China Network Media, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - CERTIFICATION - China Network Media, Inc.	f10q0610ex32i_metha.htm
EX-31.1 - CERTIFICATION - China Network Media, Inc.	f10q0610ex31i_metha.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2010

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

(No fee required)

For the transition period from to

Commission file number 333-152539

Metha Energy Solutions Inc.

(Name of Small Business Issuer in Its Charter)

DELAWARE		32-0251358
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

410 Park Avenue, 15th Floor, New York, NY 10022

(Address of Principal Executive Offices) (Zip Code)

212-231-8526

(Issuer's Telephone Number, including Area Code)

(Former name or address)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filero Smaller Reporting Companyx

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o Nox

State the number of shares outstanding of each of the issuer’s classes of common equity, as of August 12, 2010: 22,620,030 shares of common stock.

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

(A DEVELOPMENT STAGE COMPANY)

FORM 10-Q

SIX MONTHS ENDED JUNE 30, 2010

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Condensed Balance Sheets as of June 30, 2010 (Unaudited) and as of December 31, 2009	3

	Condensed Statements of Operations for the three and six months ended June 30, 2010, the three and six months ended June 30, 2009, and the Period from April 18, 2008 (Inception) through June 30, 2010 (Unaudited)	4

	Condensed Statement of Changes in Stockholders' Equity for the period from April 18, 2008 (Inception) through June 30, 2010 (Unaudited)	5

	Condensed Statements of Cash Flows for the six months ended June 30, 2010, the six months ended June 30, 2009 and the Period from April 18, 2008 (Inception) through June 30, 2010 (Unaudited)	6

	Notes to the Condensed Financial Statements (Unaudited)	7-16

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	20

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	21

Item 1A.	Risk Factors	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Removed and Reserved	21

Item 5.	Other Information	21

Item 6.	Exhibits	22

Signatures		23

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PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

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

(A DEVELOPMENT STAGE COMPANY)

Condensed Balance Sheets

	June 30, 2010			December 31, 2009
	(Unaudited)
ASSETS
Current Assets:
Cash	$	118,680		$	5,785
Accounts receivable		-			65,000
Accounts receivable-related party		3,235			-

Total Current Assets		121,915			70,785

Property, Plant & Equipment:
Website costs, net of accumulated amortization of $1,156 and $858,
respectively		633			931
Computer equipment, net of accumulated amortization of $152 and $38 ,
respectively		995			1,109
		1,628			2,040

Other Assets:
Security deposits		465			465
Investment in Serenergy		402,780			402,780

TOTAL ASSETS	$	526,788		$	476,070

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	96,818		$	136,365
Accrued expenses - related party		68,841			29,743
Loans payable - related party		2,853			2,853
Notes payable - related party		74,749			46,780
Convertible notes payable		200,000			-
Loan payable		45,525			-

TOTAL LIABILITIES		488,786			215,741

COMMITMENTS AND CONTINGENCIES		-			-

STOCKHOLDERS' EQUITY
Series A Convertible Preferred stock - $.001 par value; 100,000 shares
authorized; 100,000 and 100,000 to be issued		100			100
Series B Convertible Preferred stock - $.001 par value; 100,000 shares
authorized; 100,000 and 100,000 to be issued		100			100
Preferred stock - $.001 par value; 9,800,000 shares authorized;
none and none issued and outstanding, respectively		-			-
Common stock - $.001 par value; 100,000,000 shares authorized;
22,620,030 and 22,620,030 shares to be issued, respectively		22,620			22,620
Additional paid-in capital		717,894			716,555
Deferred compensation		(47,368	)		(56,842	)
Accumulated deficit during the development stage		(655,344	)		(422,204	)
TOTAL STOCKHOLDERS' EQUITY		38,002			260,329
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	526,788		$	476,070

See accompanying notes to the unaudited condensed financial statements.

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

(A DEVELOPMENT STAGE COMPANY)

Condensed Statements of Operations (Unaudited)

	Three months ended June 30, 2010			Three months ended June 30, 2009			Six months ended June 31, 2010			Six months ended June 30, 2009			April 18, 2008 (Inception) - June 30, 2010


Revenue	$	-		$	-		$	221,702		$	-		$	286,702
Revenue - related party		-			6,000			-			15,000			36,000
		-			6,000			221,702			15,000			322,702

Cost of goods sold		-			2,300			-			5,750			13,800
Cost of goods sold - related party		-			-			206,616			-			262,616
		-			2,300			206,616			5,750			276,416

GROSS PROFIT		-			3,700			15,086			9,250			46,286

Selling, general & administrative expenses:
Consulting fees and services - related party		31,000			3,000			72,000			6,000			186,000
Professional fees		43,161			13,381			113,278			27,522			373,183
Board member fees		19,793			-			24,530			-			27,688
Other general & administrative expenses		16,643			1,833			34,179			4,799			90,898
Total operating expenses		110,597			18,214			243,987			38,321			677,769

Loss from operations		(110,597	)		(14,514	)		(228,901	)		(29,071	)		(631,483	)

Other income (expense):
Gain (loss) on foreign currency		49			-			(959	)		-			1,669
Other income		3,236						3,236			-			3,236
Interest income		-			-			-			-			25
Interest expense		(4,719	)		(673	)		(6,516	)		(1,339	)		(10,486	)
Bad debt expense		-			-			-			-			(7,000	)
Total other expense		(1,434	)		(673	)		(4,239	)		(1,339	)		(12,556	)

Net Loss Before Provision For Income Taxes		(112,031	)		(15,187	)	$	(233,140	)	$	(30,410	)		(644,039	)

Provision for income taxes		-			627			-			627			-

Net Loss	$	(112,031	)	$	(15,814	)	$	(233,140	)	$	(31,037	)	$	(644,039	)

Basic and diluted net loss per weighted-average shares common stock	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.00	)

Basic and diluted weighted-average number of shares of common stock		21,777,926			11,350,030			21,738,670			11,350,030
to be issued

See accompanying notes to the unaudited condensed financial statements.

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

(A DEVELOPMENT STAGE COMPANY)

Condensed Statement of Changes in Stockholders' Equity

For the Period from April 18, 2008 (Inception) through June 30, 2010 (unaudited)


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

Balance April 18, 2008 (Inception)		11,305,030	$	11,305		-	$	-		-	$	-	$	-				$	(11,305	)	$	-

Series A Preferred stock issued for consulting services - related party		-		-		100,000		100		-		-		49,900					-			50,000

Common stock issued for professional services		45,000		45		-		-		-		-		22,455					-			22,500

In-kind contribution of interest expense		-		-		-		-		-		-		1,269					-			1,269

Net loss for the period from April 18, 2008 (inception) to December 31, 2008		-		-		-		-		-		-		-					(131,198	)		(131,198	)

Balance December 31, 2008		11,350,030		11,350		100,000		100		-		-		73,624					(142,503	)		(57,429	)

Series B Preferred stock and Common stock sold for cash		10,000,000		10,000		-		-		100,000		100		565,300					-			575,400

Common stock issued for professional services		1,270,000		1,270		-		-		-		-		74,930		(56,842	)					19,358

In-kind contribution of interest expense		-		-		-		-		-		-		2,701					-			2,701

Net loss for the period ended December 31, 2009																			(279,701	)		(279,701	)

Balance December 31, 2009		22,620,030		22,620		100,000		100		100,000		100		716,555		(56,842	)		(422,204	)		260,329

Common stock issued for professional services		-		-		-		-		-		-		-		9,474			-			9,474

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

Net loss for the six months ended June 30, 2010		-		-		-		-		-		-		-		-			(233,140	)		(233,140	)

Balance June 30, 2010		22,620,030	$	22,620		100,000	$	100		100,000	$	100	$	717,894	$	(47,368	)	$	(655,344	)	$	38,002

See accompanying notes to the unaudited condensed financial statements.

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

(A DEVELOPMENT STAGE COMPANY)

Condensed Statements of Cash Flows (Unaudited)

	Six months ended June 30, 2010			Six months ended June 30, 2009			For the Period April 18, 2008 (Inception) - June 30, 2010


CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(233,140	)	$	(31,037	)	$	(644,039	)
Adjustments to reconcile net 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		9,474			-			51,332
In-kind contribution of interest expense		1,339			1,339			5,309
Bad debt expense - related party		-			-			7,000
Depreciation and Amortization expense		412			298			1,308
Changes in operating assets and liabilities:
Decrease in accounts receivable		65,000			2,000			-
Increase in accounts receivable-related party		(3,235	)		-			(3,235	)
Increase in accounts receivable - related party		-			-			(7,000	)
Increase in other assets		-			-			(465	)
Increase (decrease) in accounts payable and accrued expenses		(39,547	)		27,045			96,818
Increase in accounts payable and accrued expenses-related party		39,098			-			68,841
NET CASH USED IN OPERATING ACTIVITIES		(160,599	)		(355	)		(374,131	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment		-			-			(2,936	)
Serenergy Equity investment		-			-			(402,780	)
NET CASH USED IN INVESTING ACTIVITIES		-			-			(405,716	)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sale of common stock and series B preferred stock		-			-			575,400
Proceeds from loans payable -related party		-			627			2,853
Proceeds from notes payable - related party		27,969			-			74,749
Proceeds from convertible notes payable		200,000			-			200,000
Proceeds from loan payable		45,525			-			45,525
NET CASH PROVIDED BY FINANCING ACTIVITIES		273,494			627			898,527

NET INCREASE IN CASH		112,895			272			118,680
Cash, beginning of period		5,785			49			-
Cash, END OF PERIOD	$	118,680		$	321		$	118,680

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

Income taxes	$	-		$	-		$	-
Interest paid	$	3,366		$	-		$	3,366

See accompanying notes to the unaudited condensed financial statements.

-6-

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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended June 30, 2010 are not necessarily indicative of results for the full fiscal year. It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

Effective October 12, 2009, the Company changed their name to Metha Energy Solutions Inc. (“Metha Energy” or “the Company” or “formerly Inscrutor”) (OTCBB: MGYS). Metha Energy focuses the business on commercializing advanced fuel cell technology. The Company has secured the rights to distribute for such patent pending products 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.

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.

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 from inception of $644,039. In addition at June 30, 2010 current liabilities exceed current assets by $366,871 and net cash used in operations since inception is $374,131. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company does not have enough cash to continue operations for twelve months without receiving additional debt or equity financing or increasing our revenues.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Going concern continued

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

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

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition

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

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 state are capitalized and amortized over the estimated three year life of the asset. For the six months ended June 30, 2010 and the year ended December 31, 2009, 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 11% of Serenergy’s issued and outstanding shares as of June 30, 2010 and December 31, 2009. The Company’s investment in Serenergy is accounted for based on the cost method.

-8-

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

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.

Net loss per common share

Net loss per common share is computed pursuant to FASB Accounting Standards Codification No. 260, Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. 100,000 Series A convertible and 100,000 Series B convertible Preferred shares were omitted from the calculation of earnings per share- diluted as their inclusion is anti-dilutive as of June 30, 2010 and 2009.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for the accounts receivable, accounts receivable-related party, accounts payable and accrued expenses, accrued expenses - related party, loans payable – related party, notes payable and notes payable – related party approximate fair value based on the short-term maturity of these instruments.

NOTE 3 – PROPERTY AND EQUIPMENT

At June 30, 2010 (Unaudited) and December 31, 2009, property and equipment is as follows:

	June 30, 2010		December 31, 2009
	(Unaudited)
Website costs	$	1,789	$	1,789
Computer equipment		1,147		1,147
		2,936		2,936
Less accumulated amortization		1,308		896
	$	1,628	$	2,040

Amortization expense for the six months ended June 30, 2010, June 30, 2009 and the period from April 18, 2008 (inception) to June 30, 2010 was $412, $298 and $1,308, respectively.

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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. The exclusivity period will lapse in August 2010 if the Company has not raised $1,500,000. As of June 30, 2010, the Company has not raised any money under this agreement.

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. The exclusivity period will lapse in August 2010 if the Company has not raised $1,500,000. As of June 30, 2010, the Company has not raised any money under this agreement.

In connection with both agreements, the Company will set up a sales office in the United States which will provide the base of operation in order to develop potential customers within the Territory and within the Segment.

In connection with both agreements, once financing is complete, the Company will immediately merge with Serenergy. See Note 11 for further details.

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.

NOTE 5 – CONCENTRATION RISK

Cash

The Company maintains cash balances at several financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation in the aggregate up to $250,000 at June 30, 2010. The Company also maintains cash balances at financial institutions in Denmark and accounts at these institutions are not insured by the Federal Deposit Insurance Corporation. At June 30, 2010, the Company had a cash balance of approximately $7,451 at a financial institution in Denmark.

Major Customer

For the three and six months ended June 30, 2010, the three and six months ended June 30, 2009 and the period from April 18, 2008 (inception) to June 30, 2010, the Company had none, three, one, one and five customers, who accounted for 100% of total revenues in the amount of approximately none, $222,000, $6,000, $15,000 and $323,000, respectively. One customer, Visator contributed none, none, $6,000, $15,000 and $36,000, respectively. This customer is a related party. The agreement with Visator expired on June 1, 2009 and was not renewed. Customer B contributed none, $125,000, none, none and $125,000, respectively, which is 0% and 56% of sales for the three and six months ended June 30, 2010. Customer C contributed none and $79,000, respectively, which is 0% and 35% of sales for the three and six months ended June 30, 2010. The Company plans to greatly expand their customer base in the upcoming year to mitigate this risk.

Accounts Receivable

As of June 30, 2010, the Company had an accounts receivable balance of $0 and as of December 31, 2009 an accounts receivable balance of $65,000 from a customer. As of June 30, 2010, the Company had an accounts receivable-related party balance of $3,235 and as of December 31, 2009 an accounts receivable-related party balance of $0 from a customer.

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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. For the three and six months ended June 30, 2010 and June 30, 2009, the Company recorded $3,356, $4,487, none and none, respectively of interest expense on the loan.

In June 16, 2010, the Company executed a convertible promissory note to an individual in exchange for $100,000 for funding the Company’s operating expenses. The note is due on December 31, 2011 with a 9% interest rate annually. For the three and six months ended June 30, 2010 and June 30, 2009, the Company recorded $345, $345, none and none, 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.

NOTE 7 – LOAN PAYABLE – RELATED PARTIES

On June 30, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,000 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest (See Note 12).

On July 24, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,789 to pay for the Company’s website and design. The loan is due on demand, unsecured and bears no interest (See Note 12).

On July 23, 2008, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $64 to pay for incorporation filing fees of the Company. The loan is due on demand, unsecured and bears no interest (See Note 12).

On June 8, 2009, the Company received a loan from J. Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $627 for funding the Company’s tax expense. The loan is due on demand, unsecured and bears no interest (See Note 12).

During the year ended December 31, 2009, the Company received a loan from J. Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,153 for funding the Company’s operating expenses. The loan is due on demand, unsecured and bears no interest (See Note 12).

On January 13, 2010, the Company received a loan from Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $1,072 for the purpose of funding operating expenses. The loan is due on demand, unsecured and bears no interest (See Note 12).

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NOTE 7 – LOAN PAYABLE – RELATED PARTIES CONTINUED

On May 20, 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 $1,074 for the purpose of funding operating expenses. The loan is due on demand, unsecured and bears no interest (See Note 12).

NOTE 8 –NOTES PAYABLE – RELATED PARTIES

On July 2, 2008, the Company executed a $35,000 promissory note to J. 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 (See Note 12).

On August 18, 2008, the Company received a loan from J. Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $10,000 for funding the Company’s operating expenses. The note is due on demand, unsecured and bears no interest (See Note 12).

In second quarter 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 June 30, 2010. The note is due on demand, unsecured and bears no interest.

NOTE 9 – 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. As of October 9, 2008, the shares were issued (See Note 1).

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. For the period from April 18, 2008 (inception) to March 31, 2010, 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 (See Note 4).

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NOTE 9 – STOCKHOLDERS’ EQUITY CONTINUED

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

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

On August 27, 2009, the Company authorized the issuance of 40,000 shares of common stock to a consultant from IT Ventures for finance consulting services related to raising money for the Company. For the period from April 18, 2008 (inception) to June 30, 2010, 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 a consultant for consulting services related to raising money for the Company. For the period from April 18, 2008 (inception) to June 30, 2010, 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 a consultant for consulting services performed for the Company. For the period from April 18, 2008 (inception) to December 31, 2009 the Company has recorded the fair value of $1,200 in consulting fees ($0.06 per share).

During October 2009, the Company authorized the issuance of 1,000,000 shares of common stock (500,000 each respectively) to two Board of Directors for services through December 31, 2012. The common stock has a fair value of $60,000 based on the fair value on the date of grant and will be amortized over the life of the services ($0.06 per share). For the three and six months ended June 30, 2010, the Company has recognized board compensation expense of $4,737 and $9,474, respectively, under the agreement.

For the three and six months ended June 30, 2010 and June 30, 2009, the Company recorded $673, $1,339, $673 and $1,339, respectively for in kind contribution of interest on related party notes (See Notes 5 and 6).

NOTE 10 – MANAGEMENT AGREEMENT

As part of the terms of the Separation Agreement described in Note 1, on June 1, 2008, Visator entered into a twelve month Management Services Agreement with the Company for consulting services pertaining to software maintenance provided to Visator’s management. The agreement provides for a management fee of $3,000 per month to be paid to the Company. As of six months ended June 30, 2010, the six months ended June 30, 2009 and the period from April 18, 2008 (inception) to June 30, 2010, the Company has recorded revenue of none, $15,000 and $36,000, respectively to reflect zero, six and twelve months, respectively, worth of revenue. The agreement expired on June 1, 2009 and was not renewed.

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NOTE 11 – COMMITMENTS AND CONTINGENCIES

Operating lease

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

Consulting agreement- Related party

Effective May 1, 2008, the Company entered into a consulting agreement with Jesper Toft, CEO, to provide consulting services starting in May 2008 at a rate of $1,000 per month. On September 1, 2009, the Company amended the consulting agreement starting in September 2009 to a rate of $12,000 per month. As of June 30, 2010, the Company has recorded a related party liability of $68,841 under these agreements and expenses of $72,000 for the six months ended June 30, 2010 (See Note 12).

Consulting agreement

On June 1, 2008, the Company entered into a consulting agreement with an individual to provide maintenance services from June 1, 2008 to May 31, 2009 at a rate of $1,150 per month. As of June 30, 2010, the Company has recorded a liability, net of repayment, of $6,772 and for the period April 18, 2008 (Inception) to June 30, 2010 expenses of $13,800 based on this agreement and the agreement was not renewed.

On September 1, 2009, the Company entered into a consulting agreement with an individual to provide maintenance services from September 1, 2009 to February 28, 2010 at a rate of approximately $5,000 per month. As of June 30, 2010, the Company has recorded a liability of approximately $8,500 and an expense of approximately $10,000 based on this agreement.

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 June 30, 2010, the Company has not received $2,000,000 in funding and no fees have been paid related to these agreements. 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.

The Company has paid one independent director a fee of $5,000 as of the six months ended June 30, 2010. Also, the Company has paid one independent director a fee of $10,000 as of the six months ended June 30, 2010.

Notes Payable

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NOTE 11 – COMMITMENTS AND CONTINGENCIES CONTINUED

Merger

On May 3, 2010, the Company entered into a proposed merger agreement with Serenergy to acquire a majority of outstanding shares of Serenergy. The agreement requires the Company to raise $1,500,000 in financing. If the financing is not raised, the agreement will automatically lapse on October 18, 2010. The merger will be through an exchange of shares whereby the existing shareholders of Serenergy will receive 30 common shares of the Company for each share held in Serenergy. Depending on the structure of financing, they can potentially receive 1 series C preferred share in Metha Energy per 100 common shares owned in Serenergy. Post-merger, Serenergy will be a subsidiary of the Company. As of August 16, 2010, the Company has not raised the required funds.

NOTE 12 – RELATED PARTY TRANSACTIONS

For the period from April 18, 2008 (inception) to June 30, 2010, the Company had five customers, one of which was Visator, who accounted for approximately 11% of total revenues in the amount of $36,000. This customer was also a related party. The agreement with Visator expired on June 1, 2009 and was not renewed. (See Note 5).

During the six months ended June 30, 2010, the Company paid $206,616 for materials and services to Serenergy which is included in cost of goods sold.

Effective May 1, 2008, the Company entered into a consulting agreement with Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, to provide consulting services from May 2008 to December 2008 at a rate of $1,000 per month. On September 1, 2009, the Company amended the consulting agreement starting in September 2009 to a rate of $12,000 per month. As of June 30, 2010, the Company has recorded a related party liability of $68,841 under these agreements and expenses of $72,000 for the six months ended June 30, 2010. (See Note 11).

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NOTE 12 – RELATED PARTY TRANSACTIONS CONTINUED

On August 18, 2008, the Company executed a promissory note to J. Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in exchange for $10,000 for funding the Company’s operating expenses. The note is due on demand, unsecured and bears no interest (See Note 8).

On June 8, 2009, the Company received a loan from J. Toft ApS, a wholly owned company of Jesper Toft, the Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer of the Company, in the amount of $627 for funding the Company’s tax expense. The note is due on demand, unsecured and bears no interest (See Note 7).

For the three and six months ended June 30, 2010 and June 30, 2009, respectively, the Company recorded $673, $1,339, $673 and $1,339, respectively in kind contribution of interest on related party notes. (See Note 9).

NOTE 13 – SUBSEQUENT EVENT

In August 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 $932 for the purpose of funding operating expenses. The loan is due on demand, unsecured and bears no interest.

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Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Plan of Operation

We are focusing our business within the area of alternative energy technology and related opportunities. Our agreement with Serenergy which provides us with the rights to commercialize Serenergy's patent-pending fuel cell technology to the global segment of vehicles, as well as in all segments of the US, Canada, Israeli markets, and to the United Nations organization, will be the starting-point of such activities. We plan to derive revenue from sales of these fuel cell products and related customized projects. We plan to raise financing by October 18, 2010, and if so, we will merge with Serenergy in the third quarter of 2010.

Results of Operations

For the three and six months ended June 30, 2010, we had revenue of none and $221,702 as compared to $6,000 and $15,000 for the three and six months ended June 30, 2009. The increase in revenue in 2010 versus 2009 was due to $221,702 sales of fuel cell technology in 2010 as compared to the agreement we had with Visator for $3,000 per month for services which expired in June 2009. The agreement began on June 1, 2008 and expired on June 1, 2009 and was not renewed. The cost of goods sold related to revenue was none and $206,616 for the three and six months ended June 30, 2010 as compared to $2,300 and $5,750 for the three and six months ended June 30, 2009 mainly due to $206,616 of costs incurred related to the sale of the fuel cell technology in 2010.

For the three and six months ended June 30, 2010, our operating expenses totaled $110,597 and $243,987, compared to $18,214 and $38,321 for the three and six months ended June 30, 2009. The increase in operating expenses were mainly due to the accounting, audit, consulting and legal expenses of $43,161 and $113,278, respectively, that we incurred for the three and six months ended June 30, 2010 as compared to $13,381 and $27,522 for the same periods in 2009. The increase in operating expenses was also due to consulting fee related party expenses of $31,000 and $72,000, respectively that we incurred for the three and six months ended June 30, 2010 versus $3,000 and $6,000 for same periods in 2009. This amount was due to Jesper Toft’s consulting services rising to $12,000 per month starting from September 2009 which was an increase from $1,000 per month. The net loss was $112,031 and $233,140 for the three and six months ended June 30, 2010 as compared to $15,814 and $31,037 for three and six months ended June 30, 2009. The increase in net loss of $96,217 and $202,103, respectively for the three and six months ended June 30, 2010 compared to the three and six months ended June 30, 2009 was mainly due to the increase in operating expenses due to consulting fees and services related party, professional fees and board member fees.

For the three and six months ended June 30, 2010, we also had interest expense of $4,719 and $6,516, respectively, which was made up of $673 and $1,339 related to in-kind contribution of interest on non-interest bearing loans payable-related party and $4,046 and $5,177 of interest on loan and notes payable. For the three and six months ended June 30, 2009, we had interest expense of $673 and $1,339, respectively related to in-kind contribution of interest on non-interest bearing loans payable-related party. The increase in interest expense in 2010 compared to 2009 was due to the loans and notes payable that were entered into in the six months ended June 30, 2010. For the three and six months ended June 30, 2010 and June 30, 2009, we also had other income from Serenergy of $3,236 and $3,236, none and none respectively.

Capital Resources and Liquidity

As of June 30, 2010 and as of December 31, 2009, we had cash of $118,680 and $5,785, respectively. While we are attempting to commence operations and produce revenues, our cash position may not be significant enough to support our daily operations. Management intends to raise additional funds through debt or equity.

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Capital Resources and Liquidity Continued

However, 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. We do not have enough cash to continue operations for twelve months without receiving additional debt or equity financing or increasing our revenues.

Operating Activities

Operating activities used $160,599, $355 and $374,131, respectively of cash during the six months ended June 30, 2010, June 30, 2009 and for the period from April 18, 2008 (Inception) through June 30, 2010. We had a net loss of $233,140, $31,037 and $644,039 during these periods, respectively. We had a decrease in accounts receivable of $65,000, $2,000 and none, an increase in accounts receivable related party of $3,235, none and $3,235, an increase in other assets of none, none and $465, respectively offset by an decrease in accounts and accrued expenses payable of $39,547 and an increase of $27,045, and $96,818, and an increase in accounts and accrued expenses payable related party of $39,098, none, and $68,841, respectively. In addition, we had none, none and $50,000 of series A convertible preferred stock issued for services – related party, $9,474, none and $51,332 of stock issued for consulting fees and services – related party and professional and board fees, in-kind contribution of interest for loans payable – related party of $1,339, $1,339 and $5,309, depreciation and amortization expense of $412, $298 and $1,308, and bad debt expense related party of none, none, and $7,000, respectively.

Investing Activities

We used none, none and $405,716, respectively, of cash in our investing activities during the six months ended June 30, 2010, June 30, 2009 and for the period from April 18, 2008 (Inception) through June 30, 2010. We used none, none and $402,780, respectively, of cash for our Serenergy equity investment during the six months ended June 30, 2010, June 30, 2009 and for the period from April 18, 2008 (Inception) through June 30, 2010. We used none, none and $2,936, respectively, of cash for the purchase of property, plant and equipment during the six months ended June 30, 2010, June 30, 2009 and for the period from April 18, 2008 (Inception) through June 30, 2010.

Financing Activities

We had $273,494, $627 and $898,527, respectively, of cash provided by our financing activities during the six months ended June 30, 2010, June 30, 2009 and for the period from April 18, 2008 (Inception) through June 30, 2010. We had none, none and $575,400, respectively, of proceeds from sale of common stock and series B preferred stock, none, $627 and $2,853, respectively, of proceeds of loans payable to related party, $2,146, none and $48,926, respectively, of proceeds of loans payable to J. Toft ApS related party, $25,823, none and $25,823, respectively, of proceeds of loans payable to an individual who is a related party, and convertible note payable of $200,000, none, and $200,000 and $45,525, none and $45,525 of proceeds of loan payable, respectively.

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Critical Accounting Policies

Use of estimates

Revenue recognition

Investments

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. A valuation allowance has been provided for the Company's net deferred tax asset, due to uncertainty of realization.

Net loss per common share

Net loss per common share is computed pursuant to FASB Accounting Standards Codification No. 260 , Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were 100,000 Series A and 100,000 Series B convertible Preferred shares that were omitted from the calculation of diluted earnings per share as their inclusion is anti-dilutive as of June 30, 2010 and June 30, 2009.

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Off-Balance sheet arrangements

At June 30, 2010, 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

Not required for smaller reporting companies.

Item 4.

Controls and Procedures

a) Evaluation of Disclosure Controls. Jesper Toft, our Chief Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of our second fiscal quarter 2010 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 his evaluations, Jesper Toft concluded that our disclosure controls and procedures were effective as of June 30, 2010.

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

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

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A.

Risk Factors

Not applicable because we are a smaller reporting company.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Removed and Reserved

None.

Item 5.

Other Information

None.

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Item 6.

Exhibits and Reports on Form 8-K

(a) Exhibit Index

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer

32.1 Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer and Chief Financial Officer

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SIGNATURES

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

	METHA ENERGY SOLUTIONS INC.

Dated: August 16, 2010	By:	/S/ JESPER TOFT
		Jesper Toft Chairman of the Board Directors, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer

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Attached files

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