China Network Media, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - China Network Media, Inc.	Financial_Report.xls
EX-31.1 - CERTIFICATION - China Network Media, Inc.	f10q0912ex31i_metha.htm
EX-32.1 - CERTIFICATION - China Network Media, Inc.	f10q0912ex32i_metha.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

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: 333-152539

METHA ENERGY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

Delaware		32-0251358
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Anslow & Jaclin, LLP 195 Route 9 South, Manalapan NJ		10022
(Address of principal executive offices)		(Zip Code)

(212) 231-8526

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 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 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		¨ (Do not check if a smaller reporting company)		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 x No o

State the number of shares outstanding of each of the issuer’s classes of common equity, as of October 19, 2012: 22,620,030 shares of common stock.

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

METHA ENERGY SOLUTIONS INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS

	September 30,			December 31,
	2012			2011
	(Unaudited)
ASSETS
Current Assets:
Cash	$	694		$	1,198

Total Current Assets		694			1,198

Property, Plant & Equipment:
Website costs, net of accumulated amortization of $1,789 and $1,789,
respectively		-			-
Computer equipment, net of accumulated depreciation of $612 and $497,
respectively		478			650
		478			650

Other Assets:
Security deposit		-			465

TOTAL ASSETS	$	1,172		$	2,313

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses	$	30,986		$	1,143
Accrued expenses - related party		-			785
Total Current Liabilities		30,986			1,928


COMMITMENTS AND CONTINGENCIES (See Note 12)

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		-			-
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
22,271,436 outstanding. respectively		22,620			22,271
Additional paid in capital		729,595			700,023
Less Treasury stock; 100,000 and 100,000 Series B Convertible Preferred stock (cost)		(569,366	)		(569,366	)
Accumulated deficit during the development stage		(214,535	)		(152,643	)
Accumulated other comprehensive income		1,772			-
TOTAL STOCKHOLDERS' EQUITY / (DEFICIT)		(29,814	)		385
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY / (DEFICIT)	$	1,172		$	2,313

See accompanying notes to the unaudited condensed financial statements

METHA ENERGY SOLUTIONS INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months Ended September 30, 2012			For the three months Ended September 30, 2011			For the nine months Ended September 30, 2012			For the nine months Ended September 30, 2011			April 18, 2008 (Inception) - September 30, 2012

Revenue	$	-		$	-		$	-		$	-		$	286,702
Revenue - Related Party		-			-			-			-			36,000
		-			-			-			-			322,702

Cost of goods sold		-			-			-			-			276,416
Cost of goods sold - related party		-			-			-			-			-
Gross Profit		-			-			-			-			46,286

Selling, general & administrative expenses:
Consulting fees and services - related party		-			9,623			9,000			150,623			687,433
Professional fees		6,139			16,331			24,817			263,663			764,578
Board member fees		20,921			0			20,921			38,948			107,106
Other general & administrative expenses		3,995			5,437			7,154			40,403			188,793
Total operating expenses		31,055			31,391			61,892			493,637			1,747,910

Loss from operations		(31,055	)		(31,391	)		(61,892	)		(493,637	)		(1,701,624	)

Other income (expense):
Gain (Loss) on Foreign Currency		-			(8,733	)		-			3,826			3,265
Gain on settlement of agreement		-			-			-			1,516,161			1,516,161
Other income		-			-			-			-			3,236
Forgiveness of debt		-			12,432			-			25,980			25,980
Interest income		-			-			-			3			28
Interest expense		-			-			-			(11,786	)		(40,040	)
Bad debt expense-related party		-			-			-			-			(10,236	)
Total other income (expense)		-			3,699			-			1,534,184			1,498,394
														-
Net Income (Loss) Before Provision For Income Taxes		(31,055	)		(27,692	)		(61,892	)		1,040,547			(203,230	)

Provision for (benefit from) income taxes		-			(13,642	)		-			69,660			-

Net Income (Loss)	$	(31,055	)	$	(14,050	)	$	(61,892	)	$	970,887		$	(203,230	)

Other Comprehensive Income (Loss)
Foreign currency translation adjustment	$	-		$	(10,764	)	$	1,772		$	(10,764	)	$	1,772
Comprehensive Income (Loss)	$	(31,055	)	$	(24,814	)	$	(60,120	)	$	960,123		$	(201,458	)

Basic and diluted Net Income (Loss) per weighted-average shares common stock	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	0.04

Basic weighted-average number of shares of common stock		22,271,462			22,271,351			22,271,462			22,171,582

Diluted weighted-average number of shares of common stock		22,271,462			22,271,351			22,271,462			22,271,582

See accompanying notes to the unaudited condensed financial statements

METHA ENERGY SOLUTIONS INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)

FOR THE PERIOD FROM APRIL 18, 2008 (INCEPTION) THROUGH SEPTEMBER 30, 2012

(UNAUDITED)

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

In-kind contribution of services		-			-			-		-		-			-			-		-			9,000			-			-			-		9,000

Net loss for nine months ended September 30, 2012		-			-			-		-		-			-			-		-			-			-			(61,892	)		-		(61,892	)

Accumulated foreign currency translation adjustment		-			-			-		-		-			-			-		-			-			-			-			1,772		1,772

Common Stock issued for services		348,684			349																		20,572											20,921

Balance September 30, 2012 (Unaudited)		22,620,030		$	22,620			100,000	$	100		-		$	-			100,000	$	(569,366	)	$	729,595		$	-		$	(214,535	)	$	1,772	$	(29,814	)

See accompanying notes to the unaudited condensed financial statements

METHA ENERGY SOLUTIONS INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the nine months Ended September 30, 2012			For the nine months Ended September 30, 2011			For the Period April 18, 2008 (Inception) - September 30, 2012

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(61,892	)	$	970,887		$	(203,230	)
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		20,921			19,842			98,700
In-kind contribution of interest expense		-			1,339			8,010
In-kind contribution of services		9,000			-			9,000
Bad debt expense-related party		-			-			10,236
Depreciation and Amortization expense		172			507			2,458
Gain on settlement		-			(683,071	)		(683,071	)
Changes in operating assets and liabilities:
Decrease in accounts receivable		-			-			-
Increase in accounts receivable-related party		-			-			(10,236	)
Increase in other assets		465			-			-
Increase (decrease) in accounts payable and accrued expenses		29,843			(158,303	)		30,986
Increase (decrease) in accounts payable and accrued expenses-related party		(785	)		(107,535	)		-
Increase in deferred tax liability		-			69,660			-
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(2,276	)		113,326			(687,147	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment		-			-			(2,936	)
Serenergy Equity investment		-			-			(402,780	)
Sale of Serenergy Equity		-			1,085,851			1,085,851
NET CASH PROVIDED BY INVESTING ACTIVITIES		-			1,085,851			680,135

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sale of common stock and series B preferred stock		-			-			575,400
Purchase of treasury stock		-			(569,466	)		(569,466	)
Proceeds from loans payable -related party		-			3,490			14,365
Repayment of loans payable -related party		-			(14,365	)		(14,365	)
Proceeds from notes payable - related party		-			-			71,895
Repayment of notes payable - related party		-			(71,895	)		(71,895	)
Proceeds from notes payable		-			.			45,525
Repayment of notes payable		-			(45,525	)		(45,525	)
Proceeds from convertible notes payable		-			-			200,000
Repayments of convertible notes payable		-			(200,000	)		(200,000	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		-			(897,761	)		5,934

NET INCREASE (DECREASE) IN CASH		(2,276	)		301,416			(1,078	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		1,772			(10,764	)		1,772
Cash, beginning of period		1,198			423			-
Cash, END OF PERIOD	$	694		$	291,075		$	694

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

Income taxes	$	-		$	-		$	-
Interest paid	$	-		$	15,919		$	10,700

See accompanying notes to the unaudited condensed financial statements

METHA ENERGY SOLUTIONS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2012

(Unaudited)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended September 30, 2012 are not necessarily indicative of results for the full fiscal year. It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

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. Previous filings have stated that stock certificates were issued and delivered to the shareholders. However, stock certificates have not been issued. The stock issuances have only been registered in Book Entry. 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 owned 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

Going concern

The accompanying condensed financial statements have been prepared under a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred net losses of $203,230 and net cash used in operating activities from inception of $687,147, respectively. In addition, there is a working capital deficiency of $30,292 and a stockholders’ deficiency of $29,814 as of September 30, 2012. 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.

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 and the valuation of in-kind contribution of services. 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 for the sale of fuel cell technology for 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 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 three and nine months ended September 30, 2012 and the year ended December 31, 2011, the Company paid $0, $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 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 September 30, 2012 and December 31, 2011, the Company owned 0% of the issued and outstanding shares of Serenergy.

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 September 30, 2011 and 100,000 Series A convertible preferred shares outstanding that were omitted from the calculation of diluted earnings per share as their inclusion is anti-dilutive as of September 30, 2012.

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 December 2011, FASB issued Accounting Standards Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

In July 2012, FASB issued Accounting Standards Update 2012-02, Balance Sheet- Intangibles- Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment is an Amendment to FASB Accounting Standards Update 2011-08. The objective of the amendments in this Update is to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles—Goodwill and Other—General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued. We do not expect the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

NOTE 3 – PROPERTY AND EQUIPMENT

At September 30, 2012 and December 31, 2011, property and equipment is as follows:

	September 30, 2012		December 31, 2011
	(Unaudited)
Website costs	$	1,789	$	1,789
Computer equipment		1,147		1,147
		2,936		2,936
Less accumulated amortization		2,458		2,286
	$	478	$	650

Amortization expense for three and nine months ended September 30, 2012 and 2011 and the period from April 18, 2008 (inception) to September 30, 2012 was $57, $172, $94, $507 and $2,458 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 (See Settlement Agreement Below).

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 (See Settlement Agreement Below).

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 September 30, 2012 and December 31, 2011, the Company owns 0% of the issued and outstanding shares of Serenergy.

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. 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 September 30, 2012 and December 31, 2011, the Company had a cash balance of approximately $694 and $951, respectively, at financial institutions in Denmark, which was uninsured.

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 was 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 until December 31, 2010. During the year ended December 31, 2011 the note was settled in full. For the nine months ended September 30, 2012 and 2011, respectively the Company recorded $0 and $4,677 respectively of interest expense on the loan.

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 was due on December 31, 2011 with a 9% interest rate annually. For the nine months ended September 30, 2012 and 2011, the Company recorded $0, and $2,885, 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. During the year ended December 31, 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 was due on December 31, 2011 with a 9% interest rate annually. For the nine months ended September 30, 2012 and 2011, the Company recorded, $0 and $2,885, 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. During the year ended December 31, 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).

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

On July 2, 2008, the Company executed a $35,000 promissory note to Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $35,000 cash. The note is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the loan was paid in full (See Note 13).

On August 18, 2008, the Company received a note from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $10,000 for funding the Company’s operating expenses. The note is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the loan was paid in full (See Note 13).

On January 13, 2010, the Company received a note from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,072 for the purpose of funding operating expenses. The note is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the loan was paid in full (See Note 13).

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

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company was incorporated on April 18, 2008. The Company authorized 100,000,000 shares of common stock with a par value of $.001 and 10,000,000 shares of preferred stock with a par value of $.001, of which 100,000 shares are designated as Series A Convertible Preferred Stock. Per the Distribution agreement, as of June 1, 2008, the Company is committed to issuing 11,305,030 shares of common stock, par value $.001, to the shareholders of Visator.

On July 2, 2008, the Company authorized the issuance of 20,000 shares of common stock to Anslow & Jaclin LLP for legal services related to the registration of the Company. As of December 31, 2008, the Company has recorded the fair value of $10,000 in legal fees for the share issuance.

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

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

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

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

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

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

On May 16, 2011, the Company repurchased, from a related party, 100,000 shares of the Series B Convertible Preferred stock with a par value of $.001 for a total price of approximately $570,000. The shares are recorded as treasury shares at September 30, 2012 and December 31, 2011 (See Note 13).

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

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

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

During October 2009, the Company authorized the issuance of 1,000,000 shares of common stock (500,000 each respectively) to two Board of Directors for services through December 31, 2012. The common stock has a fair value of $60,000 based on the fair value on the date of grant and will be amortized over the life of the services ($0.06 per share). During the three and nine months ended September 30, 2012 and 2011, the Company has recognized board compensation expense of $20,921, $0, $20,921 and $38,948, respectively under the agreement (See Notes 12 and 13).

On October 19, 2010, David J.P. Meachin resigned from the Board of Directors in disagreement with the Chairman of the Board of Directors and 348,684 shares are to be cancelled pay the three months ended September 30, 2012, the shares were issued in settlement of the Dispute and the Company recorded an expense of $20,921. On March 19, 2011, Robert J. Lynch Jr resigned from the Board of Directors in agreement with the Chairman of the Board of Directors and all 500,000 of his shares were fully earned and outstanding as of December 31, 2011 (See Notes 12 and 13).

For the three and nine months ended September 30 , 2012 and 2011, and the period April 18, 2008 (Inception) through September 30, 2012, $0, $0 $0, $1,339 and $8,010, respectively were recorded as an in kind contribution of interest on related party notes (See Note 13).

During the three and nine months ended September 30, 2012, Jesper Toft, the Chief Executive Officer contributed services valued $0 and $9,000 to the Company and was recorded as an in kind contribution of services (See Notes 12 and 13).

NOTE 11 – MANAGEMENT AGREEMENT

As part of the terms of the Separation Agreement described in Note 1, on June 1, 2008, Visator entered into a twelve month Management Services Agreement with the Company for consulting services pertaining to software maintenance provided to Visator’s management. The agreement provides for a management fee of $3,000 per month to be paid to the Company. For the nine months ended September 30, 2012 and 2011 and the period from April 18, 2008 (inception) to September 30, 2012, the Company has recorded revenue of $0, $0 and $36,000, respectively. The agreement expired on June 1, 2009 and was not renewed.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Operating lease

The Company does not currently have an operating lease for their office located in New York City. Office fees of approximately $200 are paid on a month to month basis for basic office services. In July 2012 the Company vacated its office space. The Company recorded an expense of $465 for the forfeiture of its security deposit.

Consulting agreement- Related party

Effective May 1, 2008, the Company entered into a consulting agreement with Jesper Toft, CEO, to provide consulting services starting in May 2008 at a rate of $1,000 per month. On September 1, 2009, the Company amended the consulting agreement starting in September 2009 to a rate of $12,000 per month. The agreement expired at March 31, 2011 and the company is now invoiced for these services. As of September 30, 2012 and December 31, 2011, the Company has recorded a related party liability of $0 under these agreements/invoices and for the nine months ended September 30, 2012 and 2011 expenses of $9,000 and $150,623 were recorded, respectively. The $9,000 recorded during the nine months ended September 30, 2012 is recorded as an in kind contribution of services (See Notes 10 and 13).

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

During October 2009, the Company authorized the issuance of 1,000,000 shares of common stock (500,000 each respectively) to two Board of Directors for services through December 31, 2012. The common stock has a fair value of $60,000 based on the fair value on the date of grant and will be amortized over the life of the services ($0.06 per share). For the nine months ended September 30, 2012 and 2011 the Company has recognized board compensation expense of $20,921 and $38,948, respectively under the agreement (See Notes 10 and 13).

The Company has paid one independent director a fee of $0 and $12,500 for nine months ended September 30, 2012 and 2011 (See Note 13).

The Company has paid one independent director a fee of $0 and $7,500 for nine months ended September 30, 2012 and 2011 (See Note 13).

Distribution agreements

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.

NOTE 13 – RELATED PARTY TRANSACTIONS

For the period from April 18, 2008 (inception) to September 30, 2012, the Company had five customers, one of which was Visator, who accounted for 11% of total revenues in the amount of $36,000. This customer was also a related party. The agreement with Visator expired on June 1, 2009 and was not renewed (See Note 5).

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 September 30, 2012 and December 31, 2011, the Company has recorded a related party liability of $0 under these agreements/invoices and for the nine months ended September 30, 2012 and 2011 expenses of $9,000 and $150,623 were recorded, respectively (See Note 12). The $9,000 recorded during the nine months ended September 30, 2012 is recorded as an in kind contribution of services.

On October 19, 2010, David J.P. Meachin resigned from the Board of Directors and his board of directors’ agreement was terminated. On March 19, 2011, Robert J. Lynch Jr resigned from the Board of Directors and his board of directors agreement was terminated (See Notes 10 and 12).

During October 2009, the Company authorized the issuance of 1,000,000 shares of common stock (500,000 each respectively) to two Board of Directors for services through December 31, 2012. The common stock has a fair value of $60,000 based on the fair value on the date of grant and will be amortized over the life of the services ($0.06 per share). For the nine months ended September 30, 2012 and 2011, the Company has recognized board compensation expense of $20,921 and $38,948, respectively under the agreement (See Note 12).

The Company has paid one independent director a fee of $0 and $12,500 for nine months ended September 30, 2012 and 2011 (See Note 12).

The Company has paid one independent director a fee of $0 and $7,500 for nine months ended September 30, 2012 and 2011(See Note 12).

On August 18, 2008, the Company executed a promissory note to Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $10,000 for funding the Company’s operating expenses. The note is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the note was paid in full (See Note 9).

On January 13, 2010, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,072 for the purpose of funding operating expenses. The loan is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the loan was paid in full (See Note 9).

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

On June 8, 2009, the Company received a loan from Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $627 for funding the Company’s tax expense. The note is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the loan was paid in full (See Note 8).

On January 5, 2011, the Company received a loan from Visator in the amount of $1,000. The amount is due on demand, unsecured and bears no interest. During the year ended December 31, 2011, the loan was paid in full (See Note 8).

For the three and nine months ended September 30 , 2012 and 2011, and the period April 18, 2008 (Inception) through September 30, 2012, $0, $0, $0, $1,339 and $8,010, respectively were recorded as an in kind contribution of interest on related party notes (See Note 10).

During the three and nine months ended September 30, 2012, Jesper Toft, the Chief Executive Officer contributed services valued at $0 and $9,000 to the Company, and was recorded as an in kind contribution of services (See Note 10).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information and financial data discussed below is derived from our unaudited financial statements for the three months and nine months ended September 30, 2012 and 2011. The financial statements were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related notes of the Company contained elsewhere in this report. The financial statements contained elsewhere in this report fully represent our financial condition and operations; however, they are not indicative of our future performance.

Overview

The Company was incorporated under the laws of the state of Delaware on April 18, 2008 under the name “Inscrutor, Inc.” as a development stage company.

On May 30, 2008, the Company entered into a Separation and Distribution Agreement with Visator, Inc. (“Visator”), a Delaware corporation that specializes in on-line media monitoring, to acquire the technology and as a result, the Company spun out from Visator. Prior to that time, the Company was a wholly-owned subsidiary of Visator. According to the terms of the agreement, Visator distributed the common stock of the Company on a 1-for-1 basis to the holders of Visator’s common and preferred stock. As a result, the shareholders of Visator became the shareholders of the Company.

On June 1, 2008, the Company entered into a twelve month Management Services Agreement with Visator for consulting services pertaining to software maintenance provided to Visator’s management. The agreement provides for a management fee of $3,000 per month to be paid to the Company. The agreement 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. The Company no longer pursues any commercialization of software/technology nor does it invest in what we acquired from the Separation and Distribution agreement on May 30, 2008.

On August 27, 2009, the Company entered into an exclusive distribution 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 for 72 months. In connection with entering the agreement with Serenergy, the Company decided to cease any further activity in the area of sophisticated data-mining technology (See Settlement Agreement).

On August 27, 2009, the Company entered into an exclusive distribution and manufacturing license agreement - vehicles 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 for 72 months (See Settlement Agreement).

Effective September 29, 2009, the Company changed its name to Metha Energy Solutions Inc. The Company intended to focus the business on commercializing advanced fuel cell technology. The Company 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.

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 which required the Company to raise $2,000,000 in financing. If the financing was not raised, the agreement would lapse. The merger would be taken through an exchange of shares whereby the existing majority shareholders of Serenergy would 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 including the right to distribute patent pending products. Prior filings incorrectly stated that the distribution agreement and the distribution and manufacturing license agreement with Serenergy had lapsed. On the contrary, these agreements were still in effect until terminated pursuant to the settlement agreement.The settlement 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, 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 no longer owned any shares of Serenergy.

To date, the Company has not been able to raise additional funds through either debt or equity offerings. Without this additional cash it has been unable to pursue our plan of operations and commence generating revenue. The Company believes that it may not be able to raise the necessary funds to continue to pursue its business operations. As a result of the foregoing, the Company began to explore options regarding the development of a new business plan and direction.

In August 2012, the Company entered into a non-binding letter of intent with a third party pursuant to which the Company and its principal shareholders will complete a share exchange transaction with such third party on or before October 31, 2012, subject to the execution of a definitive agreement. After the transaction, the third party will become a wholly owned subsidiary of the Company. As of the date hereof, the Company expects to close the share exchange transaction in two weeks, however, there is no guarantee that the contemplated transaction will come to a successful close.

Results of Operations

Results of Operations for the three months ended September 30, 2012 compared to September 30, 2011

For the three months ended September 30, 2012 and September 30, 2011, we had revenue of $0 and $0, respectively. The Company did not have any sales for the comparable periods.

For the three months ended September 30, 2012, our operating expenses totaled $31,055, compared to $31,391 for the three months ended September 30, 2011. The decrease was due to the Company’s limited activities during the three months ended September 30, 2012 compared to the period ended September30, 2011. During the three months ended September 30, 2012 the Company incurred consulting fees and services from a related party of $0 compared to $9,623 for the three months ended September 30, 2011. The decrease was due to the expiration of the consulting services agreement with Jesper Toft during September 30, 2011. During the three months ended September 30, 2012 the professional fees of $6,139 compared to $16,331 for the three months ended September 30, 2011. The decrease was mainly due to a decrease in the accounting, audit, consulting and legal expenses as there were limited operations of the Company. During the three months ended September 30, 2012 other general and administrative expenses of $3,995 compared to $5,437 for the three months ended September 30, 2011. The decrease was due to the limited operations of the Company.

The net loss before provision for Income Taxes was ($31,055) for the three months ended September 30, 2012 compared to ($27,692) for the three ended September 30, 2011. The decrease in net loss in the three months ended September 30, 2012 compared to the three months ended September 30, 2011 is mainly due to Company’s limited operations in 2012.

During the three months ended September 30, 2011 the Company recorded a benefit for income taxes of $13,642, which was mainly due to the March 2011 settlement agreement with Serenergy.

The comprehensive income/(loss) was $(31,055) for the three months ended September 30, 2012 compared to $(24,814) for the three months ended September 30, 2011.

Results of Operations for the nine months ended September 30, 2012 compared to September 30, 2011

For the nine months ended September 30, 2012 and September 30, 2011, we had revenue of $0 and $0, respectively. The Company did not have any sales for the comparable periods.

For the nine months ended September 30, 2012, our operating expenses totaled $61,892 compared to $493,637 for the nine months ended September 30, 2011. The decrease was due to the Company’s limited activities during the nine months ended September 30, 2012 compared to the period ended September 30, 2011. During the nine months ended September 30, 2012 the Company incurred consulting fees and services from a related party of $9,000 compared to $150,623 for the nine months ended September 30, 2011. The decrease was due to the expiration of the consulting services agreement with Jesper Toft during September 30, 2011. During the nine months ended September 30, 2012 the professional fees of $24,817 compared to $263,663 for the nine months ended September 30, 2011. The decrease was mainly due to a decrease in the accounting, audit, consulting and legal expenses as there were limited operations of the Company. During the nine months ended September 30, 2012 the board member fees of $20,921 compared to $38,948 for the nine months ended September 30, 2011. The decrease was due to the fact that the shares fully vested during the period. During the nine months ended September 30, 2012 other general and administrative expenses of $7,154 compared to $40,403 for the nine months ended September 30, 2011. The decrease was due to the limited operations of the Company.

The net loss before provision for Income Taxes was ($61,892) for the nine months ended September 30, 2012 compared to net income of $1,040,547 for the nine months ended September 30, 2011. The decrease in net loss in the nine months ended September 30, 2012 compared to net income for the nine months ended September 30, 2011 was mainly due to gain on settlement agreement with Serenergy of $1,516,161 as well as debt forgiveness of $25,980 which was partially offset by a loss on foreign currency exchange of ($3,826), and interest expense of ($11,786).

During the nine months ended September 30, 2011 the Company recorded a provision for income taxes of $69,660, which was mainly due to the March 2011 settlement agreement with Serenergy, versus net losses in 2012.

The comprehensive income/(loss) was $(60,120) for the nine months ended September 30, 2012 compared to $960,123 for the nine months ended September 30, 2011.

Liquidity and Capital Resources

Going concern

The accompanying condensed financial statements have been prepared under a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred net losses of $203,230 and net cash used in operating activities from inception of $687,147 respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.

As of September 30, 2012 and as of December 31, 2011, we had cash of $694 and $1,198, respectively. We are attempting to commence operations and produce revenues. Management intends to raise further relevant funds for the pursuit of our planned activities. The Company does not have enough cash to continue operations for the next 12 months.

If we are unable to satisfy our cash requirements we may be unable to proceed with our plan of operations. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we will suspend or cease operations.

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

Operating Activities

Operating activities (used) or provided $(2,276), $113,326, and $(687,147), respectively of cash during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012. We had a net income (loss) of ($61,892) $970,887 and ($203,230) during these periods, respectively. We had an increase in accounts receivable related party of none, none and $10,236, an increase in other assets of $465, none and none, respectively offset by an increase/(decrease) in accounts payable of $29,843, ($158,303), and $30,986, by a (decrease) in accounts and accrued expenses payable related party of ($785), ($107,535), and $0 respectively, and an increase in deferred tax liability of $0, $69,660, and $0, during these periods respectively. In addition, we had none, none and $50,000 of series A convertible preferred stock issued for services – related party, $20,921, $19,842, and $98,700 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 $0, $1,339, and $8,010, in-kind contribution of services – related party of $9,000, $0 and $9,000, depreciation and amortization expense of $172, $507 and $2,458, and bad debt expense related party of $0, $0, and $10,236, during these periods respectively. Previous filings have stated that stock certificates were issued and delivered to the shareholders. However, stock certificates have not been issued. Rather, the stock issuances have only been registered in Book Entry. Finally, there was a gain on settlement of $0, $683,071, and $683,071 during these periods respectively.

Investing Activities

We provided (used) $0, $1,085,851, and $680,135, respectively, of cash in our investing activities during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September, 2012. We used cash of $0, $0 and $402,780, respectively, of cash for our Serenergy equity investment during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012. We were provided cash of $0 and $1,085,851, and $1,085,851, respectively, from the sale of Serenergy equity during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012. We used $0, $0 and $2,936, respectively, of cash for the purchase of property, plant and equipment during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012.

Financing Activities

We had $0, $(897,161), and $5,934, respectively, of cash provided by (used in) our financing activities during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012. We had $0, $0 and $575,400, respectively, of proceeds from sale of common stock and series B preferred stock, $0, $3,490 and $14,365, respectively, of proceeds of loans payable to related party, and $0, $0 and $200,000, respectively of proceeds from convertible notes payable during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012. We had $0, $71,895, and $71,895 respectively, of repayment of notes payable to related party, and $0, $0 and $71,895, respectively, of proceeds from notes payable to related party, and $0, $0 and $45,525 of proceeds of notes payable, and $0, $45,525 and $45,525 of repayment of notes payable during the nine months ended September 30, 2012, September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012. There were also repayments of loan payable- related party of $0, $14,365, and $14,365 and repayments of convertible notes payable of $0, $200,000, and $200,000, respectively during the nine months ended September 30, 2012, nine months ended September 30, 2011 and for the period from April 18, 2008 (Inception) through September 30, 2012, respectively. Finally there was a purchase of treasury stock of $0, $569,446, and $569,466 during the nine months ended September 30, 2012, the nine months ended September 30, 2011 and for the period from April 18, 2010 (Inception) through September 30, 2012, respectively.

Critical Accounting Policies

Revenue recognition

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.

Property and Equipment

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 nine months ended September 30, 2012 and the year ended December 31, 2011, the Company paid $0 and $0, respectively to develop its website.

Recent Accounting Pronouncements

Off-Balance sheet arrangements

At September 30, 2012, we had no off-balance sheet arrangements.

Inflation

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls. Jesper Toft, our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of our third fiscal quarter 2012 pursuant to Rule 13a-15(b) of the Securities and Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, management concluded that our disclosure controls and procedures were not effective as of September 30, 2012. Since these entity level programs have a pervasive effect across the organization, management has determined that these deficiencies constitute a material weakness due to (i) the lack of an independent director on our Board of Directors as a result of Mr. Lynch’s resignation from the Board on October 11, 2010 and (ii) the Company’s size, which prevents us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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

(c) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.

Exhibit Number	Descriptions

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

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

101.INS+	XBRL Instance Document

101.SCH+	XBRL Taxonomy Schema

101.CAL+	XBRL Taxonomy Calculation Linkbase

101.DEF+	XBRL Taxonomy Definition Linkbase

101.LAB+	XBRL Taxonomy Label Linkbase

101.PRE+	XBRL Taxonomy Presentation Linkbase

* Furnished herewith.

+ XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13(a) or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	METHA ENERGY SOLUTIONS INC.

Dated: October 19, 2012	By:	/s/ JESPER TOFT
		Jesper Toft Chairman of the Board Directors, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer

China Network Media, Inc. - FORM 10-Q - October 19, 2012

Attached files

China Network Media, Inc. Reports