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EX-31.1 - CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT OF 2002 - China Network Media, Inc.f10q0311ex31i_methaenergy.htm
EX-32.1 - CERTIFICATIONS PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT OF 2002 - China Network Media, Inc.f10q0311ex32i_methaenergy.htm


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 (Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2011
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(No fee required)
 
For the transition period from                        to                      
 
Commission file number 333-152539
 
Metha Energy Solutions Inc.
(Name of Small Business Issuer in Its Charter)
 
DELAWARE
 
32-0251358
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
410 Park Avenue, 15th Floor, New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
 
212-231-8526
(Issuer's Telephone Number, including Area Code)
 
 (Former name or address)

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
 
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 ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
 
 Large Accelerated Filer
o
 Accelerated Filer
o
 Non-Accelerated Filer
o  
 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 May 13, 2011: 22,620,030 shares of common stock.
 
 
 

 
 
METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 2011
 
TABLE OF CONTENTS

       
Page
PART I - FINANCIAL INFORMATION
   
         
Item 1.
 
Financial Statements:
   
         
   
Condensed Balance Sheets as of March 31, 2011 (Unaudited) and as of December 31, 2010
 
3
         
   
Condensed Statements of Operations for the three months ended March 31, 2011,  the three months ended March 31, 2010, and the Period from April 18, 2008 (Inception) through March 31, 2011 (Unaudited)
 
4
         
   
Condensed Statement of Changes in Stockholders' Equity/(Deficit) for the period from April 18, 2008 (Inception) through March 31, 2011 (Unaudited)
 
5
         
   
Condensed Statements of Cash Flows for the three  months ended March 31, 2011,  the three months ended March 31, 2010  and the Period from April 18, 2008 (Inception) through March 31, 2011 (Unaudited)
 
6
         
   
Notes to the Condensed Financial Statements (Unaudited)
 
7-18
         
Item 2.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
19
         
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
 
22
         
Item 4.
 
Controls and Procedures
 
23
         
PART II - OTHER INFORMATION
   
         
Item 1.
 
Legal Proceedings
 
24
         
Item 1A.
 
Risk Factors
 
24
         
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
24
         
Item 3.
 
Defaults Upon Senior Securities
 
24
         
Item 4.
 
Reserved and Removed
 
24
         
Item 5.
 
Other Information
 
24
         
Item 6.
 
Exhibits
 
24
         
Signatures
   
25
 
 
2

 
 
PART I - FINANCIAL INFORMATION
 
Item 1.
Financial Statements

METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)
(A DEVELOPMENT STAGE COMPANY)

Condensed Balance Sheets
 
             
   
March 31, 2011
   
December 31, 2010
 
   
(Unaudited)
       
ASSETS
           
  Current Assets:
           
     Cash
  $ 1,638,954     $ 423  
                 
  Total Current Assets
    1,638,954       423  
                 
  Property, Plant & Equipment:
               
  Website costs, net of accumulated amortization of $1,603 and $1,454,
         
  respectively
    186       335  
  Computer equipment, net of accumulated depreciation of $325 and $267,
         
  respectively
    822       880  
      1,008       1,215  
                 
  Other Assets:
               
     Security deposit
    465       465  
     Investment in Serenergy
    -       402,780  
                 
TOTAL ASSETS
  $ 1,640,427     $ 404,883  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
  Current Liabilities:
               
    Accounts payable and accrued expenses
  $ 44,595     $ 181,601  
    Accrued expenses - related party
    134,520       108,320  
    Income tax liability
    205,392       -  
    Loans payable - related party
    14,365       10,875  
    Notes payable - related party
    12,444       71,895  
    Notes payable
    -       45,525  
    Convertible notes payable
    200,000       200,000  
  Total Current Liabilities
    611,316       618,216  
                 
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' EQUITY (DEFICIT)
               
Series A Convertible Preferred stock - $.001 par value; 100,000 shares
         
         authorized; 100,000 and 100,000 to be issued
    100       100  
Series B Convertible Preferred stock - $.001 par value; 100,000 shares
         
         authorized; 100,000 and 100,000 to be issued
    100       100  
    Preferred stock - $.001 par value; 9,800,000 shares authorized;
               
         none and none issued and outstanding, respectively
    -       -  
    Common stock - $.001 par value; 100,000,000 shares authorized;
               
         22,620,030 and 22,620,030 shares issued,  and 22,271,346 and
               
         21,955,559 outstanding, respectively
    22,271       22,271  
    Additional paid-in capital
    699,350       698,684  
    Deferred Compensation
    -       (19,842 )
    Accumulated deficit during the development stage
    307,290       (914,646 )
  TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
    1,029,111       (213,333 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 1,640,427     $ 404,883  
                 
 
See accompanying notes to the unaudited condensed financial statements.
 
 
3

 
 
METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)
 (A DEVELOPMENT STAGE COMPANY) 
Condensed Statements of Operations (Unaudited)

   
Three months ended March 31, 2011
   
Three months ended March 31, 2010
   
April 18, 2008 (Inception) - March 31, 2011
 
                   
                   
Revenue
  $ -     $ 221,702     $ 286,702  
Revenue - Related Party
    -       -       36,000  
      -       221,702       322,702  
                         
Cost of goods sold
    -       -       276,416  
Cost of goods sold - related party
            206,616       -  
Gross Profit
    -       15,086       46,286  
                         
Selling, general & administrative expenses:
                       
     Consulting fees and services - related party
    36,000       41,000       294,000  
     Professional fees
    5,193       70,117       482,707  
     Board member fees
    31,448       4,737       78,685  
     Other general & administrative expenses
    7,782       17,536       141,472  
     Total operating expenses
    80,423       133,390       996,864  
                         
Loss from operations
    (80,423 )     (118,304 )     (950,578 )
                         
Other expense:
                       
     Loss on foreign currency
    (5,400 )     (1,008 )     (3,357 )
     Gain on settlement transactions
    1,516,161       -       1,516,161  
     Other income
    -       -       3,236  
     Forgiveness of debt
    6,771       -       6,771  
     Interest income
    -       -       25  
     Interest expense
    (9,781 )     (1,797 )     (38,035 )
     Bad debt expense-related party
    -       -       (10,236 )
     Total other expense
    1,507,751       (2,805 )     1,474,565  
                      -  
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
    1,427,328       (121,109 )   $ 523,987  
                         
Provision for income taxes
    205,392       -       205,392  
                         
NET INCOME (LOSS)
  $ 1,221,936     $ (121,109 )     318,595  
                         
                         
Basic net income (loss) per weighted-average shares common stock
  $ 0.06     $ (0.01 )        
                         
Diluted net income (loss) per weighted-average shares common stock
  $ 0.06     $ (0.01 )        
                         
Basic weighted-average number of shares of common stock to be issued
    21,968,717       21,698,978          
                         
Diluted weighted-average number of shares of common stock to be issued
    22,168,717       21,698,978          
                         
 
See accompanying notes to the unaudited condensed financial statements.
 
 
4

 
 
METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)
 (A DEVELOPMENT STAGE COMPANY)

Condensed Statement of Changes in Stockholders' Equity/(Deficit)
For the Period from April 18, 2008 (Inception) through March 31, 2011 (unaudited)
 
 
                                       
Additional
         
Accumulated
       
   
Common Stock
   
Series A Convertible Preferred Stock
   
Series B Convertible Preferred Stock
   
Paid-in
   
Deferred
   
Deficit during the
       
   
Shares
   
Par Value
   
Shares
   
Par Value
   
Shares
   
Par Value
   
Capital
   
Compensation
   
development stage
   
Total
 
                                                             
Balance April 18, 2008 (Inception)
    11,305,030     $ 11,305       -     $ -       -     $ -     $ -     $ -     $ (11,305 )   $ -  
                                                                                 
Series A Preferred stock issued for consulting services - related party
    -       -       100,000       100       -       -       49,900       -       -       50,000  
                                                                                 
Common stock issued for professional services
    45,000       45       -       -       -       -       22,455       -       -       22,500  
                                                                                 
In-kind contribution of interest expense
    -       -       -       -       -       -       1,269       -       -       1,269  
                                                                                 
Net loss for the period from April 18, 2008 (inception) to December 31, 2008
    -       -       -       -       -       -       -       -       (131,198 )     (131,198 )
                                                                                 
Balance December 31, 2008
    11,350,030       11,350       100,000       100       -       -       73,624       -       (142,503 )     (57,429 )
                                                                                 
Series B Preferred stock and Common stock sold for cash
    10,000,000       10,000       -       -       100,000       100       565,300               -       575,400  
                                                                                 
Common stock issued for professional services
    1,270,000       1,270       -       -       -       -       74,930       (56,842 )     -       19,358  
                                                                                 
In-kind contribution of interest expense
    -       -       -       -       -       -       2,701       -       -       2,701  
                                                                                 
Net loss for the year ended December 31, 2009
    -       -       -       -       -       -       -       -       (279,701 )     (279,701 )
                                                                                 
Balance December 31, 2009
    22,620,030       22,620       100,000       100       100,000       100       716,555       (56,842 )     (422,204 )     260,329  
                                                                                 
Common stock issued for professional services
    -       -       -       -       -       -       -       16,079       -       16,079  
                                                                                 
Common stock to be returned for professional services
    (348,684 )     (349 )     -       -       -       -       (20,572 )     20,921       -       -  
                                                                                 
In-kind contribution of interest expense
    -       -       -       -       -       -       2,701       -       -       2,701  
                                                                                 
Net loss for the year ended December 31, 2010
    -       -       -       -       -       -       -       -       (492,442 )     (492,442 )
                                                                                 
Balance December 31, 2010
    22,271,346       22,271       100,000       100       100,000       100       698,684       (19,842 )     (914,646 )     (213,333 )
                                                                                 
Common stock issued for professional services
    -       -       -       -       -       -       -       19,842       -       19,842  
                                                                                 
In-kind contribution of interest expense
    -       -       -       -       -       -       666       -       -       666  
                                                                                 
Net income for the period ended March 31, 2011
    -       -       -       -       -       -       -       -       1,221,936       1,221,936  
                                                                                 
Balance March 31, 2011
    22,271,346     $ 22,271       100,000     $ 100       100,000     $ 100     $ 699,350     $ -     $ 307,290     $ 1,029,111  
                                                                                 
 
See accompanying notes to the unaudited condensed financial statements.

 
5

 
 
METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)
 (A DEVELOPMENT STAGE COMPANY)
 
Condensed Statements of Cash Flows (Unaudited)

   
Three months ended March 31, 2011
   
Three months ended March 31, 2010
   
For the Period April 18, 2008 (Inception) - March 31, 2011
 
                   
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
  Net income (loss)
  $ 1,221,936     $ (121,109 )   $ 318,595  
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
                 
Series A Convertible Preferred Stock issued for services - related party
    -       -       50,000  
Common stock Issued for services - related party, professional and board fees
    19,842       4,737       77,779  
In-kind contribution of interest expense
    666       666       7,337  
Bad debt expense-related party
    -       -       10,236  
Depreciation and Amortization expense
    207       207       1,928  
Gain on settlement
    (683,071 )     -       (683,071 )
     Changes in operating assets and liabilities:
                       
            Decrease in accounts receivable
    -       65,000       -  
            Increase in accounts receivable-related party
    -       -       (10,236 )
            Increase in other assets
    -       -       (465 )
            Increase (decrease) in accounts payable and accrued expenses
    (137,006 )     (152 )     44,595  
            Increase in accounts payable and accrued expenses-related party
    26,200       18,477       134,520  
            Increase in deferred tax liability
    205,392       -       205,392  
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    654,166       (32,174 )     156,610  
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
  Purchase of property, plant & equipment
    -       -       (2,936 )
  Serenergy  Equity investment
    -       -       (402,780 )
  Sale of Serenergy  Equity
    1,085,851       -       1,085,851  
NET CASH PROVIDED BY INVESTING ACTIVITIES
    1,085,851       -       680,135  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
                         
  Proceeds from sale of common stock and series B preferred stock
    -       -       575,400  
  Proceeds from loans payable -related party
    3,490       -       14,365  
  Proceeds from notes payable - related party
    -       1,072       71,895  
  Repayment of notes payable - related party
    (59,451 )     -       (59,451 )
  Proceeds from notes payable
    -       45,525       45,525  
  Repayment of notes payable
    (45,525 )     -       (45,525 )
  Proceeds from convertible notes payable
    -       -       200,000  
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    (101,486 )     46,597       802,209  
                         
NET INCREASE (DECREASE) IN CASH
    1,638,531       14,423       1,638,954  
Cash, beginning of period
    423       5,785       -  
Cash, END OF PERIOD
  $ 1,638,954     $ 20,208     $ 1,638,954  
                         
Supplementary disclosures of cash flow information
                       
  Cash paid during the period for:
                       
                         
Income taxes
  $ -     $ -     $ -  
Interest paid
  $ 4,677     $ -     $ 15,377  
 
See accompanying notes to the unaudited condensed financial statements.

 
6

 
 
METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)
 (A DEVELOPMENT STAGE COMPANY)
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2011
 
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended March 31, 2011 are not necessarily indicative of results for the full fiscal year. It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

Effective October 12, 2009, the Company changed their name to Metha Energy Solutions Inc.  (“Metha Energy” or “the Company” or “formerly Inscrutor”) (OTCBB: MGYS).  Metha Energy focuses the business within the area of  advanced fuel cell technology.   The Company has generated experience and knowledge on which it will base future activities.  Activities during the development stage involve developing the business plan and raising capital.

The Company was founded as Inscrutor, Inc.  (“Inscrutor”), a development stage company, that was incorporated on April 18, 2008 under the laws of the State of Delaware.  The technology that the Company owned was acquired via a Separation and Distribution Agreement on May 30, 2008 from Visator, Inc. (“Visator”), a Delaware corporation that specializes in on-line media monitoring. Prior to that time, Inscrutor was a wholly-owned subsidiary of Visator. Inscrutor was spun out from Visator with the purpose of ensuring optimal value-creation for the shareholders of both Inscrutor and Visator.  According to the terms of the Separation Agreement, Visator decided to distribute the common stock of Inscrutor on a 1-for-1 basis to the holders of Visator’s common and preferred stock (“the Distribution”). On June 1, 2008 (the "Distribution Date"), Visator transferred its shares of Inscrutor to the shareholders of record of Visator common stock and preferred stock at the close of business on May 30, 2008 (the "Record Date"), without any consideration being paid by such holders.   The Company derived revenue from a management services agreement with Visator.  The agreement with Visator expired on June 1, 2009 and was not renewed. As of September 30, 2009 the Company wrote off the $7,000 receivable balance from Visator as the balance was deemed uncollectible. We no longer pursue any commercialization of software/technology nor do we invest in what we acquired from the Separation and Distribution agreement on May 30, 2008.

From the end of August, 2009, in connection with entering the agreement with Serenergy the Company decided to cease any further activity in the area of sophisticated data-mining technology.

In March 2011, the Company entered into a settlement agreement with Serenergy that terminated all previous agreements between Metha Energy and Serenergy.  The agreement was accepted and entered into based upon certain disclosures from Serenergy.  The agreement compensated the Company due to Serenergy’s breach of contract during the original merger agreement.  The agreement also required the Company to sell back its investment in Serenergy. The Company received compensation which fundamentally reflects the Company's operating losses until today, the cash amount invested in the company and an amount securing the Company's ability to remain a going concern in this area of business - approximately $1,900,000.  The $1,900,000 includes cash received for the sale of the equity investment of $1,085,851, offset by the original value of the Serenergy investment of $402,780, resulting in a gain of $683,071.  As of March 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.
 
 
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Going concern

The accompanying unaudited condensed financial statements have been prepared under a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred net operating losses from inception of $950,578.  In addition there was no revenue during the three months ended March 31, 2011.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. 

Management believes that the actions presently being taken and the success of future operations will be sufficient to enable the Company to continue as a going concern.

However, there can be no assurance that the raising of equity will be successful and that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company.  Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires 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.  Actual results could differ from those estimates.

Revenue recognition

The Company’s revenues are derived from sales of fuel cell technology. The Company follows the guidance of the Securities and Exchange Commission’s FASB Accounting Standards Codification No. 605 for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, the item has been shipped and collectability is reasonably assured.

The payment terms for the sale of fuel cell technology is 50% of the payment (“first payment”) is due when the order is placed.  Items are shipped and revenue is recognized once the first payment is received. The remaining 50% is due 30 days after the delivery of the fuel cell technology.

Cash and cash equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
 
Property, Plant and Equipment

Property, plant and equipment is stated at cost and depreciated over its estimated useful lives ranging from three to five years using the straight-line method.   Maintenance and repairs are charged to expense as incurred.
 
 
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Website Development Costs

The Company has adopted the provisions of FASB Accounting Standards Codification No. 350 Intangible-Goodwills and Other. Costs incurred in the planning stage of a website are expensed, while costs incurred in the development state are capitalized and amortized over the estimated three year life of the asset. For the three months ended March 31, 2011 and the year ended December 31, 2010, the Company paid $0 and $0, respectively to develop its website.

Investments
 
Equity investments in companies over which the Company has no ability to exercise significant influence are accounted for under the cost method. The Company’s holds approximately none and 11% of Serenergy’s issued and outstanding shares as of March 31, 2011 and December 31, 2010. The Company’s investment in Serenergy was accounted for based on the cost method.

In March 2011, the Company entered into a settlement agreement with Serenergy that terminated all previous agreements between Metha Energy and Serenergy. The agreement was accepted and entered into based upon certain disclosures from Serenergy. The agreement compensated the Company due to Serenergy’s breach of contract during the original merger agreement. The agreement also required the Company to sell back its investment in Serenergy. The Company received compensation which fundamentally reflects the Company's operating losses until today, the cash amount invested in the company and an amount securing the Company's ability to remain a going concern in this area of business - approximately $1,900,000. The $1,900,000 includes cash received for the sale of the equity investment of $1,085,851, offset by the original value of the Serenergy investment of $402,780, resulting in a gain of $683,071.  As of March 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.
   
Income taxes

The Company follows FASB Accounting Standards Codification No. 740, Income Taxes. Under the asset and liability method of FASB Accounting Standards Codification No. 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
 
Net income (loss) per common share

Net income (loss) per common share is computed pursuant to FASB Accounting Standards Codification No. 260 , Earnings Per Share.  Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were 100,000 Series A and 100,000 Series B convertible Preferred shares that were omitted from the calculation of diluted earnings per share as their inclusion is anti-dilutive as of March 31, 2010 and is included in diluted earnings per share as of March 31, 2011.

Segments

The Company operates in one segment and therefore segment information is not presented.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for the accounts payable and accrued expenses, accrued expenses - related party, loans payable – related party, notes payable – related party and notes payable approximate fair value based on the short-term maturity of these instruments.
 
 
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NOTE 3 – PROPERTY AND EQUIPMENT
 
At March 31, 2011 (Unaudited) and December 31, 2010, property and equipment is as follows:

   
March 31,
   
December 31,
 
   
2011
   
2010
 
   
(Unaudited)
         
Website costs
 
$
1,789
   
$
1,789
 
Computer equipment
   
1,147
     
1,147
 
     
2,936
     
2,936
 
Less accumulated amortization
   
1,928
     
1,721
 
   
$
1,008
   
$
1,215
 

Amortization expense for the three months ended March 31, 2011, March 31, 2010 and the period from April 18, 2008 (inception) to March 31, 2011 was $207, $207 and $1,928, respectively.

NOTE 4 – INVESTMENT AGREEMENT

On August 27, 2009, the Company entered into an exclusive distribution agreement (the “Agreement”) with Serenergy A/S (“Serenergy”) where the Company was appointed by Serenergy as its exclusive distributor of Serenergy’s products in the United States, Canada, Israel and the United Nations (“The Territory”) for 72 months. As of December 31, 2010, the agreement has lapsed.

On August 27, 2009 the Company entered into an exclusive distribution and manufacturing license agreement - vehicles (the “License Agreement”) with Serenergy where the Company was appointed by Serenergy as its exclusive distributor of Serenergy’s fuel cell related products to the segment of vehicles (the “Segment”) for 72 months. As of December 31, 2010, the agreement has lapsed.

On August 27, 2009 the Company made an investment in Serenergy for 84,000 shares of Serenergy stock, or approximately 11% of the issued and outstanding shares, for approximately $402,000. The Company recognized the investment under the cost method of accounting. As of December 31, 2010, the Company owned approximately 11% of the issued and outstanding shares of Serenergy.

On May 3, 2010, the Company entered into a merger agreement with two shareholders of Serenergy to acquire a majority of their outstanding shares of Serenergy. On October 15, 2010 the Company entered in to a revised merger agreement. The agreement requires the Company to raise $2,000,000 in financing. If the financing is not raised, the agreement will lapse. The merger will be through an exchange of shares whereby the existing majority shareholders of Serenergy will receive 35 common shares of the Company for each share held by them. Post-merger, Serenergy would be a subsidiary of the Company.

In March 2011, the Company entered into a settlement agreement with Serenergy that terminated all previous agreements between Metha Energy and Serenergy.  The agreement was accepted and entered into based upon certain disclosures from Serenergy.  The agreement compensated the Company due to Serenergy’s breach of contract during the original merger agreement.  The agreement also required the Company to sell back its investment in Serenergy. The Company received compensation which fundamentally reflects the Company's operating losses until today, the cash amount invested in the company and an amount securing the Company's ability to remain a going concern in this area of business - approximately $1,900,000. The $1,900,000 includes cash received for the sale of the equity investment of $1,085,851, offset by the original value of the Serenergy investment of $402,780, resulting in a gain of $683,071.  As of March 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.
 
 
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NOTE 5 – CONCENTRATION RISK

Cash

The Company maintains cash balances at several financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation in the aggregate up to $250,000 at March 31, 2011.  The Company also maintains cash balances at financial institutions in Denmark and accounts at these institutions are not insured by the Federal Deposit Insurance Corporation.  At March 31, 2011 and December 31, 2010, the Company had a cash balance of approximately $1,403,000 and $18, respectively, at financial institutions in Denmark, which was uninsured.
 
Major Customer

For the three months ended March 31, 2011, three months ended March 31, 2010, and the period April 18, 2008 (Inception) through March 31, 2011, the Company had none, three, and five customers, who accounted for 100% of total revenues in the amount of approximately $0, $222,000 and $323,000, respectively.  Customer A, contributed $0, $125,000 and $125,000, respectively, which is 0%, 56% and 39% of sales for the three months ended March 31, 2011, the three months ended March 31, 2010, and the period April 18, 2008 (Inception) through March 31, 2011, respectively. Customer B, contributed $0, $79,000 and $79,000, respectively, which is 0%, 35% and 24% of sales for the three months ended March 31, 2011, the three months ended March 31, 2010, and the period April 18, 2008 (Inception) through March 31, 2011, respectively.  Customer C, Visator contributed none, none and $36,000, respectively, which is 0%, 0% and 11% of sales for the three months ended March 31, 2011, three months ended March 31, 2010, and the period April 18, 2008 (Inception) through March 31, 2011.  This customer is a related party.  The agreement with Visator expired on June 1, 2009 and was not renewed.

Accounts Receivable

As of March 31, 2011 and December 31, 2010, respectively the Company did not have an accounts receivable balance.
 
NOTE 6 – NOTES PAYABLE
  
In February 2010, the Company executed a note payable to IT Ventures Aps in exchange for $45,525 for funding the Company’s operating expenses.  The note is due on August 31, 2010 and bears monthly interest of 2.5%.  The Company has the option to extend the note up to four months, with an interest rate of 3% for each additional month. The Company renewed the note for four months therefore the note is due on December 31, 2010. For the three months ended March 31, 2011 and March 31, 2010, respectively the Company recorded $4,677 and $1,131  of interest expense on the loan.

As of December 31, 2010, the note was in default. On March 24, 2011, the note was settled in full.

NOTE 7 – CONVERTIBLE NOTES PAYABLE
 
On June 16, 2010, the Company executed a convertible promissory note to an individual in exchange for $100,000 for funding the Company’s operating expenses.  The note is due on December 31, 2011 with a 9% interest rate annually.  For the three months ended March 31, 2011 and March 31, 2010, the Company recorded $2,219 and $0, respectively, of interest expense on the loan.  If the Company completes an equity financing for a sale of Company common stock of at least $1,750,000 prior to the maturity date of the note, the note and any unpaid accrued interest will automatically convert into common stock of the Company at a 20% discount of the price paid by the investors for the equity financing. On April 27, 2011 the note was settled in full.
 
 
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NOTE 7 – CONVERTIBLE NOTES PAYABLE CONTINUED
 
On June 16, 2010, the Company executed a convertible promissory note to an individual in exchange for $100,000 for funding the Company’s operating expenses.  The note is due on December 31, 2011 with a 9% interest rate annually.  For the three months ended March 31, 2011 and March 31, 2010, the Company recorded $2,219 and $0, respectively, of interest expense on the loan.  If the Company completes an equity financing for a sale of Company common stock of at least $1,750,000 prior to the maturity date of the note, the note and any unpaid accrued interest will automatically convert into common stock of the Company at a 20% discount of the price paid by the investors for the equity financing.  On April 27, 2011 the note was settled in full.
 
NOTE 8 – LOAN PAYABLE – RELATED PARTIES

On June 30, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,000 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest (See Note 13).

On July 24, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,789 to pay for the Company’s website and design. The loan is due on demand, unsecured and bears no interest (See Note 13).

On July 23, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $64 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest (See Note 13).

On June 8, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $627 for funding the Company’s tax expense.  The loan is due on demand, unsecured and bears no interest (See Note 13).

During the year ended December 31, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,153 for funding the Company’s operating expenses.  The loan is due on demand, unsecured and bears no interest (See Note 13).

During the year ended December 31, 2010, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $6,242 for funding the Company’s operating expenses.  The loan is due on demand, unsecured and bears no interest (See Note 13).
 
On January 5, 2011, the Company received a loan from Visator in the amount of $1,000. The amount is due on demand, unsecured and bears no interest (See Note 13).  This loan holder is a related party. 

During the quarter ended March 31, 2011, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $2,490 for funding the Company’s operating expenses. (See Note 13)
 
NOTE 9 –NOTES PAYABLE – RELATED PARTIES
 
On July 2, 2008, the Company executed a $35,000 promissory note to Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $35,000 cash.  The note is due on demand, unsecured and bears no interest.  During the quarter ended March 31, 2011, the Company repaid $33,628 of the $35,000 promissory note to Toft ApS (See Note 13).

 
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NOTE 9 –NOTES PAYABLE – RELATED PARTIES CONTINUED

On August 18, 2008, the Company received a note from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $10,000 for funding the Company’s operating expenses.  The note is due on demand, unsecured and bears no interest (See Note 13).

On January 13, 2010, the Company received a note from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,072 for the purpose of funding operating expenses.  The note is due on demand, unsecured and bears no interest (See Note 13).

In the second quarter of 2010, the Company received a note payable of $25,823 from a related party stockholder.  The stockholder, through an entity that he is an owner of, owns 100,000 Class B shares of the Company as of March 31, 2011.  The note is due on demand, unsecured and bears no interest. On March 24, 2011, the note was settled in full. (See Note 13)

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company was incorporated on April 18, 2008. The Company authorized 100,000,000 shares of common stock with a par value of $.001 and 10,000,000 shares of preferred stock with a par value of $.001, of which 100,000 shares are designated as Series A Convertible Preferred Stock.  Per the Distribution agreement, as of June 1, 2008, the Company is committed to issuing 11,305,030 shares of common stock, par value $.001, to the shareholders of Visator.
 
On July 2, 2008, the Company authorized the issuance of 20,000 shares of common stock to Anslow & Jaclin LLP for legal services related to the registration of the Company.  As of December 31, 2008, the Company has recorded the fair value of $10,000 in legal fees for the share issuance.

On July 2, 2008, the Company authorized the issuance of 25,000 shares of common stock to Profit Planners, Inc. for accounting services related to the registration of the Company.  As of December 31, 2008, the Company has recorded the fair value of $12,500 in consulting fees.

On July 16, 2008, the Company authorized the issuance of 100,000 Series A Convertible Preferred Stock to Jesper Toft, the Chief Executive Officer.  This compensation for services is contingent upon the filing of the Company’s registration statement, which became effective on October 21, 2008.  As of December 31, 2008, the Company has recorded the fair value of $50,000 in consulting fees to Jesper Toft related to this issuance.

The Series A Convertible Preferred stockholders are entitled to receive, when and if declared by the Board of Directors out of funds readily available for the purpose, dividends payable in cash (the “dividend payment date”).  The aggregate amount of dividends paid to Series A Convertible Preferred stock shall be capped at $1,000,000.  After the Series A Convertible Preferred stock dividends have been paid out, they will have no preference on dividends, but they will maintain their voting rights.  The Series A Convertible Preferred stockholders are entitled to 1,000 votes per each share they hold on all matters submitted to a vote of the stockholders of the Company.  At any time on or after the issuance date, the holders of Series A Convertible Preferred shares may convert a portion or all of their shares into Common stock only on a one to one basis.

On August 27, 2009, of the 10,000,000 shares of preferred stock authorized with a par value of $.001, the Company designated 100,000 shares as Series B Convertible Preferred Stock.
 
 
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NOTE 10 – STOCKHOLDERS’ EQUITY CONTINUED

The Series B Convertible Preferred stockholders are entitled to receive, when and if declared by the Board of Directors out of funds readily available for the purpose, dividends payable in cash (the “dividend payment date”).  The aggregate amount of dividends paid to Series B Convertible Preferred stock shall be capped at $570,000. The Series B Convertible Preferred stockholders are entitled to 1 vote per each share they hold on all matters submitted to a vote of the stockholders of the Company.  At any time on or after the issuance date, the holders of Series B Convertible Preferred shares may convert a portion or all of their shares into Common stock only on a one to one basis.

On August 27, 2009 the Company sold an investor 10,000,000 shares of common stock with a par value of $.001 and 100,000 shares of Series B Convertible Preferred stock with a par value of $.001, for approximately $575,000 ($0.06 per share).

On August 27, 2009, the Company authorized the issuance of 40,000 shares of common stock to Soren Bansholt from IT Ventures for finance consulting services related to raising money for the Company.  For the period from August 27, 2009 to December 31, 2009, the Company has recorded the fair value of $2,400 in consulting fees ($0.06 per share).

On August 27, 2009, the Company authorized the issuance of 210,000 shares of common stock to Jude Dixon for consulting services related to raising money for the Company.  For the period from August 27, 2009 to December 31, 2009, the Company has recorded the fair value of $12,600 in consulting fees ($0.06 per share).

On October 29, 2009, the Company authorized the issuance of 20,000 shares of common stock to Liselotte Jensen for consulting services performed for the Company.  For the period from April 18, 2008 (inception) to December 31, 2009 the Company has recorded the fair value of $1,200 in consulting fees ($0.06 per share).

During October 2009, the Company authorized the issuance of 1,000,000 shares of common stock (500,000 each respectively) to two Board of Directors for services through December 31, 2012.  The common stock has a fair value of $60,000 based on the fair value on the date of grant and will be amortized over the life of the services ($0.06 per share).  For the three months ended March 31, 2011 and March 31, 2010, respectively the Company has recognized board compensation expense of $18,948 and $4,737 under the agreement.  On October 19, 2010, David J.P. Meachin resigned from the Board of Directors in disagreement with the Chairman of the Board of Directors and 348,684 shares are to be cancelled.  On March 19, 2011, Robert J. Lynch Jr resigned from the Board of Directors in agreement with the Chairman of the Board of Directors and all 500,000 of his shares were fully earned and outstanding as of March 31, 2011. (See notes 12 and 13)

For the three months ended March 31, 2011 and March 31, 2010, and the period April 18, 2008 (Inception) through March 31, 2011,  $666, $666 and $7,337, respectively were recorded as an in kind contribution of interest on related party notes (See Note 13).

NOTE 11 – MANAGEMENT AGREEMENT

As part of the terms of the Separation Agreement described in Note 1, on June 1, 2008, Visator entered into a twelve month Management Services Agreement with the Company for consulting services pertaining to software maintenance provided to Visator’s management. The agreement provides for a management fee of $3,000 per month to be paid to the Company.  As of three months ended March 31, 2011 and March 31, 2010 and the period from April 18, 2008 (inception) to March 31, 2011, the Company has recorded revenue of none, none and $36,000, respectively to reflect zero, zero and twelve months, respectively, worth of revenue.  The agreement expired on June 1, 2009 and was not renewed.

 
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NOTE 12 – COMMITMENTS AND CONTINGENCIES

Operating lease

The Company does not currently have an operating lease for their office located in New York City.  Office expense fees of approximately $200 are paid on a month to month basis for basic office services.

Consulting agreement- Related party

Effective May 1, 2008, the Company entered into a consulting agreement with Jesper Toft, CEO, to provide consulting services starting in May 2008 at a rate of $1,000 per month.  On September 1, 2009, the Company amended the consulting agreement starting in September 2009 to a rate of $12,000 per month. As of March 31, 2011, the Company has recorded a related party liability of $134,520 under these agreements and expenses of $36,000 for the three months ended March 31, 2011.

During October 2009, the Company entered into agreements with its two members of the Board of Directors to pay directors fees of $60,000 per year beginning the first period after the Company receives $2,000,000 in funding.  As of December 31, 2010, the Company had not been able to complete the  investment due to breach of the Serenergy agreement for the $2,000,000 in funding and so no fees have been paid.  In addition, the agreement calls for the payment of additional directors fees of 1% per director based on the total capital up to $50,000,000 each upon receiving the additional financing.  On October 19, 2010, David J.P. Meachin resigned from the Board of Directors and his board of directors agreement was terminated.  On March 19, 2011, Robert J. Lynch Jr resigned from the Board of Directors and his board of directors agreement was terminated. (See Note 13)

The Company has paid one independent director a fee of $12,500 for the three months ended March 31, 2011. (See Notes 10 and 13)

Distribution agreements

On August 27, 2009, the Company entered into an exclusive distribution agreement (the “Agreement”) with Serenergy A/S (“Serenergy”) where the Company was appointed by Serenergy as its exclusive distributor of Serenergy’s products in the United States, Canada, Israel and the United Nations (“The Territory”) for 72 months.  As of December 31, 2010, the agreement has lapsed. (See Note 4)

On August 27, 2009, the Company entered into an exclusive distribution and manufacturing license agreement - vehicles (the “License Agreement”) with Serenergy where the Company was appointed by Serenergy as its exclusive distributor of Serenergy’s fuel cell related products to the segment of vehicles (the “Segment”) for 72 months.  As of December 31, 2010, the agreement has lapsed. (See Note 4)

NOTE 13 – RELATED PARTY TRANSACTIONS

For the period from April 18, 2008 (inception) to March 31, 2011, the Company had five customers, one of which was Visator, who accounted for 11% of total revenues in the amount of $36,000.  This customer was also a related party.  The agreement with Visator expired on June 1, 2009 and was not renewed. (See Note 5)

During the three months ended March 31, 2010, the Company paid $206,616 for materials and services to Serenergy which is included in cost of goods sold.

Effective May 1, 2008, the Company entered into a consulting agreement with Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, to provide consulting services starting in May 2008 at a rate of $1,000 per month.  On September 1, 2009, the Company amended the consulting agreement starting in September 2009 to a rate of $12,000 per month.  As of March 31, 2011, the Company has recorded a related party liability of $134,520 under these agreements and expenses of $36,000 (See Note 12).
 
 
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NOTE 13 – RELATED PARTY TRANSACTIONS CONTINUED

During October 2009, the Company entered into agreements with its two members of the Board of Directors to pay directors fees of $60,000 per year beginning the first period after the Company receives $2,000,000 in funding.  As of December 31, 2010, the Company had not been able to complete the  investment due to breach of the Serenergy agreement for the $2,000,000 in funding and so no fees have been paid.  In addition, the agreement calls for the payment of additional directors fees of 1% per director based on the total capital up to $50,000,000 each upon receiving the additional financing.  On October 19, 2010, David J.P. Meachin resigned from the Board of Directors and his board of directors agreement was terminated.  On March 19, 2011, Robert J. Lynch Jr resigned from the Board of Directors and his board of directors agreement was terminated. (See Notes 10 and 12)

The Company has paid one independent director a fee of $12,500 for the three months ended March 31, 2011. (See Note 12)

On June 30, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,000 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest (See Note 8).

On July 24, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,789 to pay for the Company’s website and design. The loan is due on demand, unsecured and bears no interest (See Note 8).
 
 On July 23, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $64 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest (See Note 8).

On July 2, 2008, the Company executed a $35,000 promissory note to Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $35,000 cash.  The note is due on demand, unsecured and bears no interest. During the quarter ended March 31, 2011, the Company repaid $33,628 of the $35,000 promissory note to Toft Aps (See Note 9).

On August 18, 2008, the Company executed a promissory note to Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $10,000 for funding the Company’s operating expenses. The note is due on demand, unsecured and bears no interest (See Note 9).

On January 13, 2010, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,072 for the purpose of funding operating expenses.  The loan is due on demand, unsecured and bears no interest (See Note 9).

In the second quarter of 2010, the Company received a note payable of $25,823 from a related party stockholder.  The stockholder, through an entity that he is an owner of, owns 100,000 Class B shares of the Company as of December 31, 2010.  The note is due on demand, unsecured and bears no interest.  On March 24, 2011, the note was settled in full. (See Note 9).

On June 8, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $627 for funding the Company’s tax expense.  The note is due on demand, unsecured and bears no interest (See Note 8).

During the year ended December 31, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,153 for funding the Company’s operating expenses.  The loan is due on demand, unsecured and bears no interest (See Note 8).
 
 
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NOTE 13 – RELATED PARTY TRANSACTIONS CONTINUED

During the year ended December 31, 2010, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $6,242 for funding the Company’s operating expenses.  The loan is due on demand, unsecured and bears no interest (See Note 8).
 
On January 5, 2011, the Company received a loan from Visator in the amount of $1,000. The amount is due on demand, unsecured and bears no interest (See Note 8).  

During the quarter ended March 31, 2011, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $2,490 for funding the Company’s operating expenses. (See Note 8).  

For the three months ended March 31, 2011 and March 31, 2010, and the period April 18, 2008 (Inception) through March 31, 2011,  $666, $666 and $7,337, respectively were recorded as an in kind contribution of interest on related party notes (See Note 10).

NOTE 14 – SUBSEQUENT EVENTS

On May 5, 2011, the Company has paid one independent director a fee of $7,500.
 
On May 16, 2011, the Company repurchased, from a related party, 100,000 shares of the Series B Convertible Preferred stock with a par value of $.001 for a total price of $570,000.
 
On June 16, 2010, the Company executed a convertible promissory note to an individual in exchange for $100,000 for funding the Company’s operating expenses.  The note is due on December 31, 2011 with a 9% interest rate annually. On April 27, 2011 the note was settled in full.
 
On June 16, 2010, the Company executed a convertible promissory note to an individual in exchange for $100,000 for funding the Company’s operating expenses.  The note is due on December 31, 2011 with a 9% interest rate annually.  On April 27, 2011 the note was settled in full.
 
On July 2, 2008, the Company executed a $35,000 promissory note to Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $35,000 cash.  The note is due on demand, unsecured and bears no interest.  During the quarter ended March 31, 2011, the Company repaid $33,628 of the $35,000 promissory note to Toft ApS.  In the second quarter of 2011, the Company repaid the remaining $1,372 of the $35,000 promissory note to Toft ApS.

On August 18, 2008, the Company received a note from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $10,000 for funding the Company’s operating expenses.  The note is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

On January 13, 2010, the Company received a note from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,072 for the purpose of funding operating expenses.  The note is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

On June 30, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,000 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

 
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NOTE 14 – SUBSEQUENT EVENTS CONTINUED

On July 24, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,789 to pay for the Company’s website and design. The loan is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

On July 23, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $64 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

On June 8, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $627 for funding the Company’s tax expense.  The loan is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

During the year ended December 31, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,153 for funding the Company’s operating expenses.  The loan is due on demand, unsecured and bears no interest.  In the second quarter of 2011 the note was settled in full.

During the year ended December 31, 2010, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $6,242 for funding the Company’s operating expenses.  The loan is due on demand, unsecured and bears no interest. In the second quarter of 2011 the note was settled in full.

During the quarter ended March 31, 2011, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $2,490 for funding the Company’s operating expenses.  In the second quarter of 2011 the note was settled in full.

On January 5, 2011, the Company received a loan from Visator in the amount of $1,000. The amount is due on demand, unsecured and bears no interest.  This loan holder is a related party.  In the second quarter of 2011 the loan was settled in full.
 
 
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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

Plan of Operation

We focus our business within advanced fuel cell technology. We plan to expand our activities within this area through the experience and know-how we have in this business segment.  In that regard we plan to put in place new service and product agreements in the area of alternative energy technology and related opportunities. If we are able to obtain new product agreements, we plan to acquire relevant financing to move forward with our plans.

Results of Operations

For the three months ended March 31, 2011, we had revenue of $0 as compared to $221,702 for the three months ended March 31, 2010.  The decrease in revenue in 2011 versus 2010 was due no sales in 2011 as compared to  $221,702 in sales of fuel cell technology in 2010.  The cost of goods sold related to revenue was $0 for the three months ended March 31, 2011 as compared to $206,616 for the three months ended March 31, 2010 mainly due to no sales in 2011 versus equipment costs incurred related to the sale of the fuel cell technology in 2010.

For the three months ended March 31, 2011, our operating expenses totaled $80,423, compared to $133,390 for the three months ended March 31, 2010. The decrease in operating expenses were mainly due to the accounting, audit, consulting and legal expenses of $5,193 that we incurred in 2011 as compared to $70,117 for the same period in 2010. The decrease in operating expenses from 2011 versus 2010 was due to renegotiating lower rates for accounting services and a not having a finance consulting expense in 2011 versus 2010. The decrease in operating expenses was also due to consulting fee related party expenses of $36,000 that we incurred in 2011 versus $41,000 for same period in 2010.  

The net income was $1,221,936 for the three months ended March 31, 2011 as compared to a net loss ($121,109) for three months ended March 31, 2010. The increase in net income for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 was mainly due to the March 2011 settlement agreement with Serenergy that compensated the Company for Serenergy’s breach of contract during the original merger agreement. The company recorded a gain of approximately $1,500,000 on this agreement. For the three months ended March 31, 2011, net income was partially offset by provision for income taxes of $205,392 versus none in the same period in 2010.  The increase in provision for income taxes of $205,392 for the three months ended 2011 versus 2010 was due to net income in 2011, which was mainly due to the March 2011 settlement agreement with Serenergy, versus net losses in 2010.
 
For the three months ended March 31, 2011, we also had interest expense of $9,781, which was made up of $666 related to in-kind contribution of interest on non-interest bearing loans payable-related party, $4,677 of interest on a note payable and $4,438 of interest on convertible notes. For the three months ended March 31, 2010, we had interest expense of $1,797 related to in-kind contribution of interest on non-interest bearing loans payable-related party. The increase in interest expense in 2011 compared to 2010 was due to the notes payable entered into in February 2010 and convertible notes payable that were entered into in the second quarter of 2010.

 
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Capital Resources and Liquidity
 
As of March 31, 2011 and as of December 31, 2010, we had cash of $1,638,954 and $423, respectively. We are attempting to commence operations and produce revenues.  Management intends to raise further relevant funds for the pursuit of our planned activities.  

On May 16, 2011, the Company repurchased, from a related party, 100,000 shares of the Series B Convertible Preferred stock with a par value of $.001 for a total price of $570,000.
 
Subsequent to March 31, 2011, the Company repaid $200,000 of convertible notes payable and $26,809 of notes payable - related party and loans payable - related party.
 
If we are unable to satisfy our cash requirements we may be unable to proceed with our plan of operations. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we will suspend or cease operations.
 
Capital Resources and Liquidity Continued

We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.   

Operating Activities

Operating activities (used) or provided $654,166, $(32,174) and $156,610, respectively of cash during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.  We had a net income (loss) of $1,221,936, $(121,109) and $318,595 during these periods, respectively. We had a decrease in accounts receivable of none, $65,000 and none, an increase in accounts receivable related party of none, none and $10,236, an increase in other assets of none, none and $465, respectively offset by an decrease in accounts and accrued expenses payable of $137,006, $152, and an increase of $44,595, an increase in accounts and accrued expenses payable related party of $26,200, $18,477, and $134,520, respectively, and an increase in deferred tax liability of $205,392, none and $205,392, respectively. In addition, we had none, none and $50,000 of series A convertible preferred stock issued for services – related party, $19,842, $4,737 and $77,779 of stock issued for consulting fees and services – related party and professional and board fees, in-kind contribution of interest for loans payable – related party of $666, $666 and $7,337, amortization expense of $207, $207 and $1,928, and bad debt expense related party of none, none, and $10,236, respectively.

Investing Activities

We provided (used) $1,085,851, none and $680,135, respectively, of cash in our investing activities during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.  We used cash of none, none and $402,780, respectively, of cash for our Serenergy equity investment during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.  We provided cash of $1,085,851, none and $1,085,851, respectively, from the sale of Serenergy equity during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011. We used none, none and $2,936, respectively, of cash for the purchase of property, plant and equipment  during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.
 
 
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Financing Activities

We had $(101,486), $46,597 and $802,209, respectively, of cash provided by (used in) our financing activities during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.  We had none, none and $575,400, respectively, of proceeds from sale of common stock and series B preferred stock, $3,490, none and $14,365, respectively, of proceeds of loans payable to related party, and none, none and $200,000, respectively of proceeds from convertible notes payable during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.  We had $59,451, none and $59,451 respectively, of repayment of notes payable to related party, and none, $1,072 and $71,895, respectively, of proceeds from notes payable to related party, and none, $45,525 and $45,525 of proceeds of notes payable, and $45,525, none and $45,525 of repayment of notes payable during the three months ended March 31, 2011, March 31, 2010 and for the period from April 18, 2008 (Inception) through March 31, 2011.
 
Critical Accounting Policies

Going concern

The accompanying condensed unaudited financial statements have been prepared under a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred net operating losses from inception of $950,578. In addition there were no revenues during the three months ended March 31, 2011. These factors raise substantial doubt about our ability to continue as a going concern.
 
Management is pursuing other business relationships and believes that the actions presently being taken and the success of future operations will be sufficient to enable the Company to continue as a going concern.

In March 2011, the Company entered into a settlement agreement with Serenergy that terminated all previous agreements between Metha Energy and Serenergy. The agreement compensated the Company because Serenergy did not honor the original merger agreement. The agreement also included that Serenergy bought back their shares held by the Company.

However, there can be no assurance that the raising of debt or equity will be successful and that our anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires 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.  Actual results could differ from those estimates.
 
 
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Revenue recognition

The Company’s revenues are derived from sales of fuel cell technology. The Company follows the guidance of the Securities and Exchange Commission’s FASB Accounting Standards Codification No. 605 for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, the item has been shipped and collectability is reasonably assured.

Investments
 
Equity investments in companies over which the Company has no ability to exercise significant influence are accounted for under the cost method. The Company’s holds approximately 0% and 11% of Serenergy’s issued and outstanding shares as of March 31, 2011 and December 31, 2010.  The Company’s investment in Serenergy was accounted for based on the cost method.
 
Income taxes

We follow FASB Accounting Standards Codification No. 740, Income Taxes. Under the asset and liability method of FASB Accounting Standards Codification No. 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
 
Off-Balance sheet arrangements
 
At March 31, 2011, we had no off-balance sheet arrangements.

Inflation
 
We believe that inflation does not significantly impact our current operations.

Spin Out

In May 2008, Visator, Inc. spun out, pro rata, all of its shares of our common stock held by it to their 42 shareholders.  These shares were not registered under the Securities Act of 1933 and may not have been appropriately exempt from registration under the Act. Based upon same, if it is determined that the shares issued pursuant to this spin out do not qualify for this exemption we may be subject remedial sanctions. Such sanctions could include the payment of disgorgement, prejudgment interest and civil penalties. We may also be subject to prejudgment interest on such amount as well as civil penalties in amount that would have to be determined by the court.

We are not aware of any pending claims for sanctions against us based upon the failure to properly register such shares under the Securities Act of 1933. Nevertheless, it is possible that it could be determined that such shares may not have been exempt from registration and that we may be subject to sanctions and possible civil penalties.  In the event that a shareholder brings a claim against us for failure to properly register these shares it could have an adverse affect on our results of operations and financial condition since we would need to pay fees to defend such claim or pay damages if the shareholder is successful in their claim against us.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.
 
 
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Item 4.
Controls and Procedures

a)   Evaluation of Disclosure Controls. Jesper Toft, our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of our first fiscal quarter 2011 pursuant to Rule 13a-15(b) of the Securities and Exchange Act. Disclosure controls and procedures are controls and other procedures that 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 recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, management concluded that our disclosure controls and procedures were not effective as of March 31, 2011. Since these entity level programs have a pervasive effect across the organization, management has determined that these deficiencies constitute a material weakness due to (i) the lack of an independent director on our Board of Directors as a result of Mr. Lynch’s resignation from the Board on March 19, 2011 and (ii) the Company’s size, which prevents us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system.
 
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
(b)   Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
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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

Not required for smaller reporting companies.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
None. 

Item 3.
Defaults Upon Senior Securities

None.

Item 4.
Reserved and Removed

None.

Item 5.
Other Information
 
None.
 
Item 6.
Exhibits and Reports on Form 8-K
 
(a) Exhibit Index
   
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer
 
32.1
Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer and Chief Financial Officer
 
 
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SIGNATURES
 
In accordance with Section 13(a) or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
METHA ENERGY SOLUTIONS INC.
     
Dated:   May 20, 2011
By:
/s/  JESPER TOFT
   
Jesper Toft
Chairman of the Board Directors,
Chief Executive Officer,
Chief Financial Officer,
Chief Accounting Officer
     
 
 
 
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