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EX-32.1 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER. - China Network Media, Inc.f10k2011ex32i_metha.htm
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EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT - China Network Media, Inc.f10k2011ex31i_metha.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934
   
For the fiscal year ended December 31, 2011
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from ____________ to ____________
 
Commission file number l-9224
 
Metha Energy Solutions Inc.
(Exact Registrant as specified 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)
 
Inscrutor, Inc.
(Former name or address)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o         No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes x        No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No ¨
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o            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

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, computed by reference to the last reported price at which the stock was sold on June 30, 2011 (the last business day of the registrant’s most recently completed second quarter) was $0.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class
 
Outstanding at April 16, 2012
Common Stock, $.001 par value per share
 
22,620,030 shares


 
 

 
 
 
 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
FORM 10-K
YEAR ENDED DECEMBER 31, 2011
 
TABLE OF CONTENTS
 
PART I
 
Page
Item 1.
Business
  1
Item 1A.
Risk Factors
  2
Item 2.
Properties
  3
Item 3.
Legal Proceedings
  3
Item 4.
Mine Safety Disclosure
  3
PART II
   
Item 5.
Market for the Registrant’s Common Stock and Related Stockholder Matters
  4
Item 6.
Selected Financial Data
  4
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 
  5
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
  8
Item 8.
Financial Statements and Supplementary Data
  8
Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 
  8
Item 9A.
Controls and Procedures
  8
Item 9B.
Other Information
  9
     
PART III
   
Item 10.
Directors, Executive Officers and Corporate Governance
  10
Item 11.
Executive Compensation
  10
Item 12.
Security Ownership of Certain Beneficial Owners and Management
  11
Item 13.
Certain Relationships and Related Transactions, and Director Independence
  12
Item 14.
Principal Accountant Fees and Services
  12
PART IV
   
Item 15.
Exhibits and Financial Statements Schedules
  13

 
 
 

 

 
 FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:

 
·
business strategy;
 
 
·
financial strategy;
 
 
·
uncertainty regarding our future operating results;
 
 
·
plans, objectives, expectations and intentions contained in this report that are not historical.
 
All statements, other than statements of historical fact included in this report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and elsewhere in this report. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
 
 CERTAIN TERMS USED IN THIS REPORT
 
When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Metha Energy Solutions, Inc. and its subsidiaries.  “SEC” refers to the Securities and Exchange Commission.

 
 

 

 
Item 1.  Business
 
General
 
We are a Delaware Corporation founded in April 2008.  We changed our name to Metha Energy Solutions Inc. (“Metha Energy” or “the Company” or “formerly Inscrutor”) on October 12, 2009.  We focus our business on commercializing advanced fuel cell technology. We plan to expand our product offerings within this area through new agreements with various technology companies.

We were founded in April 2008 as Inscrutor, Inc.  (“Inscrutor”), a development stage company. The technology that we 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. As of October 9, 2008, the stock certificates were delivered to shareholders (See Note 8).  The Company derived revenue from a management services agreement with Visator.  We no longer pursue any commercialization of software/technology nor do we invest in it.

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. The Company plans to continue to identify new business opportunities within the fuel cell/technology energy area.
 
Marketing

We have sold fuel cell products to a number of different applications to both private companies, universities and other institutions and we will continue our focus in this area.  We communicate mainly through direct customer communication via e-mail and phone.
 
Competition

There are multiple companies which offer different kinds of fuel cell technologies. These different kinds of fuel cells technologies vary in attractiveness regarding different features.  The fuel cell segment is not a new segment/industry.  This is a highly competitive market.

 
-1-

 
 
Item 1A.  Risk Factors
 
THIS REPORT CONTAINS CERTAIN STATEMENTS RELATING TO FUTURE EVENTS AND THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. PROSPECTIVE INVESTORS ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS, INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS REPORT, INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. Please note that throughout this prospectus, the words “we”, “our” or “us” refer to the Company and not to the selling stockholders.
 
WE HAVE A LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE LIKELIHOOD OF OUR SUCCESS MUST BE CONSIDERED IN LIGHT OF THE PROBLEMS, EXPENSES, DIFFICULTIES, COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL DEVELOPING COMPANY.
 
We were incorporated in Delaware in April 2008. We have no significant financial resources and only a small amount of revenues to date. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated activities.
 
WE WILL REQUIRE FINANCING TO ACHIEVE OUR CURRENT BUSINESS STRATEGY AND OUR INABILITY TO OBTAIN SUCH FINANCING COULD PROHIBIT US FROM EXECUTING OUR BUSINESS PLAN AND CAUSE US TO SLOW DOWN OUR EXPANSION OF OPERATIONS.
 
We will need to raise additional funds through public or private debt or sale of equity to achieve our current business strategy. Such financing may not be available when needed. Even if such financing is available, it may be on terms that are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our capital requirements to implement our business strategy will be significant. Moreover, in addition to monies needed to continue operations over the next twelve months, we anticipate requiring additional funds in order to execute our plan of operations. No assurance can be given that such funds will be available or, if available, will be on commercially reasonable terms satisfactory to us. There can be no assurance that we will be able to obtain financing if and when it is needed on terms we deem acceptable.
 
If we are unable to obtain financing on reasonable terms, we could be forced to delay or scale back our plans for expansion. In addition, such inability to obtain financing on reasonable terms could have a material adverse effect on our business, operating results, or financial condition.
 
OUR AUDITOR HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
 
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company. If we cannot obtain sufficient funding, we may have to delay the implementation of our business strategy.
 
OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF JESPER TOFT. WITHOUT HIS CONTINUED SERVICE, WE MAY BE FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.
 
We are presently dependent to a great extent upon the experience, abilities and continued services of Jesper Toft. We currently have a consulting agreement with Mr. Toft. The loss of his services could have a material adverse effect on our business, financial condition or results of operation.
 
WE HAVE HAD TWO CUSTOMERS WHO HAVE ACCOUNTED FOR 56% AND 36%, RESPECTIVELY, OF OUR TOTAL REVENUES IN 2010.

We currently have two customers, who account for 56% and 36% of total revenues, respectively.  A significant decrease or interruption in business from our customers could have a material adverse effect on our business, financial condition and results of operations. We plan to greatly expand our customer base in the upcoming year to mitigate this risk.
 
 
-2-

 

 
OUR COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH IS SUBJECT TO RESTRICTIONS ON MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
 
If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.

Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
 
Item 2.  Property

Our business office is located at 410 Park Avenue, 15th Floor, New York, NY 10002.
 
Item 3.  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 4.  Mine Safety Disclosure

Not applicable.
 
 
-3-

 
 
PART II
 
Item 5.  Market for Common Equity and Related Stockholder Matters
 
Our common stock is quoted on the OTC Bulletin Board, a service provided by the Nasdaq Stock Market Inc., under the symbol “MGYS”.  The following table sets forth the high and low bid prices for our common stock as reported each quarterly period since inception.
 
Fiscal year ended December 31, 2011
 
High
   
Low
 
Quarter Ended
           
December 31, 2011
 
$
0
   
$
0
 
September 30, 2011
 
$
0
   
$
0
 
June 30, 2011
 
$
0
   
$
0
 
March 31, 2011
 
$
0
   
$
0
 
                 
Fiscal year ended December 31, 2010
           
Quarter Ended
 
$
0
   
$
0
 
December 31, 2010
 
$
0
   
$
0
 
September 30, 2010
 
$
0
   
$
0
 
June 30, 2010
 
$
0
   
$
0
 

Holders of Our Common Stock
 
As of the date of this annual report, we had 60 shareholders of our common stock.

Stock Option Grants
 
To date, we have not granted any stock options.

Item 6.  Selected Financial Data
 
   
Twelve months ended 
December 31, 2011
   
Twelve months ended 
December 31, 2010
   
April 18, 2008
(Inception) -
December 31, 2011
 
Statement of Operations Data:
                 
Revenue
 
$
-
   
$
221,702
   
$
286,702
 
Revenue-Related Party
   
-
     
-
     
36,000
 
             
221,702
     
322,702
 
Cost of goods sold
   
-
     
206,616
     
-
 
Gross profit
 
$
-
   
$
15,086
   
$
46,286
 
                         
Selling, general & administrative expenses
   
769,577
     
482,659
     
1,686,018
 
Loss from operations
 
$
(769,577)
   
$
(467,393
)
 
$
(1,639,732)
 
                         
Total other income/(expense)
   
1,531,380
     
(24,869
)
   
1,498,394
 
Net Income (Loss) before provision for income taxes
   
762,003
     
(492,262
)
   
(141,338)
 
Provision for income taxes
   
-
     
-
     
-
 
Net Income (Loss)
 
$
762,003
   
$
(492,442
)
 
$
(141,338)
 
Net Income (Loss) per share
 
$
0.03
   
$
(0.02
)
   
-
 
                         

Balance Sheet Data:
 
December 31, 2011
   
December 31, 2010
 
Total assets
 
$
2,313
   
$
404,883
 
Total liabilities
   
1,928
     
618,216
 
Stockholders' equity (deficit)
   
385
     
  (213,333)
 
                 
 
 
-4-

 
 
Item 7.  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 years ended December 31, 2011 and 2010, we had revenue of $0 and $221,702, respectively.  The decrease in revenue in 2011 versus 2010 was due to 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 $206,616 for the years ended December 31, 2011 and 2010, respectively. This decrease was mainly due to no sales in 2011 versus equipment costs incurred related to the sale of the fuel cell technology in 2010.
 
For the years ended December 31, 2011 and 2010, our operating expenses totaled $769,577, and $467,393, respectively.  The increase in operating expenses were mainly due to consulting fees and services from a related party of $420,433 that we incurred in the year ended December 31, 2011 as compared to $144,000 for the year ended December 31, 2010. The increase was also due to the management fee for consulting services to the Company which was previously under an agreement with a flat fee.  The agreement expired at March 31, 2011 and the Company is now invoiced for these services.  Professional fees increased to $262,227 for the year ended December 31, 2011 compared to $217,609 for the year ended December 31, 2010, 2011the increase were mainly due to the accounting, audit, consulting and legal expenses.  Board member fees decreased from $44,079 for the year ended December 31, 2010 to $38,948 for the year ended December 31, 2011. Other general and administrative expenses decreased to $47,949 for the year ended December 31, 2011 from $76,761 for the year ended December 31, 2010.  The decrease was resulting of the Company reducing its office expenses during the year ended December 31, 2011.
 
For the years ended December 31, 2011 and 2010 net income/(loss) was $762,033 and $(492,262), respectively.  While we had net income for the year ended December 31, 2011 due to the settlement of litigation, our operating expenses actually increased in 2011 compared to 2010 due to additional consulting fees and related party expenses of $420,433. The settlement with Serenergy compensated us for Serenergy’s breach of contract during the original merger agreement. We recorded a gain of approximately $1,500,000 on this agreement.    
  
For the year ended December 31, 2011 compared to year ended December 31, 2010, we also had interest expense of $11,786 and $24,284 which was made up of $1,339 and $2,701 related to in-kind contribution of interest on non-interest bearing loans payable-related party, $10,477 and $54,583 of interest on a note payable. 
 
Capital Resources and Liquidity
 
As of December 31, 2011 and as of December 31, 2010, we had cash of $1,198 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.   
 
 
-5-

 
 
Operating Activities

Net Cash Used in Operating activities were $(187,315), $(284,024) and $(684,871), respectively of cash during the years ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 2011.  We had a net income (loss) of $762,003, $(492,442) and $(141,338) 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, $(3,236) and $(10,236), an increase in other assets of none, none and $465, respectively offset by an decrease/(increase) in accounts and accrued expenses payable of $180,458, $45,235, and $(1,143), a decrease in accounts and accrued expenses payable related party of $107,535, and an increase of $78,577 and $785, respectively. In addition, we had none, none and $50,000 of series A convertible preferred stock issued for services – related party, $19,842, $16,079 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 , $2,701 and $8,010, amortization expense of $565, $826 and $2,286, 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

Cash Flows from Investing Activities were $1,085,851, none and $680,135, respectively, during the years ended December 31, 2011 and 2010 and for the period from April 18, 2008 (Inception) through December 31, 2011.  We used cash of none, none and $402,780, respectively, during the years ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 2011.  We were provided cash of $1,085,851, none and $1,085,851, respectively, from the sale of Serenergy equity during the years ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 2011. We used none, none and $2,936, respectively, of cash for the purchase of property, plant and equipment  during the nine months ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 2011.
 
Financing Activities

Cash provided by (used in) our financing activities were $(897,761), $278,662  and $5,934, respectively, during the year ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 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, $3,490, none and $14,365 of net proceeds of loans payable to related party and $14,365, none and $14,365 of repayment of loans payable to related party during the year ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 2011.  We had none, $33,137 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 year ended December 31, 2011, December 31, 2010 and for the period from April 18, 2008 (Inception) through December 31, 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 year ended December 31, 2011, December 31, 2010 and for the period from April,2008 (Inception) through December 31, 2011, respectively.
 
Critical Accounting Policies

Going concern

The accompanying 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. The Company has incurred net operating losses from inception of $1,639,732 and used cash in operations from inception of $684,871. In addition there was a working capital deficiency of $730 as of December 31, 2011.
 
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 addition, Management may decide to raise additional funds in the future from the sale of debt or equity.
 
However, there can be no assurance that the raising of debt or equity will be successful and that financing will be available in the future, at terms satisfactory to the Company. Failure to achieve satisfactory terms and amounts relating to any future equity and financing transactions at could have a material adverse effect on the Company’s ability to continue as a going concern for the next twelve months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In March 2011, the Company entered into a 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.

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.
 
 
-6-

 
 
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 December 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.

Recent Accounting Pronouncements

In June, 2011, the FASB issued ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, 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.

Additionally, the FASB issued a second amendment to ASC Topic 220 in December 2011, ASU No. 2011-12, which allows companies the ability to defer certain aspects of ASU 2011-05. For public entities, these amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments do not require any transition disclosures.

On September 15, 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other, which simplifies how an entity is required to test goodwill for impairment. This ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under the ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative assessment.  The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption is permitted.
 
Off-Balance sheet arrangements
 
At December 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.
 
 
-7-

 
 
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 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Item 8. Financial Statements and Supplementary Data
 
The financial statements of the Company, together with the Reports of Independent Registered Public Accounting Firm thereon of Webb & Company, P.A., appear herein. See Index to Financial Statements, appearing on page F-1.
 
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

There have been no changes in or disagreements with accountants on accounting or financial disclosure matters.
 
Item 9A.   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 fourth 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 their evaluations, Jesper Toft concluded that our disclosure controls and procedures were effective as of December 31, 2011.

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)  Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statement for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected in a timely manner. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Therefore, any current evaluation of controls can not and should not be projected to future periods.
 
 
-8-

 
 
Based on management's assessment, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2011 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

This Report does not include an attestation report of registered public accounting firm, regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this  Report.

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.

(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.
 
Item 9B.   Other Information.

None.
 
 
 
-9-

 

PART III
 
Item 10.  Directors, Executive Officers and Corporate Governance
 
Our executive officer’s and director’s and their respective ages as of April 16, 2012 are as follows:
 
NAME
 
AGE
 
POSITION
         
Jesper Toft
   
41
 
Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer
 
Set forth below is a brief description of the background and business experience of our sole executive officer and our directors for the past five years.

Jesper Toft, Chairman, CEO, CFO

Mr. Toft has been the owner of J. Toft ApS since May 2003, a Denmark-based company, which provides business development for companies and organizations.  Mr. Toft has extensive management experience from several start-up companies. His core competence is business development, strategy, building sales and marketing and financing. Mr. Toft has been advising large enterprises regarding strategic development and participated in contract negotiations since 1997.
 
Term of Office
 
Our sole executive officer and director, Jesper Toft, was appointed to the offices of Chief Executive Officer, Chief Financial Officer and Chairman on April 18, 2008 until the first board meeting of the board of directors ensuing after the next annual meeting of shareholders and until their respective successors in said offices are duly elected and qualified or until his earlier resignation or removal by the board.
Term of Office
  
Item 11.  Executive Compensation
 
Summary Compensation Table; Compensation of Executive Officers

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers earned by us for the years ended December 31, 2011  and December 31, 2010 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):
 
SUMMARY COMPENSATION TABLE
 
Name and Principal Position
 
Year
 
Salary
($)
   
Bonus
($)
   
Stock Awards
($)
   
Option Awards
($)
   
Non-Equity Incentive Plan Compensation ($)
   
Non-Qualified Deferred Compensation Earnings
($)
   
All Other Compensation
($)
   
Totals
($)
 
Jesper Toft (1):
                                                   
CEO, CFO,
 
2011
   
420,433
     
0
     
0
     
0
     
0
     
0
     
0
     
420,433
 
Chairman
 
2010
   
144,000
     
0
     
0
     
0
     
0
     
0
     
0
     
144,000
 

(1)  
All payments were made to J.Toft ApS as management fees. Jesper Toft, our Chief Executive Officer, has a controlling interest in  J.Toft ApS.

Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table through December 31, 2011 and 2010.

Aggregated Option Exercises and Fiscal Year-End Option Value Table. There were no stock options exercised during the years ended December 31, 2011 and 2010 by the executive officers named in the Summary Compensation Table.
  
Long-Term Incentive Plan (“LTIP”) Awards Table. There were no awards made to the named executive officer in the last two completed fiscal years under any LTIP.
 
 
-10-

 
 
Compensation of Directors

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors.  The directors were paid a total of $39,842 and $44,079 in the years ending December 31, 2011 and December 31, 2010, respectively.
 
Name and Principal Position
Year
 
Stock Awards
 ($)
   
Cash
 ($)
   
Totals
 ($)
 
                     
Jesper Toft:
2011
   
-
     
7,500
     
7,500
 
CEO, CFO, Chairman
2010
   
-
     
-
     
-
 
 
Robert J. Lynch, Jr.
2011
   
19,842
     
12,500
     
32,342
 
Director (1)
2010
   
9,474
     
22,500
     
31,974
 
 
(1)  
Robert J. Lynch, Jr. was appointed as a director of the Company on October 30, 2009. He resigned from the Board of Directors on March 19, 2011.

Employment Agreements

As of December 31, 2011, we do not have an employment agreement in place with our sole officer and chairman of our board of directors.

Consulting Agreements

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. As of December 31, 2011, the Company has recorded a related party liability of $0 under these agreements/invoices and for the years ended December 31, 2011 and 2010 expenses of $420,433 and $144,000, respectively.
 
Board of Director Agreements

On October 30, 2009, the Company entered into two Board of Director Agreements, with Robert J. Lynch Jr. and David J.P. Meachin, respectively, that lasts until December 31, 2012.  During October 2009, the Company issued 1,000,000 in total to these 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 years ended December 31, 2011 and 2010, the Company has recognized board compensation expense in total of $39,842 and $44,079 under the agreements, respectively.  On October 19, 2010, David J.P. Meachin resigned from the Board of Directors.  On March 19, 2011, Robert J. Lynch Jr resigned from the Board of Directors. 

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table provides the names and addresses of each person known to us to own more than 5% of our shares to be issued of common stock as of April 16, 2012 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
 
Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of Class
       
Common Stock
Toft ApS
Roennegade 9,
2100 Copenhagen Oe,
Denmark
10,000,000
44.21% (1)
       
Common Stock
All executive officers and directors as a group
10,000,000
44.21% (1)
       
Common Stock
ViMachel
Londegaardsvei 9
2900 Hellerup,
Denmark
10,000,000
44.21% (1)
       
Series A Convertible  
Preferred Stock 
 
 
Jesper Toft
Frisersvej 22 C
2920 Copenhagen Oe,
Denmark
100,000
100.00%
 
(1)  Based upon 22,620,030 common shares issued and outstanding as of April 16, 2012. 
 
 
-11-

 
 
Item 13.  Certain Relationships and Related Transactions, and Director Independence
 
The agreement with Visator regarding the Separation and Distribution Agreement is no longer relevant as our prior activities have been stopped.  On May 30, 2008, pursuant to a Separation and Distribution Agreement, we were spun out from Visator, Inc., ceasing to be their wholly owned subsidiary.  Visator was one of two customers.  The agreement with Visator expired on June 1, 2009 and was not renewed.

Our sole officer and director, Jesper Toft, is also the sole officer and director of Visator, Inc.

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.  During the year ended December 31, 2011, the loan was paid in full.

During the year ended December 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. During the year ended December 31, 2011, the loan was paid in full.

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 December 31, 2011.
 
Item 14. Principal Accountant Fees and Services
 
Audit Fees
 
Audit fees for 2011 were $22,488.  Audit fees for 2010 were $20,588.  All services provided by independent accountants were approved by the audit committee.  Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s registration and annual statements, for review of interim financial statements included in quarterly reports and services that are normally provided by Webb & Company P.A. in connection with statutory and regulatory filings or engagements.
 
Audit Related Fees
 
The Company did not incur non audit related fees from Webb & Company P.A. in 2011 or 2010.  Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.”

Tax Fees

The Company did not incur tax fees from Webb & Company P.A. in 2011 or 2010.  Tax Fees consist of fees billed for professional services rendered for tax compliance. These services include assistance regarding federal, state and local tax compliance.
All Other Fees

The Company did not incur any other fees from Webb & Company P.A. in 2011 or 2010.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

-approved by our audit committee; or

-entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular  service,  the  audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.

We do not have an audit committee.  Our entire board of directors pre-approves all services provided by our independent auditors.

The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of  what percentage of the above fees were pre-approved.  However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
 
 
-12-

 
 

PART IV
 
 
Item 15.  Exhibits and Financial Statement Schedules
 
(a)      Exhibits and Financial Statements
 
(1)      Financial Statements.  See Index to Financial Statements
 
(2)      Financial Statement Schedules. See pages 19 through 30, attached
 
(3)       Exhibits
 

 
-13-

 

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

PAGE
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     
PAGE
F-2
BALANCE SHEETS AS OF DECEMBER 31, 2011 AND 2010
     
PAGE
F-3
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010 AND FOR THE PERIOD FROM APRIL 18, 2008 (INCEPTION) TO DECEMBER 31, 2011
     
PAGE
F-4
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT) FOR THE PERIOD FROM APRIL 18, 2008 (INCEPTION) TO DECEMBER 31, 2011
     
PAGE
F-5
STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2011 AMD 2010 AND FOR THE PERIOD FROM APRIL 18, 2008 (INCEPTION) TO DECEMBER 31, 2011
     
PAGES
F-6 - F- 17
NOTES TO FINANCIAL STATEMENTS


 
 

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:
Metha Energy Solutions, Inc.
(A Development Stage Company)

We have audited the accompanying balance sheets of Metha Energy Solutions, Inc. (a Development Stage Company) (the “Company”) as of December 31, 2011 and 2010 and the related statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years ended December 31, 2011 and 2010 and the period April 18, 2008 (Inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Metha Energy Solutions, Inc. (a Development Stage Company) as of December 31, 2011 and 2010 and the related statement of operations and cash flows for the years ended December 31, 2011 and 2010 and the period April 18, 2008 (Inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the development stage with net losses and net cash used in operating activities from inception of $141,338 and $684,871, respectively. In addition, there was a working capital deficiency of $730 as of the year ended December 31, 2011. These factors raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/S/ WEBB & COMPANY, P.A.
 
WEBB & COMPANY, P.A.
Certified Public Accountants

Boynton Beach, Florida
April 13, 2012
 
 
F-1

 
 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS

             
   
December 31,
 
   
2011
   
2010
 
             
ASSETS
           
  Current Assets:
           
     Cash
  $ 1,198     $ 423  
                 
  Total Current Assets
    1,198       423  
                 
  Property, Plant & Equipment:
               
     
               
      Website costs, net of accumulated amortization of $1,789 and $1,454, respectively
    -       335  
      Computer equipment, net of accumulated depreciation of $497 and $267, respectively
    650       880  
      650       1,215  
  Other Assets:
               
     Security deposit
    465       465  
     Investment in Serenergy
    -       402,780  
                 
TOTAL ASSETS
  $ 2,313     $ 404,883  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
  Current Liabilities:
               
    Accounts payable and accrued expenses
  $ 1,143     $ 181,601  
    Accrued expenses - related party
    785       108,320  
    Loans payable - related party
    -       10,875  
    Notes payable - related party
    -       71,895  
    Notes payable
    -       45,525  
    Convertible notes payable
    -       200,000  
  Total Liabilities
    1,928       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
    22,271       22,271  
         22,271,346 outstanding, respectively
               
    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 )
    Accumulated deficit during the development stage
    (152,643 )     (914,646 )
  TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
    385       (213,333 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 2,313     $ 404,883  
                 

See accompanying notes to the financial statements
 
F-2

 
 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS

                   
   
For the year ended
December 31, 2011
   
For the year ended
December 31, 2010
   
For the period
April 18, 2008
(Inception) -
December 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
    420,433       144,000       678,433  
     Professional fees
    262,247       217,609       739,761  
     Board member fees
    38,948       44,079       86,185  
     Other general & administrative expenses
    47,949       76,971       181,639  
     Total operating expenses
    769,577       482,659       1,686,018  
                         
Loss from operations
    (769,577 )     (467,573 )     (1,639,732 )
                         
Other income (expense):
                       
     Gain (Loss) on Foreign Currency
    1,222       (585 )     3,265  
     Gain on settlement of agreement
    1,516,161       3,236       1,516,161  
     Other income
    -       -       3,236  
     Forgiveness of debt
    25,980       -       25,980  
     Interest income
    3       -       28  
     Interest expense
    (11,786 )     (24,284 )     (40,040 )
     Bad debt expense-related party
    -       (3,236 )     (10,236 )
     Total other income (expense)
    1,531,580       (24,869 )     1,498,394  
                      -  
Net Income (Loss) Before Provision For Income Taxes
    762,003       (492,442 )     (141,338 )
                         
Provision for (benefit from) income taxes
    -       -       -  
                         
Net Income (Loss)
  $ 762,003     $ (492,4422 )   $ (141,338 )
                         
Basic and diluted net income (loss) per weighted-average shares common stock
  $ 0.03     $ (0.02 )        
                         
Basic and diluted weighted-average number of shares of common stock to be issued
    22,196,725       21,815,868          
                         
 
See accompanying notes to the financial statements
 
F-3

 
 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
FOR THE PERIOD FROM APRIL 18, 2008 (INCEPTION) THROUGH SEPTEMBER 30, 2011
                                       
Treasury Stock
               
Accumulated
       
   
Common Stock
   
Series A Convertible Preferred Stock
   
Series B Convertible Preferred Stock
   
Series B Convertible Preferred Stock
   
Additional
Paid-in
   
Deferred
   
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 year ended December 31, 2011
    -       -       -       -       -       -       -       -       -       -       762,003       762,003  
                                                                                                 
Balance December 31, 2011
    22,271,346     $ 22,271       100,000     $ 100       -     $ -       100,000     $ (569,366 )   $ 700,023     $ -     $ (152,643 )   $ 385  

See accompanying notes to the financial statements
 
F-4

 
 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
 
   
For the year ended
December 31, 2011
   
For the year ended
December 31, 2010
   
For the Period
April 18, 2008
(Inception) -
 December 31, 2011
 
                   
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
  Net income (loss)
  $ 762,003     $ (492,442 )   $ (141,338 )
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       16,079       77,779  
In-kind contribution of interest expense
    1,339       2,701       8,010  
Bad debt expense-related party
    -       3,236       10,236  
Depreciation and Amortization expense
    565       826       2,286  
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
    -       (3,236 )     (10,236 )
            Increase in other assets
    -       -       (465 )
            Increase (decrease) in accounts payable and accrued expenses
    (180,458 )     45,235       1,143  
            Increase (decrease) in accounts payable and accrued expenses-related party
    (107,535 )     78,577       785  
NET CASH USED IN OPERATING ACTIVITIES
    (187,315 )     (284,024 )     (684,871 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
  Purchase of property, plant & equipment
    -       -       (2,936 )
  Serenergy  Equity investment
    -       -       (402,780 )
  Sale of Serenergy  Equity Investment
    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
    -       6,242       71,895  
  Repayment of notes payable - related party
    (71,895 )     26,895       (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 )     278,662       5,934  
                         
NET INCREASE (DECREASE) IN CASH
    775       (5,362 )     1,198  
Cash, beginning of period
    423       5,785       -  
Cash, END OF PERIOD
  $ 1,198     $ 423     $ 1,198  
                         
Supplementary disclosures of cash flow information
                       
  Cash paid during the period for:
                       
                         
Income taxes
  $ -     $ -     $ -  
Interest paid
  $ 15,919     $ 10,700     $ 26,619  


See accompanying notes to the financial statements
 
F-5

 
 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011


NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

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. As of October 9, 2008, the stock certificates were delivered to shareholders.  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.
 
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 intends to focus the business on commercializing advanced fuel cell technology. The Company has secured the rights to distribute such patent pending products through its investment in Serenergy and represent these products in the North American market and within the global vehicle segment. Activities during the development stage involve developing the business plan and raising capital.
 
In March 2011, the Company entered into a settlement agreement with Serenergy that terminated all previous agreements including the right to distribute patent pending products 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 December 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy. The Company plans to continue to identify new business opportunities within the fuel cell/alternative energy area.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Going concern

The accompanying 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 losses and net cash used in operating activities from inception of $141,338 and $684,871, respectively.  In addition there was a working capital deficiency of $730 as of the year ended December 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 to obtain additional funding and the success of future operations will be sufficient to enable the Company to continue as a going concern.
 
 
F-6

 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011

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. Significant estimates include the valuation of deferred taxes.  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.
 

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 years ended December 31, 2011 and 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 December 31, 2011 and 2010, respectively. 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 December 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.
   
 
F-7

 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
 
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. A valuation allowance can be provided for a net deferred tax asset, due to uncertainty of realization. As of December 31, 2011, the Company has a net operating loss carryforward of approximately $42,000 available to offset future taxable income through 2031. The valuation allowance at December 31, 2010 was approximately $303,000.  The net change in valuation allowance for the year ending December 31, 2011 was an increase of approximately $266,000.
 
   
2011
   
2010
 
             
Expected income tax recovery (expense) at the statutory rate of 34%
 
$
259,081
   
$
(167,430
)
Tax effect of expenses that are not deductible for income tax purposes (net of other amounts deductible for tax purposes)
   
2,262
     
2,102
 
Tax effect of differences in the timing of deductibility of items for income tax purposes
   
-
     
-
 
Change in valuation allowance
   
261,343
     
165,328
 
                 
Provision for income taxes
 
$
-
   
$
-
 
                 
 
The components of deferred income taxes are as follows:
 
                 
     
2011
     
2010
 
                 
Deferred income tax asset:
               
Net operating loss carryforwards
 
$
(41,950)
   
$
(302,293
)
Valuation allowance
   
41,950
     
303,293
 
Deferred income taxes
 
$
-
   
$
-
 
 
The Company’s federal income tax returns for the years ended December 31, 2008 through December 31, 2011 remains subject to examination by the Internal Revenue Service as of December 31, 2011.

 
F-8

 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
 
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 December 31, 2010 and 100,000 Series A convertible preferred shares outstanding as of December 31, 2011 and is included in diluted earnings per share as of December 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 and accrued expenses - related party approximate fair value based on the short-term maturity of these instruments.
 

Recent Accounting Pronouncements

In June, 2011, the FASB issued ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, 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.

Additionally, the FASB issued a second amendment to ASC Topic 220 in December 2011, ASU No. 2011-12, which allows companies the ability to defer certain aspects of ASU 2011-05. For public entities, these amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments do not require any transition disclosures.

On September 15, 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other, which simplifies how an entity is required to test goodwill for impairment. This ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under the ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative assessment.  The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption is permitted.
 
 
F-9

 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011

NOTE 3 – PROPERTY AND EQUIPMENT
 
At December 31, 2011 and 2010, property and equipment is as follows:

             
   
2011
   
2010
 
               
Website costs
 
$
1,789
   
$
1,789
 
Computer equipment
   
1,147
     
1,147
 
     
2,936
     
2,936
 
Less accumulated amortization
   
2,286
     
1,721
 
   
$
   650
   
$
1,215
 

Amortization expense for year ended December 31, 2011 and 2010 and the period from April 18, 2008 (inception) to December 31, 2011 was $565, $826 and $2,286 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 December 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.
 
 
F-10

 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
 
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 December 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 December 31, 2011 and 2010, the Company had a cash balance of approximately $951 and $18, respectively, at financial institutions in Denmark, which was uninsured.
 
Major Customer

For the years ended December 31, 2011 and December 31, 2010 the Company had none and two customers who accounted for 0% and 92% of total revenues in the amount of $0 and $205,632, respectively.  Customer A contributed $0 and $125,000, respectively, which is 56% of sales for the year ended December 31, 2010.  Customer B contributed $0 and $79,000, respectively, which is 35% of sales for the year ended December 31, 2010.  
Accounts Receivable

As of December 31, 2011 and 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 year ended December 31, 2011 and 2010, respectively the Company recorded $4,677, and $10,455, 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 year ended December 31, 2011 and 2010, the Company recorded $2,885, and $4,881, 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.
  
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 years ended December 31, 2011 and 2010, the Company recorded, $2,885 and $4,881, 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.  During the year ended December 31 2011, the loan was paid in full (See Note 13).
 
 
F-11

 
METHA ENERGY SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
 
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.  During the year ended December 31, 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. During the year ended December 31, 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.  During the year ended December 31, 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.  During the year ended December 31, 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.  During the year ended December 31, 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.  During the year ended December 31, 2011, the loan was paid in full (See Note 13).

During the year ended December 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. During the year ended December 31, 2011, the loan was paid in full (See Note 13).
  
NOTE 9 –NOTES PAYABLE – RELATED PARTIES