factors including the European Union climate and energy initiative. One of the key targets for the EU is for 20% of all energy to be produced from renewable sources by 2020, as this represents an immediate and sizable market opportunity for MagneGas."

Scott Mahoney, Chief Financial Officer of MagneGas, commented, "The Company made a strategic decision a year ago to focus on immediate revenue generation, improving cash flows and profitability. We spent the first two quarters of 2017 adjusting our staffing model to shift increasingly towards a sales driven model. As a result, our SG&A has decreased by approximately $612,000 versus the second quarter of 2017. At the same time, we have seen a meaningful improvement in operating cash flows, with cash flow from operations improving 46% compared to the first nine months of 2016. During the fourth quarter, our liquidity has rapidly improved and we have used our resources to quickly improve our working capital while reducing our near-term liabilities. We have put in place the key strategic pieces to fully enable accelerated growth in ESSI in Florida and expand our distributor relationships across the eastern half of the US, while driving international sales in Europe. We believe we have now turned the corner, and we project that 2017 revenue will grow over 120% versus 2016. We are truly gaining momentum and significantly improving our fundamentals, which we believe will lead to continued rapid growth and profitability in 2018 and beyond."

Third Quarter 2017 Financial Results

Revenues for the three and nine months ended September 30, 2017 were $879,511 and $2,717,503 as compared to $1,037,668 and $2,540,588 for the same period last year. The decrease in revenue during the three months ended September 30, 2017 was partly attributable to the hurricane that paralyzed much of the gulf coast of Florida in September of 2017 and the decline in one-time unit sales in the three and nine month periods ended September 30, 2017, as compared with the same period in 2016. For the three and nine months ended September 30, 2017 and 2016, we generated revenues from our metal cutting fuel and welding supply division of $879,511 and $2,717,503 compared to $676,518 and $1,985,688, respectively. This increase was primarily due to successful expansion through our two new locations in Lakeland and Sarasota, adding additional customers in Clearwater, FL and distributors acquired through ESSI.

Gross profit for the three and nine months ended September 30, 2017 were $327,137 and $1,129,084 compared to $405,137 and $801,947 for the same period last year. The improvement in gross profit for the nine-month period was due in part to strategic price increases and controlling the cost of materials

Operating costs for the three and nine months ended September 30, 2017 and 2016 were $2,620,664 and $9,018,931 compared to $3,011,124 and $9,024,824. During the nine months ended September 30, 2017 we recognized a non-cash expense of $2,288,741 in stock primarily used as compensation for third party services, compared to $820,500 in the comparable nine months ended September 30, 2016. As a result, cash based operating expenses excluding any stock based compensation decreased 18% in the nine months ended September 30, 2017. Other non-cash operating expenses were due to depreciation and amortization charges of $526,602 for the nine-month period ended September 30, 2017, compared to $507,000 for the nine months ended September 30, 2016.

Conference Call

MagneGas' executive management team will host a conference call on Wednesday, November 15th at 11:00 a.m. Eastern Time to give a business update for the third quarter ended September 30, 2017.

Interested parties can access the conference call by dialing 877-407-8031 for U.S. callers or +1 201-689-8031 for international callers.

A teleconference replay of the conference call will be available approximately one hour following the call, through midnight December 15, 2017, and can be accessed by dialing 877-481-4010 for U.S. callers or +1 919-882-2331 for international callers and entering conference ID: 22752.

About MagneGas Corporation

MagneGas® Corporation (MNGA) owns a patented process that converts various renewables and liquid wastes into MagneGas fuels. These fuels can be used as an alternative to natural gas or for metal cutting. The Company's testing has shown that its metal cutting fuel "MagneGas2®" is faster, cleaner and more productive than other alternatives on the market. It is also cost effective and safe to use with little changeover costs. The Company currently sells MagneGas2® into the metal working market as a replacement to acetylene.

The Company also sells equipment for the sterilization of bio-contaminated liquid waste for various industrial and agricultural markets. In addition, the Company is developing a variety of ancillary uses for MagneGas® fuels utilizing its high flame temperature for co-combustion of hydrocarbon fuels and other advanced applications. For more information on MagneGas®, please visit the Company's website at

The Company distributes MagneGas2® through Independent Distributors in the U.S. and through its wholly owned distributor, ESSI (Equipment Sales and Services, Inc). ESSI has four locations in Florida and distributes MagneGas2®, industrial gases and welding supplies. For more information on ESSI, please visit the company's website at


This press release contains forward-looking statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events, including our ability to raise capital, or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

For a discussion of these risks and uncertainties, please see our filings with the Securities and Exchange Commission. Our public filings with the SEC are available from commercial document retrieval services and at the website maintained by the SEC at

(tables follow)

MagneGas Corporation  
   September 30,   December 31,  
   2017   2016  
Current Assets           
Cash  $93,895   $1,616,410  
Accounts receivable, net of allowance for doubtful accounts of $101,063 and $145,931, respectively   542,800    442,555  
Inventory, net   1,604,857    1,615,933  
Prepaid and other current assets   304,580    226,305  
Total Current Assets   2,546,132    3,901,203  
Property and equipment, net of accumulated depreciation and amortization of $1,902,058 and $1,474,944, respectively   6,015,305    6,402,931  
Intangible assets, net of accumulated amortization of $484,470 and $401,277, respectively   421,712    437,121  
Security deposits   37,356    26,636  
Goodwill   2,108,781    2,108,781  
Total Assets  $11,129,286   $12,876,672  
Liabilities and Stockholders' Equity          
Current Liabilities           
Accounts payable  $1,611,993    416,247  
Accrued expenses   661,034    276,630  
Deferred revenue and customer deposits   44,824    25,000  
Capital leases, current   8,793    9,328  
Note payable, net of debt discount of $13,043 and 0, respectively   986,957    -  
Promissory notes payable - related party   340,007    -  
Derivative liabilities   -    7,700,585  
Total Current Liabilities   3,653,608    8,427,790  
Long Term Liabilities           
Note payable   520,000    520,000  
Capital leases, net of current   8,806    25,317  
Senior convertible debenture, net of debt discount of $27,504 and $811,000, respectively   1,496    75,000  
Total Liabilities   4,183,910    9,048,107  
Commitments and Contingencies          
Series C Preferred stock: 25,000 shares designated; 0 shares issued and outstanding.   -    -  
Series D Preferred stock: 694,422 shares designated; 0 shares issued and outstanding.   -    -  
Series E Preferred stock: 455,882 shares designated; 0 shares issued and outstanding.   -    -  
Stockholders' Equity           
Preferred stock: $0.001 par; 10,000,000 shares authorized           
Series A Preferred stock: 10,000,000 shares authorized; 1,000,000 shares issued and outstanding with a liquidation preference of $1,000 at September 30, 2017 and December 31, 2016   1,000    1,000  
Series B Preferred stock: 2,700 shares designated, 0 shares issued and outstanding at September 30, 2017 and December 31, 2016   -    -  
Common stock: $0.001 par; 190,000,000 shares authorized; 13,358,128 shares issued and outstanding at September 30, 2017 and 5,804,027 shares issued and outstanding at December 31, 2016   13,358    5,804  
 Additional paid-in-capital   67,637,489    57,380,241  
 Accumulated deficit   (60,706,471 )  (53,558,480 )
Total Stockholders' Equity   6,945,376    3,828,565  
Total Liabilities and Stockholders' Equity  $11,129,286   $12,876,672  
MagneGas Corporation  
   For the three months ended September 30,   For the nine months ended September 30,  
   2017   2016   2017   2016  
Revenue:  $879,511   $1,037,668   $2,717,503   $2,540,588  
Cost of Revenues   552,374    632,531    1,588,419    1,470,569  
Gross Profit   327,137    405,137    1,129,084    1,070,019  
Operating Expenses:                     
Selling, general and administration   2,453,160    2,690,495    8,366,604    7,544,484  
Research and development   1,470    143,072    125,725    472,329  
Impairment of joint venture   -    -    -    501,011  
Depreciation and amortization   166,034    177,557    526,602    507,000  
Total Operating Expenses   2,620,664    3,011,124    9,018,931    9,024,824  
Operating Loss   (2,293,527 )  (2,605,987 )  (7,889,847 )  (7,954,805 )
Other Income and (Expense):                     
Interest   (27,233 )  (47,734 )  (46,142 )  (67,233 )
Non-Cash Interest, derivative liability   -    (50,000 )  -    (50,000 )
Amortization of debt discount   (804,776 )  -    (951,533 )  (2,622,080 )
Other (expense) income   481    40,533    (2,066 )  61,763  
Extinguishment of debt   -    -    (513,725 )  -  
Change in fair value of derivative liability   -    (1,404,490 )  2,255,322    (206,971 )
Total Other Income (Expense)   (831,528 )  (1,461,691 )  741,856    (2,884,521 )
Net Loss   (3,125,055 )  (4,067,678 )  (7,147,991 )  (10,839,326 )
Deemed dividend   1,034,682    -    1,109,682    -  
Net loss attributable to common shareholders  $(4,159,737 ) $(4,067,678 ) $(8,257,673 ) $(10,839,326 )
Net loss per share: Basic and Diluted  $(0.39 ) $(0.81 ) $(1.06 ) $(2.29 )
Weighted average common shares: Basic and Diluted   10,786,551    5,036,152    7,763,782    4,723,559  

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