Earlier in 2015, The Brewer Group joined forces with MagneGas Corporation (NASDAQ: MNGA), an alternative energy company that invented an innovative Plasma-Arc Gasification® which gasifies a number of liquid wastes into a natural gas alternative and sterilizes liquid for irrigation or fertilization. Working alongside this company over the last year has been a remarkable experience for me. It is partners like MagneGas that help The Brewer Group reach its "Global Vision With a Social Focus." This week I had an opportunity to sit down with MagneGas CEO Ermanno Santilli and ask him about some of the great strides MagneGas has made in 2015.
Brewer: So to start, could you tell us a bit about MagneGas?
Santilli: MagneGas® Corporation (MNGA) owns a patented process that converts various liquid wastes into hydrogen based fuels. These fuels can be used as a replacement to natural gas or for metal cutting. The Company's testing has shown the fuels are faster, cleaner and more productive than other alternatives on the market. They are also cost effective and safe to use with little changeover costs. The Company currently sells MagneGas® into the metal working market as a replacement to acetylene. In addition, the Company is developing a variety of ancillary uses for MagneGas® fuels utilizing its high flame temperature for co-combustion of hydrocarbon fuels and other advanced applications. For more information on MagneGas®, please visit the Company's website at http://www.MagneGas.com
Brewer: Many may not know MagneGas is a company created and based on family values. Can you tell us more about that?
Santilli: My father, Dr. Ruggero Santilli, is a physicist who developed the Plasma-Arc Gasification technology after many years of teaching and studying physics and applied mathematics at MIT and Harvard. He worked with a lot of different projects and companies throughout his career, but ultimately decided to start MagneGas independently from his other existing brands. It’s gratifying to see that his 30+ years of research and development has produced a technology that we are able to use for a positive global impact. He retired several years ago and has passed on his legacy to our new management team comprised of experts from our targeted industries and operations. As required by the SEC, we also have a fully independent Board of Directors. There are some that question the insider ownership of MagneGas or insider compensation. The vast majority of compensation has been in the form of stock, currently held by the family and other insiders which has not been sold. This means that all insiders have a strong vested interest in seeing this Company succeed. At the end of the day, we have an amazing product and a pure agenda, and many successful companies such as Apple and Facebook have been controlled by insiders.
Brewer: How does MagneGas continue to keep a 20 year old technology at the forefront of such an innovative market?
Santilli: The Plasma-Arc Gasification process is continually tested and modified. An example of this is a test run by the US Navy last year that came back inconsistent to other test results. We immediately looked into the testing and found that the torch had not been set properly because we were not allowed to provide hands-on training. This had become a consistent problem for us with our original fuel, MagneGas1®. We learned that although an excellent fuel, the torch was difficult to set by end users and after years of development, we introduced MagneGas2®. MagneGas2® is a far superior product, and independent testing by well respected laboratories used by the Navy show that MagneGas2® is 38% faster than acetylene. The Navy has since placed their first order of MagneGas2®. In addition we have several major utilities, fire-rescue and industrial companies now using or testing MagneGas2®.
Our innovation is supported by multiple patents that form a “patent thicket” with over 16 patents, patent applications and provisional patents. We continually drive customer or market driven innovations which are backed by IP protection, and as we continue to get traction, we re-invest in more IP protection. Our newest patent expires in 2026.
Brewer: How do you navigate the stock market as a new entrepreneur to ensure transparency and growing profits?
Santilli: MagneGas has had an entire army of advisors, partners and service providers behind the scenes to help steer us in the right direction. We consistently consult some of the most reliable experts in relevant fields like finance, legal, business development, and investor relations in order to ensure the best business practices for MagneGas. It is because of these experts that we can confidently say all activities involving MagneGas are fully and properly disclosed, our operations are compliant and we are in the best shape in the Company’s history. I have never been so confident of the opportunities available to us and our focus going into 2016 will be to execute on our business plan and deliver outstanding results.
Brewer: MagneGas recently announced business endeavors in multiple developing nations like Sierra Leone and Haiti. As you continue to expand globally what are some of the challenges you face?
Santilli: Global expansion has been a huge priority for us this last year and will continue to be going forward. Developing nations are ones that can benefit tremendously from our Plasma-Arc Gasification, and our mission includes helping countries like these. The biggest challenge for us is translating the impact of this expansion to our investors. In countries like Sierra Leone, we work directly with the government and local organizations in order to obtain the largest impact on the community. However, local organizations and governments in developing nations are more action based and don’t hold a responsibility of being digitally visible to their people. Our investors like to do their online research and rely on market numbers to ensure that we are moving in the right direction, but unfortunately traditional market and research development reports do not compare to our in-person meetings and physical due diligence with the partners and the community that we are expanding into. We understand that this process requires more trust and faith from our investors, but we are confident that we can prove it’s possible to get a financial return alongside a huge positive impact from even the most remote places in the world.
Brewer: There was a recent announcement regarding issues with your prior auditor, does that affect MagneGas?
Santilli: We were recently informed that our auditor from 2014 was barred by the SEC from practicing for two years. MagneGas was not one of the companies implicated in the auditor issues, nor did MagneGas receive any notice from the SEC that investors could not rely on our financial statements. Since that time, we have hired a new auditor who has already reviewed our financials from the periods ending June 30 and September 30 of this year, and we are extremely confident in both the accuracy of our reporting as well as our internal controls.
Brewer: Can you tell us about MagneGas partners and distributors?
Santilli: Currently, MagneGas has over a dozen MagneGas2® distributors located throughout the United States. In addition, we have partners in various parts of the world that are in various stages of development. Some are seeking additional funding sources, such as our partner in China; some hope to fund their Company through government contracts, such as our partner in Sierra Leone; some have applied for funding through grants, such as our partner in Italy; and others such as our partner in Louisiana, is fully funded and has a significant business expansion plan in place. We have a disruptive technology that does something that has never been done before. Anytime a Company is introducing a new technology, that is disruptive to the current way of doing business, it can be difficult to find the right partners. We have found that the quality of our partners over the years has evolved as we have developed and we are confident that we have the right distributors and partners to bring the technology forward. In addition, we are constantly meeting with new potential distributors and partners to expand our distribution capability.
Brewer: How does MagneGas decide its priorities with regards to Research and Development?
Santilli: MagneGas is continually investing in Research and Development based on market trends, internal innovation and business development opportunities. Our Research and Development spend is a small fraction of what we have spent developing new generations of Plasma-Arc-Flow refineries, which is the heart of our Company. We are on our 8th generation of Plasma-Arc-Flow refineries, and each of those build outs, although not classed as traditional “R&D” involve substantial innovation, advanced development and cutting edge technologies. We focus our efforts on improving the efficiency of our process with an eye on innovation for the future.
Brewer: How has the Company attracted the right management and Board members over the years?
Santilli: When we first started in 2007, all we had was an idea, little funding, and a couple of hundred investors who believed in us, and a dream. It was difficult to attract good talent when we couldn’t pay them and had limited operations. Over the years we have evolved as a Company and replaced most of our management team and Board in 2012. We have brought in experts from public markets, military, oil and gas, mergers and acquisitions, engineering, finance, manufacturing, liquid waste and alternative energy sectors to either sit on our Board or be part of our management team. We are so excited at the team we have in place now and truly believe we have a team with the integrity, passion and foresight to bring this Company forward.
Brewer: Reflecting on the MagneGas history, what accomplishments are you most proud of and what do you still have to work towards in the future?Santilli: I am most proud of the network of supporters we have attracted over the past few years. Over 40 years ago my father had a crazy idea to produce a cleaner, safer, and more efficient fuel to better our environment. Now we have an overwhelming amount of people supporting this idea and helping it become a reality. Our customer loyalty is off the charts, our partners and advisors are dedicated to keeping MagneGas moving forward, and we are successfully expanding to new countries. The best part of it is that we are only at the beginning. The long-term impact of our product and how it can change multiple industries globally is still just a vision. Over the next few years we expect to prove our value with numbers and facts. The thought of rewarding those who have bought into our mission and supported us through these early stages is something that I am very excited about.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer