MagneGas Corporation, Clearwater, Florida, announced its financial results and provided a business update for the second quarter ending June 30, 2016.

Second quarter 2016 financial highlights
Revenue for the three months ended June 30, 2016 increased 43 percent to $837,257 compared to $584,445 for the same period last year;

• Revenue for the six months ended June 30, 2016 increased 33 percent to $1.5 million compared to $1.1 million for the same period last year;
  
• Gross margins increased 737 basis points to 44 percent from 36 percent for the three-month period ending June 30, 2016 versus June 30, 2015;

The company had an ending cash balance of $3,848,292 on June 30, 2016.
Ermanno Santilli, CEO of MagneGas, says, "We are pleased to report a 43 percent increase in revenue for the three months ending June 30, 2016 versus the same period last year. Our strong growth was due to a combination of equipment sales and an increase in our industrial gas sales. On the domestic front, we signed a lease to open another facility for our ESSI subsidiary, which will be our fourth such location in Florida. In the second quarter, we also added several new distributors, including a major Southeast distributor with over 20 locations in Georgia, Tennessee, Kentucky, Alabama, Virginia, South Carolina and North Carolina. In June, we signed a distribution agreement with Berger Welding Supply of Indiana. Berger will be the preferred distributor for MagneGas2 for metal cutting in their territory and will supply MagneGas2 to a local Fortune 100 company. We now have distribution coverage in many of the major hubs in the eastern half of the United States. We plan to support our continued expansion through both new plant installation as well as joint ventures.

"Last month we announced that a global auto manufacturing company based in the Midwestern United States chose to switch to MagneGas2 as its sole fuel of choice for metal working at one of its top factories. The company chose MagneGas2 to be its exclusive fuel and to discontinue use of acetylene. We believe MagneGas2 will save them money by reducing downtime on the assembly line, while demonstrating their continued environmental leadership. Independent testing shows that MagneGas2 is a faster, hotter replacement to existing cutting fuels and we believe these initial purchase orders will open the door to other larger opportunities with this customer.

"We are also expanding along the West Coast and internationally. In May we announced that Complete Welding and Cutting Supplies Inc., with multiple locations in both California and Mexico, will be distributing MagneGas2 and has taken its first fuel orders. As a result of this new distributor relationship, and others already in place, MagneGas2 fuel is now available in most major California metropolitan areas. This is also our first international gas supplier relationship for MagneGas2. Mexico has grown to be a major manufacturing hub using large amounts of acetylene fuel. We are pleased to offer an alternative that is renewable, cuts faster and has many favorable attributes.

“Another component of our strategy is leveraging our existing distribution channels by adding new gas products. Last month, we announced that we became an authorized distributor for Global Calibration Gasses (GCG). GCG, based in Florida, is a premier supplier of calibration gases and custom specialty gas mixtures. This new relationship with GCG allows us to expand our revenue potential by providing our existing customers with GCG's calibration gases and custom specialty gas mixtures. Through ESSI, we have developed relationships with major clients in the technical rescue, auto manufacturing and utility markets. Now those clients can buy both MagneGas2 and these specialty gases from one source.

"We continue to push forward with our cocombustion project as intensive testing continues and we still anticipate independent verification of our results in 2016, using MagneGas fuel to reduce coal emissions. Additionally, we are continuing with our sterilization project as we have applied to the U.S. Department of Agriculture for a grant to utilize our system on a farm and hope to hear the results of that application in the third quarter of 2016.

"Finally, we continue to look for opportunities to increase equipment sales. In July, we met a key benchmark for system construction as per our original agreement with Green Arc Supply LLC to manufacture and sell a $775,000 100 kilowatt plasma-arc gasification system. To date, we have received milestone payments totaling $583,750 and expect to receive a final payment of $191,250 in the third quarter of 2016. We believe that this first domestic equipment sale will open the door for additional equipment sales nationwide."

Second quarter 2016 financial results
Revenues for the three months ended June 30, 2016 were $837,257 as compared to $584,445 for the same period last year. Revenue from the industrial gas segment was $643,507 for the second quarter of 2016 compared to $561,112 for the same period last year. This increase was primarily due to additional customers and distributors acquired through ESSI.

Gross margins increased to 44 percent from 36 percent for the second quarter ending June 30, 2016 versus June 30, 2015.

Operating expenses increased approximately $820,000 for the second quarter ending June 30, 2016 to $3.1 million from $2.3 million for the same period last year. The increase in the company’s operating expense in 2016 was primarily attributable to the completion of its new headquarters and increased consulting expenses related to research and development, investor relations, public relations and new business development. The company plans on beginning an aggressive cost cutting campaign aimed at focusing operational expenses on the most promising business opportunities.

As a result of the financing in June of 2016, the company did incur a derivative liability associated with the warrants and debenture from that transaction. This resulted in a non-cash interest expense in the period ending June 30, 2016 of $2,622,084. In addition, the company took a one-time adjustment of $501,011 as an impairment of its joint venture with China. That joint venture, although still active, did not produce the operational results expected and as such the company has chosen to impair its value on the balance sheet.

At the end of June, the company announced it has closed on $4.0 million of financing out of a possible maximum amount of approximately $10.6 million with a single institutional investor for a registered direct placement and concurrent private placement.