MagneGas Corporation has announced financial results and provided a business update for the first quarter ending the 31st March 2017.
Revenues for the three months ended 31st March 2017 were $871,788 as compared to $665,663 for the same period last year. This increase was primarily due to additional customers and distributors acquired through ESSI. Gross profit increased to $368,400 from $299,900 for the first quarter versus 31st March 2016.
Operating expenses for the Q1 were $2.9m, unchanged from $2.9m for the same period last year. Operating expenses decreased $1.9m, or 39.9% for the three months ending 31st March 2017 as compared to the three months ending 31st December, 2016. The primary cause for the decrease was a focus on vendor rationalisation, reduction in consulting and third party services, and overall cost control efforts.
The company has also taken additional cost cutting measures related to personnel. The company has conducted a full review of the previous staffing model and has begun to eliminate redundant and non-essential positions. This has reduced compensation expense from approximately $3.8m on an annualised basis to approximately $2.7m. The company continues to evaluate its costs structure, and may seek to reduce costs further throughout the remainder of 2017.
Ermanno Santilli, CEO of MagneGas, stated, “We continue to leverage MagneGas 2® to grow our industrial gas sales and are pleased to report a 31% increase in revenue for the three months ending 31st March 2017 versus the same period last year. At the same time, we have been streamlining our operations-reducing our operating expenses by 40% versus the fourth quarter in 2016. While our SG&A was down sequentially from the fourth quarter of 2016, we expect the true impact of our recent and future cost reductions to be reflected in future quarters. We also identified a more cost-effective feedstock for MagnegGas2®, which has significantly enhanced our gross margins and productivity. Given the fixed cost nature of our business, we see a clear path to profitability through organic growth and careful management of our expenses.”
In addition to organic growth, the company has focused on acquiring accretive companies in the industrial gas market, as a means to rapidly scale the business and maximise profitability. In addition to potential acquisitions in Florida and Indiana, where the company already has a strong presence and existing sales force, it is also seeking to penetrate new markets in the US with a strong industrial base, and has identified a number of potential high-quality targets.
Scott Mahoney, Chief Financial Officer of MagneGas, commented, “Last week, we announced that we completed a $1m bridge financing and warrant exchange. The bridge financing provides us additional working capital for general corporate purposes at favorable terms and the warrant exchange will help to dramatically enhance our capital structure. By simplifying our capital structure, we now have greater financial flexibility, which we believe will ultimately enhance value for shareholders as we execute our corporate restructuring and new growth initiatives.”