MagneGas Corporation (MNGA) CEO Scott Mahoney on Q3 2018 Results - Earnings Call Transcript

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About: MagneGas Corporation (MNGA)
by: SA Transcripts

MagneGas Corporation (NASDAQ:MNGA) Q3 2018 Earnings Conference Call November 14, 2018 10:00 AM ET

Executives

Tirth Patel - Edison Advisors

Scott Mahoney - CEO

Analysts

Amit Dayal - H.C. Wainwright

Steven Austin - Zacks

Tirth Patel

Good morning and thank you for joining MagneGas Third Quarter 2018 Financial Results and Business Update Conference Call. On the call with us today, we have Scott Mahoney, who is recently named Chief Executive Officer of MagneGas Applied Technology Solutions. As the conclusion of today’s remarks, we will open the call up for your questions. If anyone has any question after the call, please contact me Tirth Patel of Edison Advisors at 646-653-7035.

Before we begin, let me take a minute to note that this conference call may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. Such information is subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause forward-looking information. Listeners are cautioned not to place undue reliance on forward-looking information as no assurances can be given as to the future results, levels of activity or achievements.

With that out of the way, let me now turn the call over to Scott Mahoney, Chief Executive Officer. Please go ahead, Scott.

Scott Mahoney

Thank you, Tirth, and thanks to everyone for joining us today. I’m proud to lead today’s call and share our business strategy and recent performance with you. MagneGas was originally founded in order to harness the energy potential of many of the world's prevalent waste streams including agricultural, medical and industrial and pharmaceutical wastes.

Over the past decade, we have successfully harnessed our technology to create a renewable synthetic gas which we have branded as MagneGas. Due to exceptionally high flame temperature, we took this product into the industrial gas industry as a highly effective, renewable metal cutting fuel. This product then provide a platform for us to quickly springboard into one of the largest global industries and review the success to quickly able to pass towards the stable, self funding Corporation that can reinvest our profits into a diverse technology platform, all centered on environmental innovation.

Through a much R&D and the Company's past, we were seeing that the technology research centric organization and through the acquisitions and implementation of our technology I’m leaving the charge to be redefined our company as a rapidly scaling commercial competitor in a global industrial gas industry while unlocking additional commercial applications. We are leveraging our advanced plasma arc technology to establish a dominant position within key market and verticals.

And we’re consistently been noticed by large organizations as a key partner to improve their own sustainability and environmental initiatives, not only we integrated our gasification unit into more applications and expanded our commercial distribution. We’re now operating in a revenue run rate of over $14 million, which represents almost 500% increase over the same time last year. This is a key point that underscores the positive transformational nature of our new vision.

Given the prime position we’re now following with the revision, I’d like to address the recently announced management changes that enables MagneGas to maximize our potential. The leadership transition was done for two reasons. First, we needed a single leader driving technology relationships and accelerating new commercial applications. I have spent much of my life as finance executive management at several public and large privately held companies in the banking, energy and recycling industries.

Ermanno has also spent more than 15 years of exposure in technology and MagneGas benefits the most from employing his wealth of experience as Chief Technology Officer. Secondly, I have spent the majority of myself in MagneGas driving a recent explosive growth that we've experienced through acquisitions and organic activities. Drawing from our prior experience in running other companies, at MagneGas, I will be managing investor relations and capital market activities that have enabled this growth and through that build meaningful relationships to help drive it further.

We also recently announced a share buyback of our Series A preferred stock, also known as the global alpha series A preferred for total consideration of $1 million cash and 5 million shares of the Company's common stock. These global alpha shares share class with the super majority voting Class stock, that essentially gives complete voting control of the Company to its holders. Over the past two years, I have gained valuable investment feedback particularly from large well-respected institutional investors for the global alpha preferred with an impediment to our company's ability to attract capital and then it would impact your ability to scale and there was a general detriment to shareholder value.

We elected to retire the security to demonstrate clearly to all of our shareholders that think going into 2019. We intend to demonstrate our commitment to our shareholders by putting the control of critical corporate actions that affect all shareholders back in the hands of our shareholders. Unilateral actions that would impair shareholder value will be a thing in the past under our new leadership. We are excited to partner with our investors to scale, drive value in a sustainable prudent manner. Together were going to close up 2018 successfully. We've announced before, our strategy for 2018 was to make critical acquisitions in the two key markets in the US for industrial gases.

We have made a total of six acquisitions to date and we are rapidly achieving that goal. We are looking forward to 2019, when we can begin to fully realize the benefits of acquisitions as we will continue to scale organically, leveraging our combined operations in our three core markets. We will continue to selectively evaluate acquisitions in these markets primarily on the expansion of a cost-effective hub and spoke model most likely we've been executing in Texas recently. Our goal is not to be the largest industrial gas company providing our materials in the U.S. instead it is to be extremely relevant and to attract the very interest of a global player in our industry that could partner with us to eliminate the use of acetylene for metal cutting fuel entirely.

Acetylene is dangerous, unstable and unhealthy to use. We offer a safer environmentally friendly product that is vastly superior to acetylene from the performance and a safety perspective. Our mission for this product is nothing short of global to do this, we want to demonstrate that in the very best markets we can compete and when more than our fair share. As a result we will continue to selectively acquire existing industrial gas distributors to expand and enhance our geographic reach in California and Texas. However, we are also increasing our focus on organic activities beyond gas production. We will look to launch our sterilization service model in multiple locations to serve a range of end markets. We are working towards a solution that can address the algae blooms and related deadly [sina] bacteria issues facing Florida today.

We are working towards the completion of our USDA grant funded program and we working to commercialize our service model in North Carolina and other potential U.S. markets. We’re also working to complete our sterilization grant application for a scalable European funded project based in Netherlands. Beyond sterilization, we also wish to move forward with our fourth generation gasification unit, this has the potential to enable us to dramatically reduce our gas production costs and it could really enable our entry into the waste to energy market.

We recently announced a €2.5 million grant that we applied for work with some of the best research organization in Europe, regardless of the grant application outcome we wish to fund and move forward with this application process. We see this as well as sterilization is two near-term opportunities to transform our company, we will be irresponsible not to attempt to unlock the potential value of these application.

Lastly, we will be working to advance our research on metal recovery and recycling, using our technology, we have very initial findings that indicate power plasma arc technology can advance the recovery rates on metal particular suspended in the fluid as it passes through the plasma arc. In terms of potential commercial application in mining and metals recycling, scarcity of trace precious metals thrives a great deal of innovation in this global industry and we potentially could play a key in this industry for technology improves commercially valid.

To accomplish this wide range of compelling growth opportunities, the Company will continue to access capital from time to time. In the past we have been forced to utilize primarily equity and this was costly and highly dilutive due to our early stage of commercialization, our historical financial profile as well as the legacy corporate structure dictated such. With our newfound scale our clear path to improve financial performance and the near term operational enhancements that the new executive team is implementing. We anticipate that we will be able to reduce the cost of capital on multiple fronts. Now move over our accomplishments, we will need to preserve our NASDAQ listing status and we intend to do so.

I will now go into further detail on our recent acquisitions, government collaborations fourth generation gasification unit and global strategy going forward. 2018 has been transformative for many reasons, and they are rapidly expanding geographic footprint in the United States has been one of the strongest signals. We probably announce our monthly sales figures because we are regularly seeing more than 200% year-over-year revenue growth each month. This not only speaks to our acquisition strategy and due diligence being effective but I would also like to thank all the teams for the speed and efficiency which we have effectively integrated our acquisitions and enabling them to be immediately accretive.

We are on track to capture significant market share all across the American South and Southwest. We made two more acquisitions in Texas this past quarter, making one of our strongest markets overall and meeting us to reach higher margins and operational efficiency. Our most recent acquisition alliance with a strategy of expanding geographic footprint towards Houston, one of the largest global markets for industrial gases and metal cutting fuels, we’re very excited to combine newly acquired team with other boots in the ground resources in Texas and improve operational synergies.

Texas is an extremely robust market for our industrial gases particular in metal cutting fuels such as MagneGas. Acquiring many new customers in a large batch that we can systematic convert to MagneGas2 is a powerful competitive advantage. As the world’s only renewable metal cutting fuel we can effectively build a permanent competitive barrier around our acquire customer base simply through superior product quality. Furthering our acquisition strategy in October, we also acquired independent industrial gas and welding supply distributor based in Shreveport, Louisiana for $1.5 million.

Expanding our geographic footprint in the northern Louisiana markets it is critical for our U.S. expansion strategy because it's one of the most significant industrial quarters right with strong exposure to the oil and gas production and refining markets. We’re now able to combine this acquisition with the scale, of green arc, a company we acquired back in February, independent industrial gas and molding supply company with three locations in Texas and one in Louisiana to form meaningful economics of scale in a very attractive market.

Overall, this Louisiana acquisition increased their monthly sales by about $80,000. We have also been very fortunate to quickly integrate the green arc team into our company overall, and we expect to do the same here. We benefited from day one with an excellent experienced sales team is ready to unlock their full potential under our ownership and our support.

Last quarter, we authorize a team to increase the sales force in East Texas by up to 100% as needed and we’re starting to see major growth opportunities in this market. This effective doubling of our customer facing sales staff has allowed our combined Louisiana teams to be more aggressively pursuing customers and perform more onsite visits which will resulted in a high closure rate of new customers.

We now distribute MagneGas products through seven acquisitions just in this year and now operate 13 locations across California, Texas, Louisiana and Florida. To further share some insight. We've added more than 30 potential acquisition targets that mind up the capital strategy required to make the most effective acquisitions possible. We then worked to negotiate transaction structures in a sequence that gave shareholders the best possible path for long-term growth and success with the least possible financial risk.

So far we have executing this strategy and it has resulted in transformational growth in a very short period of time. Just in the three acquisitions in East Texas combined they add about 25% to existing revenues with very little extra general cost, such as staffing occupancy. We’re looking to improve profitability as a result of 75,000 per month once we consolidate the two, Street port locations together.

We remain selective in our acquisition strategy to add additional companies to our portfolio in Florida, Greater Texas and Greater California. We’re evaluating one to two additional opportunities in California and Texas that could significantly impact profitable in each market. Long-term our goal is to be one of the top five independent operations in each of these market, were rapidly approaching that goal with every passing day. Being a supplier and service providers to some of the largest cultural and industrial companies it is imperative for us to build and grow our partnerships with local and federal governments as well. We see our collaborative efforts as validating and supportive to the growth of new business opportunities all across the country.

Once of these government collaborations that I’m proud of and we’ve recently launched is in North Carolina, we conducted an extensive polemic permitting research leading up to the meeting with the North Carolina Department of Environmental Quality and NCDEQ and the U.S. Army Corps of Engineers in August to gain a clear and complete understanding of the various regulatory and permitting requirements to begin scale the commercialized sterilization of agricultural waste in the state.

Our meeting with the Department of environmental quality and the Army Corps of Engineers was encouraging because they really value our technology and support our efforts, but also we find it encouraging from the perspective of generating a clear roadmap of the necessary regulatory and operational check marks, we need to advance our path towards commercialized sterilization in the agricultural industry. As many of you already know or learn from some of the devastating hurricane damage coverage that North Carolina has a massive positive industry that produces a lot of waste, of which more than 90% is water-based, making this a very viable candidate for our sterilization process.

We’re breaking entirely new ground in our assets to launch one of the first truly organic sterilization solutions for the agricultural industry. The U.S. market for hog is over $19 billion and North Carolina is the second largest hog producing state in the country with over 2 billion annual sales and 10 million hog head population worth more than 2,300 hog farms in the state, generating over 15.5 million tons of animal waste annually. This waste poses serious health risks to freshwater resources, water and air quality and sanitary agricultural practices. This is a massive market, serious unmet economic and environmental problems that MagneGas has already addressed and now we have a clear roadmap and organizational support to get there.

One of our more long-standing relationships in the sterilization community has been with the U.S. Department of Agriculture. We’ve talked extensively in the past about our demonstration days we’ve held in Florida and the $432,000 grant, we are awarded to fund our agricultural waste sterilization pilot program at the dairy farm in Bowling Green, Florida. The project successfully launched earlier in 2018, and we completed the first live demonstration in May. While this past July, the USDA invited us to attend and present those findings at the Soil and Water Conservation Society, 73rd International Annual Conference on culture, climate, conservation, which has significant influence in the development of forward thinking research and commercial adoption for resource conservation initiatives overall and particularly in the agricultural industry.

This not only represents significant validation of our technology but it also represents a key business strategy of ours, to leverage government-backed funding programs to defray and offset the costs of unlocking new opportunities. We firmly believe that our sterilization technology has tremendous commercial potential as well as the ability to have a meaningful social impact in the areas of water conservation, reduction in animal -- agricultural contaminants, reduction in pharmaceutical contamination and groundwater sources and many other water pollution.

We are also very proud that organization such as the Water Conservation Society, the USDA and others value our technology because we are able to announce the second phase of the 18 month grant funded sterilization project with the USDA. The second phase of sterilization project expanded the scope of pathogens tested and living organisms tested for sterilization efficacy. The product also extended the study of efficacy in breaking down pharmaceutical waste that traps excessive wastewater.

Lastly, the second phase of the project significantly expanded the study of the waste solids that we’re processing as we sterilize the wastewater; this last point is crucially important because the U.S. agricultural industry generates more than 2 million gallons of wastewater each and every day. This water is harmful due to a variety of containing agents such as pathogens, pharmaceuticals and high NPK concentrations. Upon winning approval for the Phase 2 we held our second public demonstration day on October 23rd, featuring our 50 kilowatt sterilization unit at the Bowling Green Farm in Florida with the highly positive test results. Given the great feedback and results we’ve seen to date. We see this is a potentially scalable path selling the solid into the global fertilizer industry.

We’ve also identified another much larger funding opportunity to the European Commission under the EU program MagneGas Limited, which is our newly formed UK subsidiary, would form a consortium with leading industry partners, a leading research organization such as a university or technology center, as well as a regulatory body. As a combined group, we would then contribute various resources and expertise to a multiyear program to unlock our sterilization technology with the goal to address some of the European Union’s biggest environmental issues around environmentally sustainable agriculture and water conservation. We intend to apply for that grant in the middle of February of 2019.

Similarly, we have also identified two European Commission sponsored grant programs for waste to energy. Based on our research with Ernst & Young, we believe that these two grants would be a strong fit for our 4th generation gasification unit. Under this project, we would look to complete the redesign of our current 3rd generation plasma arc transportation unit. The potential benefits of this 4th generation gasification model cannot be overstated.

First, the new design models indicate that we can dramatically increase the surface area of our plasma arc, thus increasing the speed at which we can efficiently and effectively gasify fluids. This is projected to reduce the costs of generating our gas by up to 90%. Further, we can then expand our gasification process to include fluidized solids. This means that we could cleanly gasify feedstocks such as pulverized coal, pulverized plastics and biomass into clean burning gases for power generation. It also means we would have the ability to also gasify a wider range of waste streams, including many fluids as well as pulverized solids such as solid plastics and other single use wastes.

The potential of this technology would not only benefit our current metal cutting fuel business, but it would dramatically expand our ability to provide a truly competitive waste-to-energy solution for the European Union first, and around the globe in the future. Liability and creditability of our next generation gasification unit recently further boosted by our German Partner, Infinite Fuels and government support. Together, we announced, we apply for voted the grants by the European Commission Executive Agency for small and medium size enterprise as part of their license program of funding instruments that recognize and support environmental and climate conservation.

The grant application was initially made by Infinite Fuels during Eco-Innovation funding initiatives and MagneGas as the join giant recipient has been collecting invoice payments under the $1 million consulting to increase is closed. Brings me to last topic I wish to cover before we discuss our financial results in detail. We spent a great deal of time and engine 2018 cultivating various commercial opportunity in Europe.

And although, we touched on our last quarterly call, I’d like to discuss some of the major opportunities we can capture that. In Europe, MagneGas metal coming technology as significant cut advantages we do not enjoy the U.S. There’s legislators and regulatory pressure to diversify away from fossil fuel products such as propane. Second, there is significant government and social pressure to conduct industrial activities with the highest standards of environmental responsibility. We consume no fresh water in our production process for our MagneGas cutting fuel, and our feedstock is 100% renewable.

As a result, our production process of our metal cutting fuels fits extremely well in the European Union strategy. In order efficiently reach the highest concentrations of industrial consumers for our metal cutting products. We focused our marketing in the largest ports in Europe. We had ongoing positive dialogue with the Port of Rotterdam and Port of Amsterdam in particular. We have also been introduced to the Port of Antwerp and port of Hamburg and expect to be introduced to more.

These ports represent the four largest ports in Europe today and they are widely considered some of the most innovative ports in the world, acting as early adopters of the many best in class safety and environmental practices in the global shipping and logistics industry. We want to recognize the ports of Amsterdam, Rotterdam in particular as they been exceptional partners as we navigate the process as connecting with the largest metal cutting fuels consumers in their respective areas of operations.

Through these two ports and their resources, we've been introduced to and are having ongoing dialogue with several prime commercial relationships for our products, including multinational shipbuilders, refurbishment companies, skilled manufacturers and some of the largest construction companies in the world. As I mentioned earlier in today's call our key business strategy of ours is to leverage government-backed funding for commercial opportunities, so we’re also in discussions with multiple government, regulatory, research and academic institutions across Europe.

I will now shift the focus of the call to our third quarter financials. I’m going to first cover the revenues generated for third quarter of 18. The three months ended September 30, 2018 and 2017 we generated revenues of 2.6 million which equates to 195% increase over to the same period in the prior year. The 195% increase in revenue was due primarily to our acquisition of Trico, welding supplies in northern California which generated $1.269. Trico has significant exposure to add cultural industry of northern California as well as the rapidly emerging cannabis market in the region.

As the growth of cannabis operations is entered the market, Trico has been well-positioned to provide a wide range of hot goods and industrial gases to support the installation and maintenance of some of the larger growers in the region. Organic sales growth in the area of pre-existing operations generated 1.33 million to three months ended September 30, 2018 as compared to 879,000 for the three months ended September 30, 2017. Revenues generated by ESSI our industrial gas and welding supplies particularly in Florida were $830,000 and this was largely unchanged for the same period in prior year.

For the three months ended September 30, 2018, the cost of revenues was $1.6 million. During the period, we generated a gross profit 998,000. Gross margins for the three companies for the three months ended September 30, 2018 and 2017, were 38% and 37%, respectively. The Company reported $201,809 in additional cost of goods sold during the period strictly due to acquisition accounting. If this amount had been excluded, gross margins would've otherwise been 46%, which is one of the highest margins we recorded since our operations have been in existence.

The Company anticipates that margins will improve as all acquired inventory is sold and a cost basis for replacement inventory is reflected in our future cost of goods sold. Partially offsetting this increase in cost of goods sold, the Company has achieved better pricing in terms on select products as we achieve economies of scale and greater buying power. It means also implemented series of cost adjustments related to recent test and then price increases on product sold. This has enabled the Company to improve gross margins by 194 basis points when the impact from acquisition accounting is entirely excluded.

The Company anticipates the gross margins will continue to improve in the coming quarters. The Company is currently in the process of installing a bulk industrial gas fill plant at its Clearwater facilities. These facilities are estimated to further improve combined gross margins by 3 to 5 percentage points as the Company expects to improve its gas margins in the Florida market early in 2019.

MagneGas recorded additional $534,000 in additional cost of goods sold during the period strictly due to acquisition accounting. If these noncash expenses were excluded, gross margins would have been 43%. The Company anticipates that margins will improve as all acquired inventory is sold and our cost basis for replacement inventory is reflected in our future cost to goods sold. Operating costs for the three months ended September 30, 2018 and 2017 were 4.5 million and 2.6 million, respectively. Our operating expenses as a percentage of sales decreased to 175% and from 298% for the three months ended 2018 as compared to the same period in 2017. This is a direct result of the increase in our revenues and accelerated rate relative to our operating spend.

In addition, the Company has experienced a number of expenses that we view of nonrecurring and directly related to our acquisition and capital raising activities during 2018. The increase in our operating costs in 2018 was primarily attributable to the completion of our acquisition in April 2018 and significant capital market activity during the same period. The Company spent $547,000 in consulting related to the April 2018 acquisition and other acquisitions made during the year. The Company also recognized significant nonrecurring charges related to integration of these acquisitions. The Company incurred 62,000 computer and IT integration activity. Travel expenses were also significantly higher due to ongoing personnel training, integration and other nonrecurring activities.

Next I would like to discuss our operating income, and adjustment we've made to evaluate normalized operating performance. One of our key financial objectives is to improve the overall profitability of the Company. We measure our profitability through a rather simply adjusted operating income. Our calculations just stayed straightforward. We add back or adjust our operating income to exclude the impact from the specific non-cash items such as stock compensation, depreciation and amortization, and other non-cash expenses such as accretion of debt discounts.

Given that this has been and will continue to be an area of heightened focus for our company's foreseeable future I would like to spend some time providing some additional information regarding this metric. In the third quarter of 2018 our unadjusted operating income was negative 3.5 million compared to an operating loss 2.3 million for the same period in 2017. When we add back the non-cash expense for depreciation, stock inventory adjustment for such are just the EBITDA was $64,000.

Turning to our balance sheet as of September 30, 2018, the Company had 1.8 million and as reported net loss of 10.2 million, and have used cash in operations of 6.38 million for the nine months ended September 30, 2018. Probably offsetting our negative cash flows and as of September 30, 2018, the Company had a positive working capital position of 2.6 million and a stockholder's equity balance of 16.6 million. As a result of the Company’s negative cash flow generation, there is reasonable data with the Company's ability to continue as a growing concern within one year from the issuance date of the financial statements.

I am pleased to report that since the end of third quarter our balance sheet is greatly improved and we believe we have ample cash on hand to access -- and access the capital to continue to grow the field future. Our balance sheet and liquidity outlook are as strong as I've seen in three years. The MagneGas team worked diligently to complete a business transformation in 2018; in the current year we have three overall business objectives.

First, we want to scale our U.S. industrial revenues. So we're financially self-sufficient. Second, we want to unlock the growth potential of the European markets. Lastly, we want to explore new and complementary technology opportunities leveraging both our existing technologies as well as through partnerships or other technology additions to our patent portfolio. I believe we're hitting on all cylinders and that MagneGas is currently best positioned to maximize our growth potential.

Question-and-Answer Session

Operator

The first question is coming from Amit Dayal from H.C. Wainwright. Your line is now live.

Amit Dayal

Just looking at the third quarter revenues sequentially it was a little lower than the second quarter. Is this seasonality or something else that you experienced?

Scott Mahoney

This is almost all due to seasonality. And in Florida in particular, we’ve a couple of large utility clients that are meaningful to our revenue composition in Florida. So as I'm sure you know in Florida during the summer months when air conditioning, electrical consumption is very high, most of our big customers will put off maintenance and other work until the cooler months so they can maximize electrical power generation. So we do have some seasonality in Florida, in the past that’s been that for the fact that we were always focused on trying to push organic growth in Florida.

With the diversification of business this year into other key markets, we basically have de-prioritized Florida, in the short term and that’s the first time investors are probably seen a little seasonality. Second factor is in California in the third quarter our agricultural sensitive customers. They experienced planting and other seasonality that has a modest impact on Trico's revenue. So when you add the two factors, it should make sense that we saw a little bit of a downturn strictly because of the seasonality in Florida and Northern California.

Amit Dayal

With all these acquisitions now under the belt, pretty significant list of targets are entering companies you mentioned that you have your eyes on. Growth next year, how should we think about growth next year? Is that 50% growth 100% growth or are you going to maybe take time to consolidate all this? You’re already at a 12 million to 14 million annual rate, could this look like in 2019?

Scott Mahoney

So our corporate objective is through a combination of smart precise acquisitions and organic growth. We want to see the overall business grow many fold compared to where it is now. I think just in California and Texas alone we have the ability to be $100 million revenue business, just in the gas business within three to five years. So the balancing act is trying to maximize shareholder value, minimize dilution and at the time recognizing that in certain markets there is a scarcity of targets. So you have to be prudent, you have to be opportunistic.

So when there are really strong opportunities to add company in world-class markets like Los Angeles or Houston, the bay area, Ockham in San Francisco, if somebody says it’s my time to sell you got to be prepared to act and fortunately so far we been very choosy, we found really good deals. We will continue to evaluate deals but we’re not just buying things to chase buying thing. We’re being very strategic about trying to cover the map in the two best markets in the country so that we can then build a defensive mode around our castle by basically cross-selling all these customers into our gas, and making it very difficult for people to take them away from us.

Amit Dayal

And in that context, how is your operating cost structure going to change? The 1.8 million in cash you mentioned. Was it at the end of the third quarter, if you could just give us an updated cash number that you have currently?

Scott Mahoney

So, we have to be careful about talking about cash because that can often sends a signal to the market, rather wanting to raise money or needing to raise money and we all know in micro caps, world you have to be really careful about telegraphing cash. What I’m comfortable saying is that with the market dynamics in October, the vast majority of the Series C convertible preferred was converted. That is what ultimately affected your share count and so we pulled in a lot of cash like almost $10 million in cash in 30 days. So between that and where we should direct transaction, we did that was announced about three weeks ago. Our cash position is very, very strong. We use it wisely. We declared some acquisitions we've done some other things, but we still have ample liquidity and our liabilities are about as low as we had them since I have been involve in the Company. So I think our balance sheet is in great shape.

Amit Dayal

And on the operating cost structures side, should we anticipate sort of more investments to ramp up sales force, support resources, et cetera for customers from these levels? How should we think about annual operating process in 2018?

Scott Mahoney

So part of the reason for the executive change over the last couple weeks, it was announced last week is, I had experience running companies that had very low margin businesses and helping them to turn around rapidly. And with MagneGas, you go a company that has enormous growth potential both organically and through acquisitions and that’s just on the gas side, does not counting sterilization or anything else that we could try to push pretty hard in 2019. But what we really are doing right now is, we’re really sending out the corporate overhead getting the administrative side of team has been in team when possible.

So that operating entity is not a burden on the cash flow generating subsidiaries, these while these supply businesses across these markets that we serve. So what you we'll see, as you'll see our operating expense decreased pretty rapidly both in absolute dollar terms, as well as a percentage of revenue, but we will be prudently, incorporate additional sales force. So right now what we're doing is were specifically bringing three people on to support Jack Armstrong, who is our Head of Global Business Development and basically giving him what we call a MagneGas champion.

So, someone who is an expert on the product that can do live demonstrations in the local market; from all of this year, we've had one guy running around our country doing demos and he has done a fantastic job, but what will do will start to really be focused on taking three specific gentlemen and asking them with making MagneGas their top priority in their perspective markets. So, I don’t think operating cost are going to go up I think if anything they are going to go down and I think we're going to get really lien and also that makes enable us to start to turn the corner and get profitable pretty quickly.

Amit Dayal

Just one last question from Scott, So what are the next steps in sort of the corporate reorganization you would have put into motion. There has been management change. You've change the sort of controlling interest structure. What remains to be done over here now?

Scott Mahoney

So if this was a baseball game to use that analogy, from a change perspective to the outside world, we're probably somewhere between the third and the fifth inning. We're not even halfway done the transformation of MagneGas and I just I hope that the markets embrace what we're doing because it's going to be bold it's going to let us really attack these other complementary technologies that are pre-revenue, so we need to position the teams throughout the handle some really bold growth some really serious projects.

So we’re going to start to make our entire team public to the world and a simple example. We have not updated our website to talk about the depth of experience. We have an industrial gas business now. Just as our top executives in each region, we have over 100 years of experience in that industry, and so were going to start to talk about the people we have, we're also going to talk about the people they were adding right now in key areas.

So I'll give you a simple example were adding three more people to our engineering staff, one to support our agenda for endeavor, one to support sterilization in North Carolina and Europe, and another to basically handle Phase 2 of USDA grant process and begin applying for the next larger USDA grant going to '19. So you're going to get a lot of good news about the people in this company and the people we are adding and I would just encourage everyone stay tune because there are some exciting things coming.

Operator

Our next question today is coming from [Harry Nucifora] from Royal Lines. Your line is now live.

Unidentified Analyst

Hi, Scott, couple of quick question. First is, now that the preferred have been retired, are you at all concerned given the potential for the technology about control? In other words, is there any plan to implement any type of a poison pill?

Scott Mahoney

There's a lot of different ways we could manage that risk. I think the way I think about it right now is I'm pretty in tuned with our shareholder base. I have a pretty good handle on where several most important relationships are. So I feel that we don't put anything in from a legal perspective to try to steer people away from something like that. And as you think about if we do a good job articulating the value proposition what we are really building here I'm pretty confident that we are going to see some pretty dramatic shareholder improvement in the sentiment whether translates into price.

I don't know but if this company continues to improve its value and someone really wanted to come along and buy it in the same price that wouldn’t necessarily be the worst thing for shareholders. I'm not contemplating the sale, but it's just ended up a significantly higher share price for everybody involved. My job is to try to create shareholder value so we are not interested in selling the Company this company like I said we are very early in the process of really rebooting this thing. I want to get a chance to show people what we can do before we even see anybody coming in and doing anything hostile.

Unidentified Analyst

And the last question is, you had talked in the previous conference calls about a project where you were working with pharmaceutical manufacturers turn that waste into MagneGas, any update on that?

Scott Mahoney

So, one of the things that we are pretty serious about is starting to produce our gas from waste. So ethanol which is very commonly used in the medical industry, not just for making gel gas, but also for hospitals and a lot of other medical facilities, a lot of them produce a lot of all ethanol that basically is single used contaminated that can't be used for anything else. It's very expensive to get rid of. So, as we start to shift our production and make our gas throughout the United States, we are actually very focused right now on finishing the process with our potential customer or supplier I should say in Florida.

And so, we are looking to try to get something in writing and done with them defensively maybe as soon as by yearend. I really want to be able to use that marketing volume in Europe negotiating with some of these ports because in many instances there is significant amount of ethanol waste that we could use as our feet are in Europe. And as you can imagine when you can tell that local port authorities that you are going to make a safer more functional gas for metal cutting purposes out of their garbage, it really opens up the door to public funding support work to do.

Operator

Our next question is coming from [Samuel Moore], a Private Investor. Your line is now live.

Unidentified Analyst

In regards to the quantity of MagneGas2 that you guys have on hand, do you have more than the demand or less than the demand, and if you have access, how much access?

Scott Mahoney

So, we always have a buffer like it's just good logistical support to make sure you have adequate reserves at all times, but we don't quote our gas we don't build massive inventories and then just let it fill in the shelves. So we have largely a just in time model where in Florida with our current operational capabilities we more than keep up with their demand and we always keep out of quick reserves. So on that topic, I want to kind of introduce something so starting in January the Company actually intends to start disclosing production volumes and dollar values of sales of MagneGas we want to finish up a couple things before year-end and then that’s something that a lot of investors have asked us to disclose and now hopefully as you can see from us starting to disclose monthly sales numbers we’re going to start disclosing guess sales. Hopefully investors will start to see a very transparent hopefully positive store people to support.

Unidentified Analyst

And one other thing, with respect to MagneGas2 versus MagneGas, it's my understanding that MagneGas2 is made from butane and the original MagneGas is made from the wastewater. Do you actually sell the original MagneGas as well or just a MagneGas2?

Scott Mahoney

So let me actually clarify so MagneGas, the original MagneGas was actually a mixture of best of oils diesel, it was half a dozen things that went into that suit that made MagneGas. Today we actually don't make MagneGas2, MagneGas2 was all made from soybean oil. So we actually make the gas today from butanol and our version of butanol that we source is derived from corn. So when they make ethanol they then further refine it and make butanol, so we technically are on what you want to call it MagneGas2 or 2.53 or MagneGas3, one of the other things that we’re going to stop doing is calling it MagneGas2, it’s MagneGas and this version of MagneGas is made from butanol.

Unidentified Analyst

And one other thing is there any chance you can make the YouTube video documenting the USDA Phase 1, Phase 2 and what’s going on with that and promoting the Company as a worldwide opportunity for -- I think that’d be great for PR?

Scott Mahoney

So let me talk about that, one of the things we’re going to be doing as part of this corporate reboot is we’re going to completely bring down and build back up the website, it’s going to be something that's really representative not only of what we are doing in the gas side of the business but it’s going to talk about all the other technologies that we have in the works. It's also going to really detail, who the heck is on our team, what our real capabilities are? So we get all sorts of interesting solicitations like can you guys give us like drone videos of all your different locations?

So we've actually been talking to video companies about doing just what you’re talking about. We actually want to do a live demonstration of our gas cutting side-by-side with propane or with settling show the cutting speed, show some of the functionalities like there’s a really cool visual aspects, you’re seeing what our gas can do head to head with the alternatives. And we’re actually planning on building an entire video library of probably about 15 to 20 different things about our company, interviews with some of our key executives, interviews with customers, site videos, demonstrations, the USDA program, when we go live in the Netherlands showing that partnership with the potentially very large dairy farm all these different things are going to be on the website as multimedia presentations that I think will make people feel pretty excited about what we’re doing.

Unidentified Analyst

I love your company and I lumbered to doing for the environment, and I think you guys really do...

Scott Mahoney

It’s a pretty unique opportunity to be able to make money, create shareholder value and do social good. And that’s what we’re really trying to do.

Operator

Our next question is coming [Mike Seth] a Private Investor. Your line is now live.

Unidentified Analyst

I just want to take out of some additional color seems like whether your top line is driven by acquisition, so specially at the recent TriCor. Just wondering could you provide some color on how much of TriCor's revenue is from MagneGas cells?

Scott Mahoney

So starting in January we will detail this pretty closely. So let me kind of answer this in a slightly different way. So when I came on board. We had a dilemma because we had several people who all wanted to be part of MagneGas from an acquisition or M&A perspective, roughly at the same time. And they all knew about our products sold a little bit of our product but they weren’t pushing our products the way ESSI was pushing our product. So the dilemma that we had was that when you make our gas and then you ship it across the country because it's a gas the value of what you can carry in a truck is really very low compared to the cost of shipping it. So we deliberately held off on pushing this product hard for a couple reasons.

One, we didn’t want to waste a lot of time and energy and then get in front of the customer and not be able to competitively priced this net of shipping to make money. So we deliberately held off over last six months. I don't want to steal some of the tonnage is coming but our Texas facility has the ability to manufacture our gas. If we were to begin producing our gas scale there our logistics would drop dramatically. As most of you can appreciate shipping from central Florida all the way up the coast and then across the U.S. is a pretty daunting proposition when you are trying to sell things at scale. So we’re basically doing is were prepared California to be able to really gear up marketing of MagneGas and basically to do that we got to move the production to Texas.

Unidentified Analyst

That is very interesting thing, thank you very much for that detail. One quick follow-up question, you mentioned that the preferred C class shares were redeemed. When was that done?

Scott Mahoney

So, there are two different things related to preferred stock that are unrelated to each other. So June of last year we announced that we put together a financing instrument a 25 millimeter financing instrument and essentially what that was it was almost like an ATM, basically periodically that investor would sell shares into the market and would give us cash. And ultimately a lot of investors have asked us, is this something that is helpful. Yes it’s very helpful when you can get access to capital to grow your business to where we have.

But the decrement is to create short-term down side pressure on the stock. That vehicle is just about done and when it’s exhausted and gone. We will announce to the world that it is behind us, and for many investors back will be a big signal that downside pressure on the stock has updated and as hopefully as the stock price improve substantially, as part of the reason why we've been very clear and try to be direct at investors about wanting to get the extension on the reverse split because we believe that if the Series C is gone and investors see the progress we are making it will give us the chance to see significant improvement in the share price before we have to consider of doing anything.

So that is what I was talking about a few minutes ago on the call, but the separate thing we did which, which I think I should speak about the because I think there's some confusion on this matter is the former CEOs family the founding family of this company owned a separate class of preferred stock and ultimately that preferred have two things that I felt were detrimental to shareholders. First, if we ever sold the business under certain terms and conditions all the proceeds would go to them. And second, that share that preferred vehicle had a super majority voting blocks.

So, it basically tonight shareholders the ability to vote on a lot of key actions, so if we wanted to raise more than a certain amount of money, shareholders have nothing saying it, if we wanted to do a reverse split shareholders have nothing saying it, so we deliberately got preapproval for a couple of things in case they were needed and in the very short-term. But long-term the power to make these corporate decisions is back in the hands of U.S. shareholders, and I thought that if I can try to lead this company that's important things we will be able to bring to investors day one. So we did it.

Unidentified Analyst

So it's done or it's going to be done?

Scott Mahoney

So what we bought out that we disclose this last week when we announced that I became the CEO. We announce that the Company bought backs and retired the Series A preferred, it's not convertible, so we just paid a set amount of cash, and a set number of shares to the family and basically competitive them to give up their total control of this company and its debt it's gone to passage bond and now we can move on together.

Unidentified Analyst

And so than the November 6th press release?

Operator

Our next question is coming from [Tarek Nahas] from Point Communications Group. Your line is now live.

Unidentified Analyst

I guess my main concern and not considering but all of the other benefits that MagneGas Corp brings to our world. Can you elaborate a little bit more on the involvement of MagneGas in the marijuana business now and where they see their sales in the future pertaining to marijuana and its involvement in that industry?

Scott Mahoney

So the cannabis industry right now, obviously there's been a pretty big change in at least some governments views, so some of the states have made cannabis legal and some way we should perform. So in California, for example, Trico is benefiting from the legalization of cannabis because, there's an enormous number of growers, moving into existing warehouse facilities converting them and creating growing facilities in the sacramental area as well as building new locations.

So it's not so much that we are directly targeting cannabis it's just the growth industry of choice and they need a lot of the products that we sell. So they need a lot of our products for the construction of their facilities, the maintenance of their facilities. They also need several of these gases for their facilities. So we're quite happy to support growth and we are quite fortunate that in that area where there were competitive and we are being well received.

So I would just have to guess that as we add additional capabilities in some other markets like Southern California, we will probably well-positioned there based on the lessons we have learned and Northern California as we move into other markets where cannabis could become legal I don't know that it necessarily down the docket many of the states that we are actively marketing our products in today, but in growth industries that need metal cutting fuels, industrial gases, and the hard goods that we sell we are going to be pretty well positioned to compete.

Unidentified Analyst

Can I ask one more question?

Scott Mahoney

Sure.

Unidentified Analyst

Well, I'm from Michigan, motor city in particular. We have got U.S. dealer we have got many steel factories here, we have got the auto industry here. we have got tons of factories in the Midwest. At what point -- and I did look on website and I know that there are few distributors in the Midwest that are distributing MagneGas, but at what point do we start to hit the industrial sector in the auto market?

Scott Mahoney

So we have a distributor in both Indiana and then Michigan that actually sell our products to General Motors now. So every single Corvette made in Americans made with our gas. I believe it’s one of the truck facilities as well, as one of their light truck facilities has migrated to our gas. I know that they are actively trying to get our gas into all 26 or 27 of the plants across the U.S. So our growth strategy right now, we took a very series look at a couple of companies in the Midwest and what we found was that it's really difficult to go in either as a brand-new entrant to the market or to buy some legacy family business and many parts of the Midwest. It's harder to do that and then be embraced as the new guy.

We found that in Texas and in California because they are more migratory destinations we have a lot of population shift coming going into both Texas and California. People there are more open to new entrance and new competitors and new business owners that’s part of the reason why we prioritized our what we call our retail business where we sell our product all the way through directly to the end consumer.

And these markets in the states our business model right now is first to get our operating costs for making production at a rock-bottom level and that includes the logistics of getting it to the wholesaler and then really supporting our wholesale partnerships in places like Michigan, so that they can sell our gas as profitably as possible and maximize the revenue opportunity for both himself and us. So you will probably see us ramp up in Midwest over the next year, but you won't see us owning a retail company in the Midwest anytime soon.

Unidentified Analyst

Well I look forward to seeing a bottle of MagneGas next to the propane and acetylene at Home Depot and Lowe's that one, at any point in the future. I’ve got one more question only because it is just very interesting to me. What’s your thought on SpaceX and probably maybe SpaceForce? Do you think MagneGas will ever have a place with any of these companies?

Scott Mahoney

I think start by saying this. One of the interesting attributes of our flame is the flame speed appears to kind of the like the fact that the [indiscernible] we didn’t know our flame temperature will be so high when we invented MagneGas. We also didn't expect that the flame speed, the actual rate at which the heat is coming off the burner, it’s an interesting theoretical opportunity for us to look at MagneGas for propulsion at some date in the future.

I'm not going to go out and say that it is going to be a renewable rocket fuel, but there are some interesting angles that we want to unpack related to this and a whole bunch of other industries. One that I would definitely stay tuned on is we think we think there may be some applications for our technology and the metal recycling and mining industries. And as we kind of unveil that over the next couple months it's going to be another whole potential area for us to unlock if we find the right partners.

Unidentified Analyst

I got one more hypothetical only because I find it also interesting. What about municipalities, wastewater treatment plants? Can this technology be set in line at a wastewater treatment plant to utilize the waste coming from the municipality changing or producing MagneGas to possibly fuel city vehicles can this be something that the future can bring?

Scott Mahoney

That’s an interesting question. So I think that the angle to pursue with municipalities would be to pursue sterilizing the water not for making gas, but for sterilizing the water.

Unidentified Analyst

Like you’re bringing -- you’re getting liquid waste that comes into these plants can the sterilization or MagneGas product be put in line in order to take that sewage or wastewater and convert it to gas only -- and if I am not making sense it’s only because maybe I'm not clear about how the conversion takes place as far as waste is concerned, but is that possible?

Scott Mahoney

At this time, I think the bigger opportunity is the water. I think really being able to held places like San Diego or Los Angeles or other places where the groundwater constraint issues, as we can help them reclaim their municipal water. That's where the money is at.

Operator

Thank you. Our next question is coming from [Jonathan Roy] from [Devron]. Your line is now live.

Unidentified Analyst

My question is related to hopefully clear objective in the next six months. We do believe in the product for sure. We do believe that we could hopefully support the growth in the group in Asia as well, and my question is related to NASDAQ compliance to hopefully reach this $1 target without hopefully a reverse split. You shared so much your thoughts there. Would like to have or give more details about a certain plan you’re trying to achieve in the following months weeks?

Scott Mahoney

Sure, it’s very straight forward. We’re doing everything we can execute a good smart business model, show investors results and do everything we can try to improve the market conditions of, specifically the stock price for one or two scenarios and both of which are important and beneficial to shareholders, if that some way she perform this stock would have go back above $1 and stay for 10 trading days. We will be complying with NASDAQ's just because of that event. So if that happens before the first week of April, mission accomplished. And realistically when you think about a reverse split you actually probably got to implement it in February or early March in order to give it some time to comply in advance of the cut off for that dead line in April.

So scenario one is the stock just organically goes back above the $1 because of our results and investor sentiment that the problem solved. The second scenario is one is which the share price improves so obviously with the share price improving pretty dramatically over the last 30 days. If we are forced to do a reverse split between now and April in order to maintain and satisfy NASDAQ. It is imperative that we try to let investors have the best possible ratio to give you simple example, if investors only had let’s say this was a $0.50 or $0.75 stock and we could do a much, much smaller reverse, that’s good for investors.

So want to try that everything we can to give investors the best possible outcome if and when we decide to do reverse. So we have one pre-approve in the next 12 months. NASDAQ's and a lot of people don’t really understand this, being in NASDAQ with the Company give you access to capital to grow and execute your business plan with much, much better terms than anything an OTC company could get. So a lot of people say, you need to just drop to OTC. If we drop to OTC forget about growth, because you can’t fund it. So investors need to decide do they want to see growth and if so, we need to be supportive of staying on NASDAQ and keeping this company compelling and attractive for all forms of capital going forward.

Unidentified Analyst

Sure, thank you very much for your answer. That question regarding the European and Asian market great challenges there as well, so you think a lot of competition. So I was wondering and hopefully some others are wondering as well, how would you plan to penetrate this market hopefully in 2019, again you elaborate some thoughts during on the call, if you could share a little bit more details or you’re vision about this and market and potential sales in 2019?

Scott Mahoney

So let’s talk specific about let’s say Amsterdam. So right now we've commenced with a market study to basically identify the top 100 prospective users who, the decisioning person is, what their current consumption of alternative product. So that basically we know exactly who to stack rank for prospecting purposes. So we're building that marketing game plan at the same time we've had most of meetings with the poor were actually now working towards talking directly with the city of Amsterdam and then report about potentially -- there's a whole bunch of different funding mechanisms that can help you to offset the cost of operations and some of it can just help you offset, you starter cost your occupancy cost and labor cost, taxes as the whole bunch of different programs over there that we may or may not qualify for. But we're trying to figure out which ones are the low hanging fruit.

At that point with the business plan and understanding what we qualify for you'll take between 5 and 6 months to be operational. So our goal is that everything checks out and the reason that we believe is true today lines up so the very realistic scenarios that we are up and running and marketing our gas by the end of '19 most likely in Amsterdam. But allow me to several times to see specific sites, where we could be operational, it's in a great location. The port is extremely good to work with. It's a shortened up distance from a shipping perspective you can be selling your gas down into Rotterdam, which is one of the 65 to 70 miles away. You can easily drive sample gas done Antwerp and Hamburg for marketing purposes.

So unless something really unforeseen or to develop, we'd really like to try to be in Amsterdam by the end of next year, generating real revenue from our gas sales. The consumption of metal cutting fuels in the ports is very high. There is some business that are very, very large and could easily dwarf what we've already accomplished in the states and most importantly, it's a really, really lien operating model you are not trying to sell your other ancillary products, you don't need a lot of staff, you don't need a lot of CapEx, and it's a very, very high-margin business. So I think the highest party for us right now is to figure how to get-up and running in Europe as soon as possible.

Operator

Thank you. Our next question is coming from Steven Austin from Zacks. Your line is now live.

Steven Austin

Scott, let me -- lot of my questions have been answered already, but I have a few granular questions especially in the metal cutting fuel area. The three most recent acquisition seem to come have come from a Tyler's welders supply and from what, what I gather was United Welding specialties, Paris oxygen and Latex welding, and could you please confirm that and also I would assume that there are other operations in Henderson and Silver Springs were not part of the transactions?

Scott Mahoney

So there is a common ownership, some of the companies that we owned were owned by a family that owned a series of largely supply businesses so there are multigenerational family has been in this business since the early 70s, we bought three of their standalone locations from different members of that family.

Steven Austin

And just want to make sure I heard correctly that the sales from Florida than in the third quarter were $830,000?

Scott Mahoney

I believe so let me double check.

Steven Austin

And the grant you talked about that you are going to apply for in Europe in February that’s different than the horizon 2020 grant correct?

Scott Mahoney

Yes, it's part of the European commission's grant governing bodies. I don’t remember the exact name of it right at the top of my head, but one of the 2020 grants and the other is through a different program with the EU.

Steven Austin

And the timing you expect when their approvals will come through for the horizon 2020?

Scott Mahoney

So the one I just applied for the first cut is I believe at the end of February and if you make the cut you then have to submit a more expansive application that’s got to be completed in April and it let us know sometime probably like September for the February application for sterilization I think they would let us know in April. So that one would be the one we have probably learned more about quicker.

Operator

Our next question is coming from [Brian Richardson], a Private Investor. Your line is now live.

Unidentified Analyst

I just had a couple of questions. The first one is you had mentioned some state to state cannabis opportunities and I was wondering, what are your thoughts on where we are at in the states for cannabis and cannabis opportunities?

Scott Mahoney

I don’t want to dwell too much in cannabis. I think it's just you know things were -- if we are in that market and not state legalized this cannabis you are going to see an uptick in industrial activity as we are building these facilities and then they need a lot of support products to maintain the operations thereafter. We are not going to chase cannabis but if we are in a market where something legalizes it we are going to make sure our guys are actively marketing our products and services to those businesses, just like we would any other consumer or products in that space.

Unidentified Analyst

And it seems to me that you have no trouble finding supply to make MagneGas as just my question is specifically on, what are the plans to match the future production demand, if we get all this growth that we are planning on and talking about? Because it seems like you have got unlimited application for a product and unlimited resources to produce the product, but they actually production line of the product is my concern.

Scott Mahoney

So the objective is in each of your markets to minimize your logistical costs if your utilization equipment high enough, you can justify the staffing required, you need three to four people to operate one unit. So you can have a certain amount of payroll and then you are going to want to have one to two trucks in the local market that are basically ferrying full and empty cylinders back and forth to the point of sale.

So you don't want to just put it specifically somewhat the California today and then hope you quickly get enough sales to cover your costs. The responsible thing is to develop the business first and then place a unit in California to meet the needs of California similarly do the same thing for Texas. So the game plan is over the next two years to make sure that we have more than enough demand to justify a unit in each market, that’s really the goal.

Unidentified Analyst

And then my final question is, can you expand on any of the PR plans to fire up investors and educate the public on product because it seems to be it's a wonder -- wonder product that unfortunately doesn't have a big knowledge base when you get out there and talk to the people, not a lot of people in industry actually know much about it or heard about it before? So education for any new product brought to market is typically the most expensive and that's kind of my question is. What are we doing as far as planning on educating the public about the product?

Scott Mahoney

So, there is multiple answers so that. So Jack Armstrong’s sales force will be educating metal cutting consumers and helping them to understand the specific end-user benefits of the gas. At the corporate level, there is going to be a whole host of activities to raise awareness and help everyone understand the benefits of our guests not just the end-users, the shareholders, potential investors, regulators and all of this can be done in a fairly cost-effective way. In a building really quality website and then having good content on that website is probably one of the most cost effective things we can do to help educate people. And then really using the sales force at the grassroots level to educate the customer, potential end-users then your education becomes a profit center and then you can kind of move forward from there.

Operator

Thank you. Our next question is coming from [Harry Nucifora] from Royal Lines. Your line is now live.

Unidentified Analyst

Scott, one follow-up question can you bring us up to date after the most recent acquisitions what’s our current share count?

Scott Mahoney

I believe that’s in the Q, and will be out here in the next couple of hours, it is in 130 million, 536 million range.

Operator

Thank you. Our next question is coming from [Fred Wilkerson] a Private Investor. Your line is now live.

Unidentified Analyst

Just have you all thought of expanding into other distributing shifts as far as -- I am in the automotive aftermarket and the automotive aftermarket calls on at lot of same customer base as you that get work up promoting your product in a joint venture. Have you considered that?

Scott Mahoney

We’ve thought about quite a few different sales channels that could be used. The biggest challenge is just making sure that you’re producing the gas and maximizing the revenue opportunity. With a lot of these partnership opportunities, you end up selling your gas wholesale and you get volume sales, but you don't get a lot of profitability from selling wholesale when you compare that with selling retail. So at least for the next year, I think that the focus is going to be to market our gas heavily to the newly acquired customer base.

So let’s just say hypothetically that we had had 5,000 customers in Florida and now we have 25,000 customers across the Company. The best thing we could do right now is get them start buying MagneGas and stop buying these alternate products that we sell them because they can buy acetylene from anybody. But if they follow-up with MagneGas, we make much more money so it’s more profitable and it’s defensive, meaning the big competitors can’t come in the door and sell them away from MagneGas. If they love it, we’re the only game in town and they got to stay with us. So at least for the short-term that’s the top priority.

Unidentified Analyst

My geologist think along that the sales forces is that my customers had could promote your product and not just distribute it, but just promoted and kind work out at joint venture here what you’re saying in your projected comment.

Scott Mahoney

I think we’re going to be open minded but first things first that’s all.

Operator

Thank you. We reached end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

Scott Mahoney

So just in closing, so we had a record number of people on this call today. What I hope that mean is that we’re doing something right that investors are very interested in what’s going on. Clearly, everyone can see through the news flow that we're being very proactive, we’re taking bold steps. And I hope that as we have these calls in the future, we can report back to that we made a whole lot more progress because we’re still only in early days that really making us something meaningful. And I hope you all stay tuned and stay interested and stay supportive and look forward to having everyone on the call the next time we speak.