China Network Media, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT - China Network Media, Inc.	f10q0611ex32i_methaenergy.htm
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT - China Network Media, Inc.	f10q0611ex31i_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 June 30, 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

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of August 11, 2011: 22,620,030 shares of common stock.

METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)

(A DEVELOPMENT STAGE COMPANY)

FORM 10-Q

SIX MONTHS ENDED JUNE 30, 2011

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Condensed Balance Sheets as of June 30, 2011 (Unaudited) and as of December 31, 2010	3

	Condensed Statements of Operations for the three and six months ended June 30, 2011, the three and six months ended June 30, 2010, and the Period from April 18, 2008 (Inception) through June 30, 2011 (Unaudited)	4

	Condensed Statement of Changes in Stockholders' Equity/(Deficit) for the period from April 18, 2008 (Inception) through June 30, 2011 (Unaudited)	5

	Condensed Statements of Cash Flows for the six months ended June 30, 2011, the six months ended June 30, 2010 and the Period from April 18, 2008 (Inception) through June 30, 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	23

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

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)

(A DEVELOPMENT STAGE COMPANY)

Condensed Balance Sheets

	June 30, 2011			December 31, 2010
	(Unaudited)
ASSETS
Current Assets:
Cash	$	329,987		$	423

Total Current Assets		329,987			423

Property, Plant & Equipment:
Website costs, net of accumulated amortization of $1,751 and $1,454,
respectively		37			335
Computer equipment, net of accumulated depreciation of $383 and $267,
respectively		765			880
		802			1,215

Other Assets:
Security deposit		465			465
Investment in Serenergy		-			402,780

TOTAL ASSETS	$	331,254		$	404,883

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses	$	23,848		$	181,601
Accrued expenses - related party		785			108,320
Deferred tax liability		83,302			-
Loans payable - related party		-			10,875
Notes payable - related party		-			71,895
Notes payable		-			45,525
Convertible notes payable		-			200,000
Total Current Liabilities		107,935			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 and outstanding		100			100
Series B Convertible Preferred stock - $.001 par value; 100,000 shares
authorized; none and 100,000 to be issued and outstanding		-			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		700,023			698,684
Less Treasury stock; 100,000 and 0 Series B Convertible Preferred stock (cost)		(569,366	)		-
Deferred Compensation		-			(19,842	)
Retained earnings (Accumulated deficit) during the development stage		70,291			(914,646	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		223,319			(213,333	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	331,254		$	404,883

See accompanying notes to the unaudited condensed financial statements.

METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)

(A DEVELOPMENT STAGE COMPANY)

Condensed Statements of Operations (Unaudited)

	Three months ended June 30, 2011			Three months ended June 30, 2010			Six months ended June 30, 2011			Six months ended June 30, 2010			April 18, 2008 (Inception) - June 30, 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		105,000			31,000			141,000			72,000			399,000
Professional fees		242,139			43,161			247,332			113,278			724,846
Board member fees		7,500			19,793			38,948			24,530			86,185
Other general & administrative expenses		27,184			16,643			34,966			34,179			168,656
Total operating expenses		381,823			110,597			462,246			243,987			1,378,687

Loss from operations		(381,823	)		(110,597	)		(462,246	)		(228,901	)		(1,332,401	)

Other income (expense):
Gain (Loss) on Foreign Currency		17,959			49			12,559			(959	)		14,602
Gain on settlement of agreement		-			-			1,516,161			3,236			1,516,161
Other income		-			3,236			-			-			3,236
Forgiveness of debt		6,777			-			13,548			-			13,548
Interest income		3			-			3			-			28
Interest expense		(2,005	)		(4,719	)		(11,786	)		(6,516	)		(40,040	)
Bad debt expense-related party		-			-			-			-			(10,236	)
Total other income (expense)		22,734			(1,434	)		1,530,485			(4,239	)		1,497,299
														-
Net Income (Loss) Before Provision For Income Taxes		(359,089	)		(112,031	)		1,068,239			(233,140	)		164,898

Provision for (benefit from) income taxes		(122,090	)		-			83,302			-			83,302

Net Income (Loss)	$	(236,999	)	$	(112,031	)	$	984,937		$	(233,140	)	$	81,596

Basic and diluted net income (loss) per weighted-average shares common stock	$	(0.01	)	$	(0.01	)	$	0.04		$	(0.01	)

Basic weighted-average number of shares of common stock to be issued		22,271,351			21,777,926			22,120,870			21,738,670


Diluted weighted-average number of shares of common stock to be issued		22,371,351			21,777,926			22,220,870			21,738,670

See accompanying notes to the unaudited condensed financial statements.

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 June 30, 2011 (unaudited)

	Common Stock						Series A Convertible Preferred Stock				Series B Convertible Preferred Stock						Treasury Stock Series B Convertible Preferred Stock					Additional Paid-in			Deferred			Accumulated Deficit during the development
	Shares			Par Value			Shares		Par Value		Shares			Par Value			Shares		Par Value			Capital			Compensation			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

Series B Preferred stock and Common stock sold for cash		-			-			-		-		-			-			-		-			-						-			-

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	)

Purchase of Treasury Stock		-			-			-		-		(100,000	)		(100	)		100,000		(569,366	)		-						-			(569,466	)

Common stock issued for professional services		-			-			-		-		-			-			-		-			-			19,842			-			19,842

In-kind contribution of interest expense		-			-			-		-		-			-			-		-			1,339			-			-			1,339

Net income for the six month period ended June 30, 2011		-			-			-		-		-			-			-		-			-			-			984,937			984,937

Balance June 30, 2011		22,271,346		$	22,271			100,000	$	100		-		$	-			100,000	$	(569,366	)	$	700,023		$	-		$	70,291		$	223,319

See accompanying notes to the unaudited condensed financial statements.

METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)

(A DEVELOPMENT STAGE COMPANY)

Condensed Statements of Cash Flows (Unaudited)

	Six months ended June 30, 2011			Six months ended June 30, 2010			For the Period April 18, 2008 (Inception) - June 30, 2011


CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	984,937		$	(233,140	)	$	81,596
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			9,474			77,779
In-kind contribution of interest expense		1,339			1,339			8,010
Bad debt expense-related party		-			-			10,236
Depreciation and Amortization expense		413			412			2,134
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		-			(3,235	)		(10,236	)
Increase in other assets		-			-			(465	)
Increase (decrease) in accounts payable and accrued expenses		(157,753	)		(39,547	)		23,848
Increase (decrease) in accounts payable and accrued expenses-related party		(107,535	)		39,098			785
Increase in deferred tax liability		83,302			-			83,302
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		141,474			(160,599	)		(356,082	)

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
Purchase of treasury stock		(569,466	)		-			(569,466	)
Proceeds from loans payable -related party		3,490			-			14,365
Repayment of loans payable -related party		(14,365	)		-			(14,365	)
Proceeds from notes payable - related party		-			27,969			71,895
Repayment of notes payable - related party		(71,895	)		-			(71,895	)
Proceeds from notes payable					45,525			45,525
Repayment of notes payable		(45,525	)		-			(45,525	)
Proceeds from convertible notes payable		-			200,000			200,000
Repayments of convertible notes payable		(200,000	)		-			(200,000	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(897,761	)		273,494			5,934

NET INCREASE (DECREASE) IN CASH		329,564			112,895			329,987
Cash, beginning of period		423			5,785			-
Cash, END OF PERIOD	$	329,987		$	118,680		$	329,987

Supplementary disclosures of cash flow information
Cash paid during the period for:

Income taxes	$	-		$	-		$	-
Interest paid	$	15,919		$	3,366		$	26,619

See accompanying notes to the unaudited condensed financial statements.

METHA ENERGY SOLUTIONS INC. (FORMERLY INSCRUTOR, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

AS OF JUNE 30, 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 June 30, 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 June 30, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.

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 $1,332,401. In addition there was no revenue during the six months ended June 30, 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.

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 stage are capitalized and amortized over the estimated three year life of the asset. For the six months ended June 30, 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 June 30, 2011 and December 31, 2010. The Company’s investment in Serenergy was accounted for based on the cost method.

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 convertible Preferred shares 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 June 30, 2010 and 100,000 Series A convertible preferred shares outstanding as of June 30, 2011 and is included in diluted earnings per share as of June 30, 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.

Recent Accounting Pronouncements

ASU No. 2011-02; A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“TDR”). In April, 2011, the FASB issued ASU No. 2011-02, intended to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. Early adoption is permitted. The Company intends to adopt the methodologies prescribed by this ASU by the date required, and is continuing to evaluate the impact of adoption of this ASU.

ASU No. 2011-03; Reconsideration of Effective Control for Repurchase Agreements. In April, 2011, the FASB issued ASU No. 2011-03. The amendments in this ASU remove from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.

The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. In May, 2011, the FASB issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted.

The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

ASU No. 2011-05; Amendments to Topic 220, Comprehensive Income. In June, 2011, the FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.

The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Due to the recency of this pronouncement, the Company is evaluating its timing of adoption of ASU 2011-05, but will adopt the ASU retrospectively by the due date.

NOTE 3 – PROPERTY AND EQUIPMENT

At June 30, 2011 (Unaudited) and December 31, 2010, property and equipment is as follows:

	June 30,		December 31,
	2011		2010
	(Unaudited)
Website costs	$	1,789	$	1,789
Computer equipment		1,147		1,147
		2,936		2,936
Less accumulated amortization		2,134		1,721
	$	802	$	1,215

Amortization expense for the six months ended June 30, 2011, June 30, 2010 and the period from April 18, 2008 (inception) to June 30, 2011 was $413, $412 and $2,134, 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.

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 June 30, 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 June 30, 2011 and December 31, 2010, the Company had a cash balance of approximately $320,000 and $18, respectively, at financial institutions in Denmark, which was uninsured.

Major Customer

For the three and six months ended June 30, 2011, the three and six months ended June 30, 2010, and the period April 18, 2008 (Inception) through June 30, 2011, the Company had none, none, none, three, and five customers, who accounted for 100% of total revenues in the amount of approximately none, none, none $222,000 and $323,000, respectively. Customer A, contributed none, $125,000 and $125,000, respectively, which is 0%, 56% and 39% of sales for the six months ended June 30, 2011, the six months ended June 30, 2010, and the period April 18, 2008 (Inception) through June 30, 2011, respectively. Customer B, contributed none, $79,000 and $79,000, respectively, which is 0%, 35% and 24% of sales for the six months ended June 30, 2011, the six months ended June 30, 2010, and the period April 18, 2008 (Inception) through June 30, 2011, respectively. Customer C, Visator contributed none, none and $36,000, respectively, which is 0%, 0% and 11% of sales for the six months ended June 30, 2011, six months ended June 30, 2010, and the period April 18, 2008 (Inception) through June 30, 2011. This customer is a related party. The agreement with Visator expired on June 1, 2009 and was not renewed.

Accounts Receivable

As of June 30, 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 and six months ended June 30, 2011 and June 30, 2010, respectively the Company recorded none, $4,677, $3,356 and $4,487, respectively 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 and six months ended June 30, 2011 and June 30, 2010, the Company recorded $666, $2,885, $345 and $345, 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 7 – CONVERTIBLE NOTES PAYABLE CONTINUED

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. In the second quarter of 2011, the loan was paid in full (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. In the second quarter of 2011, the loan was paid in full (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. In the second quarter of 2011, the loan was paid in full (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. In the second quarter of 2011, the loan was paid in full (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. In the second quarter of 2011, the loan was paid in full (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. In the second quarter of 2011, the loan was paid in full (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. This loan holder is a related party. In the second quarter of 2011, the loan was paid in full (See Note 13).

During the six months ended June 30, 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 loan was paid in full (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 first quarter ended March 31, 2011, the Company repaid $33,628 of the $35,000 promissory note to Toft ApS. During the second quarter ended June 30, 2011, the Company paid the note in full by repaying the remaining $1,372 on promissory note to Toft ApS (See Note 13).

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 paid in full (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. In the second quarter of 2011, the note was paid in full (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 paid 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.

NOTE 10 – STOCKHOLDERS’ EQUITY CONTINUED

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.

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 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 approximately $570,000. The shares are recorded as treasury shares at June 30, 2011 (See Note 13).

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 and six months ended June 30, 2011and June 2010 the Company has recognized board compensation expense of $7,500, $38,948, $4,737 and $9,474, respectively under the agreement (See Notes 12 and 13).

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 and six months ended June 30, 2011 and June 30, 2010, and the period April 18, 2008 (Inception) through June 30 2011, $673, $1,339, $673, $1,339, and $8,010, 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 six months ended June 30, 2011 and June 30, 2010 and the period from April 18, 2008 (inception) to June 30, 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.

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. The agreement expired at March 31, 2011 and the company is now invoiced for these services. In the three months ended June 30, 2011, the related party incurred $105,000 of fees. As of June 30, 2011, the Company has recorded a related party liability of $785 under these agreements/invoices and expenses of $141,000 for the six months ended June 30, 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 six months ended June 30, 2011 (See Note 13).

The Company has paid one independent director a fee of $7,500 for the six months ended June 30, 2011 (See Note 13).

Distribution agreements

NOTE 12 – COMMITMENTS AND CONTINGENCIES CONTINUED

Distribution agreements continued

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 June 30, 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 six months ended June 30, 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. The agreement expired at March 31, 2011 and the Company is now invoiced for these services. In the three months ended June 30, 2011, the related party incurred $105,000 of consulting fees. As of June 30, 2011, the Company has recorded a related party liability of $785 under these agreements/invoices and expenses of $141,000 for the six months ended June 30, 2011 (See Note 12).

The Company has paid one independent director a fee of $12,500 for the six months ended June 30, 2011 (See Note 12).

The Company has paid one independent director a fee of $7,500 for the six months ended June 30, 2011 (See Note 12).

NOTE 13 – RELATED PARTY TRANSACTIONS CONTINUED

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 first quarter ended March 31, 2011, the Company repaid $33,628 of the $35,000 promissory note to Toft Aps. During the second quarter ended June 30, 2011, the Company paid the note in full by repaying the remaining $1,372 on 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. In the second quarter of 2011, the note was paid in full (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. In the second quarter of 2011, the note was paid in full (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 paid 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. In the second quarter of 2011, the loan was paid in full (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. In the second quarter of 2011, the note was paid in full (See Note 8).

For the three and six months ended June 30, 2011 and June 30, 2010, and the period April 18, 2008 (Inception) through June 30, 2011 $673, $1,339, $673, $1,339, and $8,010, respectively were recorded as an in kind contribution of interest on related party notes (See Note 10).

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 and six months ended June 30, 2011, we had revenue of $0 and $0 as compared to $0 and $221,702 for the three and six months ended June 30, 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 and $0 for the three and six months ended June 30, 2011 as compared to $0 and $206,616 for the three and six months ended June 30, 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 and six months ended June 30, 2011, our operating expenses totaled $381,823, and $ 462,246 compared to $110,597 and $ 243,987 for the three and six months ended June 30, 2010. The increase in operating expenses were mainly due to the accounting, audit, consulting and legal expenses of $242,139 and $247,332 that we incurred in the three and six months ended June 30, 2011 as compared to $43,161 and $113,278 for the same periods in 2010, respectively. The increase in operating expenses from 2011 versus 2010 was due to incurring business development expense of approximately $200,000 for the three and six months ended June 30, 2011 as compared to none and none for the same periods in 2010. The increase in operating expenses was also due to consulting fee related party expenses of $105,000 and $141,000 that we incurred for the three and six months ended June 30, 2011 versus $31,000 and $72,000 for same periods in 2010, respectively. The increase was due to the management fee increasing to $105,000 for the three months ended June 30, 2011.

The net income/(loss) was $(236,999) and $ 984,937 for the three and six months ended June 30, 2011 as compared to a net loss ($112,031) and $(233,140) for three and six months ended June 30, 2010. The increase in net loss in the three months ended June 30, 2011 compared to the three months ended June 30, 2010 was mainly due to increases in operating expenses. The increase in operating expenses from 2011 versus 2010 was due to incurring business development expense of approximately $200,000 for the three and six months ended June 30, 2011 as compared to none and none for the same periods in 2010. The increase in operating expenses was also due to consulting fee related party expenses of $105,000 and $141,000 that we incurred for the three and six months ended June 30, 2011 versus $31,000 and $72,000 for same periods in 2010, respectively. The increase was due to the management fee increasing to $105,000 for the three months ended June 30, 2011. The increase in net income during six months ended June 30, 2011 compared to the six months ended June 30, 2010 was mainly due to the 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 June 30, 2011, net loss was partially offset by benefit for income taxes of $122,090 versus none in the same period in 2010. For the six months ended June 30, 2011, net income was partially offset by provision for income taxes of $83,302 versus none in the same period in 2010. The increase in provision for income taxes of $83,302 for the six months ended June 30, 2011 versus the same period in 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 and six months ended June 30 2011, we also had interest expense of $2,005, and $11,786 which was made up of $673 and $1,339 related to in-kind contribution of interest on non-interest bearing loans payable-related party, none and $4,677 of interest on a note payable and $1,332 and $5,770 of interest on convertible notes, respectively. For the six and three months ended June 30, 2010, we had interest expense of $4,719 and $6,516 respectively, which was made up of $673 and $1,339 related to in-kind contribution of interest on non-interest bearing loans payable-related party and $4,046 and $5,177 of interest on loan and notes payable. The increase in interest expense for the six months ended June 30, 2011 compared to the same period in 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.

Capital Resources and Liquidity

As of June 30, 2011 and as of December 31, 2010, we had cash of $329,987 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.

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.

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 $141,474, ($160,599) and ($356,082), respectively of cash during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011. We had a net income (loss) of $ 984,937, ($233,140) and $81,596 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, $(3,235) 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 $157,753, $39,547, and an increase of $23,848, also a decrease in accounts and accrued expenses payable related party of $ 107,535, an increase of $ 39,098 and 785, respectively, and an increase in deferred tax liability of $83,302, none and $83,302, respectively. In addition, we had none, none and $50,000 of series A convertible preferred stock issued for services – related party, $19,842, $9,474 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 $1,339 , $1,339 and $8,010, amortization expense of $413, $412 and $2,134, gain on settlement of $683,071, none and $683,071, and bad debt expense related party of none, none, and $10,236, respectively.

Investing Activities

We provided $1,085,851, none and $680,135, respectively, of cash in our investing activities during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011. We used cash of none, none and $402,780, respectively, of cash for our Serenergy equity investment during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011. We provided cash of $1,085,851, none and $1,085,851, respectively, from the sale of Serenergy equity during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011. We used none, none and $2,936, respectively, of cash for the purchase of property, plant and equipment during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011.

Financing Activities

We had $(897,761), $273,494 and $5,934, respectively, of cash provided by (used in) our financing activities during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011. We had none, none and $575,400, respectively, of proceeds from sale of common stock and series B preferred stock, $569,466, none and $569,466, respectively, of cash used to purchase treasury stock, $10,875, and none and none of net proceeds of loans payable to related party during the six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011. We had none, $27,969 and $71,895, respectively, of proceeds from notes payable to related party, $71,895, none and $71,895, respectively, of repayment of notes payable to related party, respectively, 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 six months ended June 30, 2011, June 30, 2010 and for the period from April 18, 2008 (Inception) through June 30, 2011, respectively. We had proceeds from convertible notes payable of none, $200,000 and $200,000, and repayment of convertible notes payable of $200,000, none and $200,000 during the six months ended June 2011, June 30, 2010 and for the period from April,2008 (Inception) through June 30, 2011, respectively.

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 $1,332,401. In addition there were no revenues during the six months ended June 30, 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

Revenue recognition

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 June 30, 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.

Recent Accounting Pronouncements

Off-Balance sheet arrangements

At June 30, 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

Smaller reporting companies are not required to provide the information required by this item.

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 second 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 June 30, 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) Remediation of Material Weaknesses in Internal Control Over Financial Reporting. In order to remedy our existing internal control deficiencies, as our finances allow, we intend to investigate the opportunity to bring in an Independent Director as well as the opportunity to hire internal audit staff.

(c) 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.

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

Smaller reporting companies are not required to provide the information required by this item.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares (or Units) Purchased (1)		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2011 through April 30, 2011		0		0		0		0
May 1, 2011 through May 31, 2011		100,000	$	5.70		0		0
June 1, 2011 through June 30, 2011		0		0		0		0
Total		100,000	$	5.70		0		0

(1)

All shares repurchased by the Company refer to Series B Convertible Preferred Shares. The Series B Convertible Preferred stockholders are entitled to receive, when and if declared by the Board of Directors of the Company, 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 one (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.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Reserved and Removed

Item 5.

Other Information

None.

Item 6.

Exhibits.

Exhibit Number	Descriptions

31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*	Interactive Data File (Form 10-Q for the quarterly period ended June 30, 2011 furnished in XBRL).

* The registrant will be furnishing Exhibit 101 within 30 days of the filing date of this Form 10-Q, as permitted under the rules of the Securities and Exchange Commission.

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: August 22, 2011	By:	/s/ JESPER TOFT
		Jesper Toft Chairman of the Board Directors, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer

Attached files

China Network Media, Inc. Reports

Also read