Shares in MagneGas Corp. (OTC: MNGA), developers of a technology that converts liquid waste into a hydrogen-based metal working fuel and natural gas alternative, have gained 212% since their February 15th low of .195. MNGA was up as much as 328% from that low when shares of the penny stock reached .835 on May 2nd. MagneGas has had decent volume throughout its recent rally, around 400K, making MNGA one of those hot penny stocks to add to the watch list.
MagneGas took its first order from City Recycling, Inc. in Michigan for its product to be used in metal-cutting operations. More interesting than the post effective S-1 with the SEC to amend their recently filed 10-K. for the issuance of 39,208,125 Shares of Common Stock and 20,170,625 Warrants to Purchase Common Stock is that MagneGas has an iPhone App available for free at the Apple App store on the iPhone.
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MNGA Stock Chart:
Market Cap: 94.18M
Price/Sales (ttm): 246.61
Price/Book (mrq): 17.94
(May 2, 2012): 0.84
(Nov 7, 2011): 0.15
Avg Vol (3 month): 224,850
Avg Vol (10 day): 681,183
Shares Outstanding: 154.39M
Scott Wainwright, President of MagneGas, said that the addition of Detroit-based City Recycling Inc. to their list of clients shows that the Company is continuing to execute successfully their growth strategy. MNGA customers see both the financial and environmental benefits immediately when using their fuel which should be the foundation for a long-lasting business relationship with City Recycling.
The details of the post-effective S-1 from October 28, 2011 called for the sale by the selling stockholders of up to:
• (i) 19,037,500 shares of common stock, par value $0.001 per share,
• (ii) 20,170,625 warrants to purchase common stock,
• (iii) 20,020,625 shares issuable upon exercise of the warrants at an exercise price of $0.30 per share, and
• (iv) 150,000 shares issuable upon exercise of the warrants at an exercise price of $0.25 per share.
MagneGas Corp. of Tarpon Springs, FL, an alternative energy company, creates and produces hydrogen based alternative fuel through the gasification of liquid waste.
The Company has developed a process which transforms various types of liquid waste through a proprietary plasma arc machine. Carbonize the waste for normal disposal is the end result of the process. A byproduct of the carbonization process produces an alternative to natural gas which is currently being sold in the metalworking market.
MagneGas produce gas bottled in cylinders for the purpose of distribution to the metalworking market as an alternative to acetylene. Additionally, the Company markets, for the sale or licensure, their proprietary plasma arc technology. Through the course of the Company’s business development, they have established a retail and wholesale platform to sell their fuel for use in the metalworking and manufacturing industries.
In 2010, MagneGas recognized their initial sale of a Plasma Arc Flow unit and are continuing efforts to sell or lease additional equipment to end users.
Some of MagneGas’ main customers and distributors are:
• Blue Water Industrial Products – Blue Water Industrial Products, based in New Baltimore, Michigan near Detroit. Blue Water is a leading supplier of metalworking and welding gases in the upper mid-west with existing MagneGas™ customers. Blue Water is planning to make MagneGas™ one of its leading fuel products.
• J&M Cylinder Gases, one of the largest independent manufacturers of acetylene in the southeastern U. S., has an established sales platform serving 8 distributors with 22 retail outlets and 3 retail stores of its own, across Alabama and Tennessee. As with Blue Water, J&M’s goal is to eventually make MagneGas™ a leading component of its fuel product offering. J&M is a distributor for MagneGas™ for the state of Alabama and the 250-mile radius around its Decatur, Alabama facility.
• York Welding Supply, a metal fabrication gas distributor located in York, Pennsylvania, sells several products related to the welding and welding fuel industry and have been actively distributing MagneGas fuel for metalworking.
The Company also directly sells their product to the following Florida based companies:
• Garden Street Iron & Metal, a scrap metal processor and recycler, has 6 facilities in Ohio and Florida.
• CTL Transportation, a Florida-based trucking company, hauls chemicals nationwide from 11 terminals in 6 states. They are using MagneGas™ at their Mulberry, Florida terminal in the repair and maintenance of the location’s 150 trucks.
The Company believes it will have the opportunity to expand and extend MagneGas™ use to all 11 CTL locations.
MagneGas reported a net loss of $783,738 for the fiscal year ended December 31, 2009, a net income of $23,600 for the fiscal year ended December 31, 2010 and a net loss of $1,080,508 for the nine months ended September 30, 2011 compared to a net income of $56,800 for the nine months ended September 30, 2010.
For the fiscal year ended December 31, 2011, revenues decreased-81.25% to $381,892 compared to $2,036,238 for the same period the year prior. decrease in total revenues is directly related to Unit Sales which the company recorded $0 in fiscal 2011 compared to $1,855,000 for fiscal 2010. The Company uses $150,000 per month to fund their operations.
According Freedonia Group who reported on the global market for metalworking gasses, demand for industrial gases in metal welding and fabrication markets is projected to increase 8.6% per year to $5.6 billion in 2014. Gains will be driven primarily by expanding industrial production and construction activity.
As a result, the greatest opportunities for growth will emerge in China, India and other developing economies, where industrialization is proceeding most rapidly and where further infrastructural development is key to sustained economic growth. Western Europe, North America and Japan will remain the largest consumers of industrial gases for welding and fabrication markets, although growth opportunities will not equal those of developing economies.
Bottom Line: The penny stock of MNGA is at an all-time high and has had nice rally almost in tandem with Omni Ventures Inc.’s OMVE. The lack of any unit sales for fiscal 2011 doesn’t seem to be impeding the share price of the penny stock which raises some concern. Yet it’s hard to be trading penny stocks and see that stock chart above without saying “I wish I knew about MNGA in February”.