GWTI 10-Q
Greenway Technologies, Inc. & Subsidiaries (GWTI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from _______ to _______
Commission
File No.
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirement for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐
The number of shares of the registrant’s common stock, par value $0.0001 per share, outstanding as of November 15, 2021 was .
Table of Contents
| 1 |
PART I – FINANCIAL INFORMATION
| Item 1. | Condensed Consolidated Financial Statements & Notes (Unaudited). |
GREENWAY TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (See Note 2) | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid Expenses | ||||||||
| Total Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities & Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Advances - related parties | ||||||||
| Accrued severance expense | ||||||||
| Accrued expenses | ||||||||
| Accrued expenses - related parties | ||||||||
| Accrued
interest payable (includes related parties interest of $ | ||||||||
| Notes payable and convertible notes payable | ||||||||
| Notes
payable - related parties (Net of debt discount of $ | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 10) | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock shares authorized, par value $, and outstanding at September 30, 2021 and December 31, 2020, respectively | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Common stock to be issued | ||||||||
| Subscription receivable - warrants | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities & Stockholder’s Deficit | $ | $ | ||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 2 |
GREENWAY
TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2021 and 2020
(Unaudited)
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total Expense | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Gain/(loss) on change in fair value of derivative | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on settlement of accounts payable | ||||||||||||||||
| Gain/(loss) on debt settlement | ||||||||||||||||
| Reserve for equity method investment receivable | ( | ) | ( | ) | ||||||||||||
| Convertible debt derivative expense | ( | ) | ||||||||||||||
| Total other income / (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share | ||||||||||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 3 |
GREENWAY
TECHNOLOGIES, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the nine months ended September 30, 2021 and 2020
(Unaudited)
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Common Stock, par value $0.0001 | Additional | Common Stock | ||||||||||||||||||||||||||
| Number of shares | Amount | paid-in capital | to be Issued | Subscription Receivable | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Shares to be issued for promissory note fees | - | - | - | - | - | |||||||||||||||||||||||
| Shares to be issued for consulting fees | - | - | - | - | - | |||||||||||||||||||||||
| Shares issued for private placement | - | - | - | |||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2021 | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Shares to be issued for promissory note fees | - | - | - | - | - | |||||||||||||||||||||||
| Shares to be issued for private placement | - | - | - | - | - | |||||||||||||||||||||||
| Shares issued for promissory note fees | ( | ) | - | - | ||||||||||||||||||||||||
| Shares issued for consulting fees | ( | ) | - | - | ||||||||||||||||||||||||
| Shares issued for private placement | - | - | - | |||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2021 | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Shares to be issued for promissory note fees | - | - | - | - | - | |||||||||||||||||||||||
| Shares to be issued for private placement | - | - | - | - | - | |||||||||||||||||||||||
| Shares issued for promissory note fees | ( | ) | - | - | - | |||||||||||||||||||||||
| Shares issued for private placement | ( | ) | - | - | ||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2021 | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
| Common Stock, par value $0.0001 | Additional | Common Stock | ||||||||||||||||||||||||||
| Number of shares | Amount |
|
paid-in capital | to be Issued | Subscription Receivable | Accumulated deficit | Total | |||||||||||||||||||||
| Balance, December 31, 2019 | 296,648,677 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Shares issued for cashless Warrant conversions | - | ( | ) | - | - | |||||||||||||||||||||||
| Shares issued for Loan Conversion | ( | ) | - | - | - | |||||||||||||||||||||||
| Shares issued for Promissory Note Fees | ( | ) | - | - | - | |||||||||||||||||||||||
| Shares to be issued for Promissory Note Fees | - | - | - | - | - | |||||||||||||||||||||||
| Shares to be issued for settlement of accrued legal expenses | - | - | - | - | - | |||||||||||||||||||||||
| Shares issued for stock-based compensation | ( | ) | - | - | - | |||||||||||||||||||||||
| Shares issued for Private Placement | - | - | - | |||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2020 | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Shares issued for Private Placement | - | - | - | |||||||||||||||||||||||||
| Shares to be issued for settlement of accrued legal expenses | ( | ) | - | - | - | |||||||||||||||||||||||
| Net loss for the three months ended June 30, 2020 | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Shares to be issued for promissory note fees | - | - | - | - | - | |||||||||||||||||||||||
| Shares issued for loan conversion | - | - | - | |||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2020 | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 4 |
GREENWAY TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
For
the nine months ended September 30, 2021 and 2020
(Unaudited)
| Nine
Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Change in fair value of derivatives | - | ( | ) | |||||
| Amortization of debt discount | ||||||||
| Derivative expense | - | |||||||
| Share based consulting fees | - | |||||||
| Debt settlement | - | ( | ) | |||||
| Gain on settlement of accounts payable | - | ( | ) | |||||
| Reserve for equity method investment receivable | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expenses | - | |||||||
| Accrued expenses - related parties | ||||||||
| Accounts payable | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash flows from Investing Activities: | ||||||||
| Receivable - related parties | - | ( | ) | |||||
| Net Cash Used in Investing Activities | - | ( | ) | |||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from notes payable - related parties | - | |||||||
| Proceeds from convertible notes payable | - | |||||||
| Payments on notes payable - related parties | ( | ) | - | |||||
| Payments on other notes payable | ( | ) | ( | ) | ||||
| Advances - other | - | |||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from stockholder advances | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Increase (Decrease) in Cash | ( | ) | ||||||
| Cash Beginning of Period | ||||||||
| Cash End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash Paid during the period for interest | $ | $ | ||||||
| Cash Paid during the period for taxes | $ | $ | ||||||
| Non-Cash investing and financing activities | ||||||||
| New debt discount from convertible notes | $ | $ | ||||||
| Subscription receivables - warrants | $ | $ | ||||||
| Loan
conversion (fair value of shares issued: $ | $ | $ | ||||||
| Discount related to shares issued for promissory note fees | $ | $ | ||||||
| Conversion of stockholder advances – related parties to notes payable | $ | $ | ||||||
| Shares issued for promissory note fees | $ | $ | ||||||
| Shares issued for legal expense | $ | $ | ||||||
See accompanying notes to the condensed unaudited consolidated financial statements.
| 5 |
GREENWAY TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 1 – ORGANIZATION
Nature of Operations
Greenway Technologies, Inc., (“Greenway”, “GTI” or the “Company”) through its wholly owned subsidiary, Greenway Innovative Energy, Inc., is primarily engaged in the research, development and commercialization of a proprietary Gas-to-Liquids (GTL) syngas conversion system that can be economically scaled to meet individual natural gas field/resource requirements. The Company’s proprietary and patented technology has been realized in Greenway’s first generation commercial-scale G-ReformerTM unit (“G-Reformer”), a unique and critical component of the Company’s overall GTL technology solution. Greenway’s objective is to become a material direct and licensed producer of renewable GTL synthesized diesel and jet fuels, with a near term focus on U.S. market opportunities.
Greenway’s GTL Technology
In
August 2012, Greenway Technologies acquired
To facilitate the commercialization process, Greenway announced in August 2019 that it had entered into an agreement to partially own and operate an existing GTL plant located in Wharton, Texas. Originally acquired by Mabert, a company controlled by director, Kevin Jones, members include OPMGE (a company formed to facilitate the joint venture), Mabert and Tom Phillips, an employee of the Company. The Company’s involvement in the venture is intended to facilitate third-party certification of the Company’s G-Reformer technology, related equipment and technology. In addition, the Company anticipates that OPMGE’s operations will demonstrate that the G-Reformer is a commercially viable technology for producing syngas and marketable fuel products. As the first operating GTL plant to use Greenway’s proprietary reforming technology and equipment, the Wharton joint venture facility is initially expected to yield a minimum of 75 - 100 barrels per day of gasoline and diesel fuels from converted natural gas. To date, the Company has not raised sufficient funding to achieve the aforementioned objectives but continues to work toward that end.
The Company believes that its proprietary G-Reformer is a major innovation in gas reforming and GTL technology in general. Initial tests have demonstrated that the Company’s solution appears to be superior to legacy technologies which are more costly, have a larger footprint and cannot be easily deployed at field sites to process associated gas, stranded gas, coal-bed methane, vented gas, or flared gas, all markets the Company seeks to service. The new plant is anticipated to prove out the economics for the Company’s technology and GTL processes.
NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
| 6 |
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the financial statements of Greenway and its wholly owned subsidiaries. All significant inter-company accounts and transactions were eliminated in consolidation.
The accompanying condensed unaudited consolidated financial statements include the accounts of the following entities:
| Name of Entity | % | Entity | Incorporation | Relationship | ||||||
| Greenway Technologies, Inc. | Corporation | |||||||||
| Universal Media Corporation | % | Corporation | ||||||||
| Greenway Innovative Energy, Inc. | % | Corporation | ||||||||
| Logistix Technology Systems, Inc. | % | Corporation | ||||||||
Greenway’s investments in unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. See Note 3 – Summary of Significant Accounting Policies.
Going Concern Uncertainties
The
condensed unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates realization of
assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2021, we have an accumulated deficit
of $
The outbreak of COVID-19 (coronavirus), caused by a novel strain of the coronavirus, was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental directives, reduced business and consumer spending due to both job losses, reduced investing activity and M&A transactions, among many other effects attributable to the COVID-19 (coronavirus), and there continue to be many unknowns. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and other measures. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak. The extent to which the COVID-19 (coronavirus) outbreak will impact our operations, the operations of OPMGE and/or ability to obtain financing or future financial results is uncertain.
The accompanying unaudited consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied in the presentation of the condensed unaudited consolidated financial statements are as follows:
Property and Equipment
Property and equipment is recorded at cost. Major additions and improvements are capitalized. The cost and related accumulated depreciation of equipment retired or sold, are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale or salvage value are recorded as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the estimated useful life of the assets.
Impairment of Long-Lived Assets
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with Accounting Standards Codification, ASC Topic 360, Property, Plant and Equipment. An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate. If an asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value. If estimated fair value is less than the book value, the asset is written down to the estimated fair value and an impairment loss is recognized. There were no long-lived assets or impairment charges for the period ended September 30, 2021.
| 7 |
Revenue Recognition
The FASB issued ASC 606 as guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has not, to date, generated any revenues.
Equity Method Investment
On
August 29, 2019, the Company entered into a Material Definitive Agreement related to the formation of OPM Green Energy, LLC (OPMGE).
Use of Estimates
The preparation of condensed unaudited consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include allowance for collectible receivables, derivative liability valuations and deferred tax valuation allowances. Actual results could differ from such estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three-months or less to be cash
equivalents.
There were
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.
The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Open tax years, subject to IRS examination include 2016 – 2020, with no corporate tax returns filed for the years ending 2016 to 2020.
Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares issued and outstanding for the period. For the nine months ended September 30, 2021, shares issuable upon the exercise of warrants (), shares convertible for debt () and shares outstanding but not yet issued () have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive. For the nine months ended September 30, 2020, shares issuable upon the exercise of warrants (), shares convertible for debt () and shares outstanding but not yet issued () have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive.
| 8 |
Derivative Instruments
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Company did not have any derivative liabilities as of September 30, 2021. During the year ended December 31, 2020, the Company entered into two convertible notes creating derivative liabilities which were converted into shares and settled during the year.
Fair Value of Financial Instruments
Fair value measurements are determined by the Company’s adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities, as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three levels as follows:
Level 1 – Valuation based on unadjusted quoted market prices in active markets for identical assets or liabilities.
Level 2 – Valuation based on, observable inputs (other than level one prices), quoted market prices for similar assets such as at the measurement date; quoted prices in the market that are not active; or other inputs that are observable, either directly or indirectly.
Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.
The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020:
| Description | Level 1 | Level 2 | Level 3 | |||||||||
| September 30, 2021 Derivative Liabilities | $ | $ | $ | |||||||||
| December 31, 2020 Derivative Liabilities | $ | $ | $ |
All gains and losses on assets and liabilities measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy are recognized in other interest income and expense in the accompanying condensed unaudited consolidated financial statements.
As of and for the nine months ended September 30, 2021, the Company did not have a derivative or derivative activity.
The following assets and liabilities are measured on the balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:
The change in the convertible notes payable derivative liabilities at fair value for the nine-month period ended September 30, 2020, is as follows:
| Fair
Value January 1, 2020 | Change
in Fair Value | New Convertible Notes | (Gain)/loss on Settlement | Conversions | Fair
Value September 30, 2020 | |||||||||||||||||||
| Derivative Liabilities | $ | - | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
| 9 |
The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values. At September 30, 2021, the Company did not have any outstanding stock options.
Concentration and Credit Risk
Financial
instruments and related items, which potentially subject the Company to concentrations of credit risk consist primarily of cash. The
Company places its cash with high credit quality institutions. At times, such deposits may be in excess of the FDIC insurance limit of
$
Research and Development
The
Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research
and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred.
Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed
when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored
research and development costs related to both present and future products are expensed in the period incurred. The Company incurred
research and development expenses of $
Issuance of Common Stock
The issuance of common stock for other than cash is recorded by the Company at market values based on the closing price of the stock on the date of any such grant.
Impact of New Accounting Standards
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed unaudited consolidated financial statements.
NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT
| Range
of Lives in Years | September 30, 2021 | December 31, 2020 | ||||||||||
| Equipment | $ | $ | ||||||||||
| Furniture and fixtures | ||||||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||||||
| $ | $ | |||||||||||
Depreciation
expense was $
| 10 |
NOTE 5 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE RELATED PARTIES
Convertible notes payable, including notes payable to related parties consisted of the following at September 30, 2021 and December 31, 2020 respectively:
| September
30, 2021 | December
31, 2020 | |||||||
| Secured
notes payable with related parties at | $ | $ | ||||||
| Total notes payable related parties | $ | $ | ||||||
| Unsecured
convertible note payable at | ||||||||
| Promissory
Note at | ||||||||
| Settlement
agreement to pay $ | ||||||||
| Total notes payable and convertible notes payable | $ | $ | ||||||
| (1) |
Under
the Loan Agreement, various private lenders have loaned gross loan proceeds of $
The
private party loans with the Company are often established by converting the Company’s outstanding stockholder advances due to
related parties into a new note payable under the Loan Agreement in the quarter following the advance. There have been instances in which
private lenders, under the Loan Agreement, enter into loans directly with the Company (not through an advance). As of December 31, 2020,
the Company had a total of $
On
March 31, 2020, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $
On
July 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $
On
July 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Ransom Jones, a Director and shareholder for $
On
July 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kent Harer, a Director and shareholder for $
On August 28, 2020, the Company executed a Promissory Note under the Loan Agreement with Michael Wykrent, a Director and shareholder for , at interest per annum. As a cost of the note, the Company agreed to issue shares of its Common Stock at a market price of per share for a total debt discount of , subject to standard Rule 144 restrictions.
On October 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for , at interest per annum. As a cost of the note, the Company agreed to issue shares of its Common Stock at a market price of per share for a total debt discount of , subject to standard Rule 144 restrictions.
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On
October 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Ransom Jones, a Director and shareholder for $
On
October 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kent Harer, a Director and shareholder for $
On
January 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $
On April 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Michael Wykrent, a Director and shareholder for $, at interest per annum. As a cost of the note, the Company agreed to issue shares of its Common Stock at a market price of per share for a total debt discount of $, subject to standard Rule 144 restrictions.
On
April 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kent Harer, a Director and shareholder for $
On April 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $, at interest per annum. As a cost of the note, the Company agreed to issue shares of its Common Stock at a market price of $ per share for a total debt discount of , subject to standard Rule 144 restrictions.
On July 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $, at interest per annum. As a cost of the note, the Company agreed to issue shares of its Common Stock at a market price of per share for a total debt discount of , subject to standard Rule 144 restrictions. The shares of common stock are reported in common stock to be issued as of September 30, 2021, as they were not yet issued by the Company.
Each of the individual Promissory Notes have one-year terms, automatically renewable, unless an individual lender under the Loan Agreement notifies the agent within 60 days of the term that they would like payment of the principal and accrued interest upon the end of such promissory note term. No lenders requested payment for such individual promissory notes through the period ended September 2021.
| (2) |
| (3) |
| (4) |
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NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE
The
Company issued a $
The
Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded
that the Convertible Note did not result in a derivative. The Company evaluated the terms of the convertible note and concluded that
there was a beneficial conversion feature since the convertible note was convertible into shares of common stock at a discount to the
market value of the common stock.
On
September 26, 2019, the Company entered into a Settlement Agreement with Southwest Capital Funding Ltd. (“Southwest”)
to resolve all conflicts related to a lawsuit in Hawaii, cause no. 16-1-0342, in the Circuit Court of the Third Circuit, State of Hawaii,
styled Southwest Capital Funding, Ltd. v. Mamaki Tea, Inc., et. al., whereby the Company had provided loan guarantees for Mamaki
of Hawaii, Inc., Hawaiian Beverages, Inc., Curtis Borman, and Lee Jenison. As part of the consideration for an agreed stipulated judgement,
we agreed to provide Southwest a Promissory Note in the amount of $
NOTE 7 – ACCRUED EXPENSES
Accrued expenses consisted entirely of accrued consulting fees. The consulting work involved fundraising and capital raising activities with potential investors for the Company, as well as consulting work related to chemical engineering and plant operations.
NOTE 8 – CAPITAL STRUCTURE
The Company is authorized to issue shares of Common Stock with a par value of $per share, with each share having one voting right.
Common Stock
At September 30, 2021, there were total shares of Common Stock outstanding.
During
the three-months ended September 30, 2021, the Company: issued shares of Rule 144 restricted Common Stock, including
shares issued in private placement to fifteen (15) accredited investors at an average price of $ per share for $
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During
the three-months ended June 30, 2021, the Company: issued shares of Rule 144 restricted Common Stock, including shares
issued in private placement to five (5) accredited investors at an average price of $ per share for $
During
the three-months ended March 31, 2021, the Company: issued shares of Rule 144 restricted Common Stock, issued in a private
placement to an accredited investor, at $ per share for $
During the three-months ended September 30, 2020, the Company issued shares of Rule 144 restricted Common Stock as the result of a lender’s conversion of a portion of note principal at an average price of $ per share.
During the three-months ended June 30, 2020, the Company: issued shares of Rule 144 restricted Common Stock, including shares issued in a private placement to an accredited investor, at $ per share, and shares at an average of $ per share for the settlement of legal expenses which were previously accrued pursuant to agreements with two prior law firms.
During
the three-months ended March 31, 2020, the Company: issued shares of Rule 144 restricted Common Stock, including shares
issued in a private placement to an accredited investor, at $ per share, for the conversion of a prior loan at $
At December 31, 2020, there were shares of Common Stock issued and outstanding.
Stock options, warrants and other rights
As of September 30, 2021 and 2020 respectively, the Company has not adopted and does not have an employee stock option plan.
For
the year ended December 2020, the Company had
NOTE 9 - RELATED PARTY TRANSACTIONS
After
approval during a properly called special meeting of the board of directors, on September 14, 2018 Mabert, LLC, a Texas Limited Liability
Company owned by a director and stockholder, Kevin Jones and his late wife Christine Early, as an Agent for various private lenders including
themselves, entered into a loan agreement (“Loan Agreement”) for the purpose of funding working capital and general corporate
expenses for the Company of up to $
Through Mabert, as of September 30, 2021, Mr. Jones along with his late wife and his company have loaned $, net of repayments, and six other shareholders have loaned the balance of the Mabert Loans. These loans are secured by the assets of the Company. A financing statement and UCC-1 have been filed according to Texas statutes. Should a default under the loan agreement occur, there could be a foreclosure or a bankruptcy proceeding filed by the Agent for these shareholders. The actions of the Company in case of default can only be determined by the shareholders. A foreclosure sale or distribution through bankruptcy could only result in the creditors receiving a pro rata payment based upon the terms of the loan agreement. Mabert did not nor will it receive compensation for its work as an agent for the lenders.
For
the period ended September 30, 2021, the Company accrued expenses for related parties of $
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Through
the period ended September 30, 2021, the Company received $
Through
the periods ended September 30, 2021 and December 31, 2020, the Company made advances to an affiliate, OPMGE, of $
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Employment Agreements
In August 2012, the Company entered into an employment agreement with our chairman of the board, Ray Wright, as president of Greenway Innovative Energy, Inc., for a term of five years with compensation of $ per year. In September 2014, Wright’s employment agreement was amended to increase such annual pay to $. By its terms, the employment agreement automatically renews each year for successive one-year periods, unless otherwise earlier terminated. During the three-month period ended September 30, 2021, the Company paid and/or accrued a total of $ for the period under the terms of the agreement.
Effective
May 10, 2018, the Company entered into identical employment agreements with John Olynick, as President, and Ransom Jones, as Chief Financial
Officer, respectively. The terms and conditions of their employment agreements were identical. John Olynick elected not to renew his
employment agreement and resigned as President on July 19, 2019. Ransom Jones, as Chief Financial Officer, earns a salary of $
Effective April 1, 2019, the Company entered into an employment agreement with Ryan Turner for a term of twelve (12) months with compensation of $per year, to manage the Company’s Business Development and Investor Relations functions. Turner reports to the President of Greenway Technologies and is entitled to a no-cost grant of common stock equal to shares of the Company’s Rule 144 restricted common stock, par value $per share, valued at $per share, or $, which was expensed as of the effective date of the agreement. Such stock-based compensation shares were physically issued in February 2020. Mr. Turner is no longer with the Company.
Other
In
the August 2012 acquisition agreement with Greenway Innovative Energy, Inc. (“GIE”), the Company agreed to: (i) issue an
additional shares of restricted common stock when the first portable GTL unit is built and becomes operational, and, is capable
of
The
Company has accrued management fees of $
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Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company adopted this guidance effective January 1, 2019 and noted that the leases discussed below did meet the requirements for recording a right of use asset or liability under ASC-842 given that they were short term leases.
Greenway
rents approximately
Each
September, the Company pays $
Legal Matters
On
October 19, 2019 the Company was served with a lawsuit by Norman Reynolds, a previously engaged counsel by the Company. The suit was
filed in Harris County District Court, Houston, Texas, asserting claims for unpaid fees of $
On September 7, 2021, the Company was served with a demand for mediation and potential arbitration by Gregory Sanders, a previous employee of the Company. The demand claims Mr. Sanders had an employment agreement with the Company entitling him to certain compensation payments under the contract. No conclusion was met during mediation which occurred in the fourth quarter of 2021. Greenway is confident in its defenses and counterclaims and intends to vigorously defend its interests and prosecute its claims.
Capital Expenditures
The
last funded Scope of Work (“SOW”) under our SRA with UTA was completed in the year ended December 2019, with payments
made of $
NOTE 11-SUBSEQUENT EVENTS
Effective November 3, 2021, Kevin Jones resigned from the Board of Directors for the Company.
From October 1, 2021 through November 15, 2021, the Company issued shares of Rule 144 restricted Common Stock issued in private placements to three accredited investors at an average price of $per share.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
The following discussion and analysis of our results of operations and financial condition for the periods ending September 30, 2021 and 2020 should be read in conjunction with our unaudited Financial Statements and the notes to those unaudited Financial Statements that are included elsewhere in this Form 10-Q and were prepared assuming that we will continue as a going concern. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors,” “Cautionary Notice Regarding Forward-Looking Statements” and “Description of Business” sections and elsewhere in this Form 10-Q. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “predict,” and similar expressions to identify forward-looking statements. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, our actual results could differ materially from those discussed in these statements. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.
Information regarding market and industry statistics contained in this Report is included based on information available to us that we believe is accurate. Much of this general market information is based on industry trade journals, articles and other publications that are not produced for purposes of SEC filings or economic analysis. We have not reviewed nor included data from all possible sources and cannot assure investors of the accuracy or completeness of any such data that is included in this Report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of our services. As a result, investors should not place undue reliance on these forward-looking statements, and we do not assume any obligation to update any forward-looking statement.
The following discussion and analysis of financial condition, results of operations, liquidity, and capital resources, should be read in conjunction with our Annual Form 10-K filed on April 14, 2021. As discussed in Note 2 to these condensed unaudited consolidated financial statements, our recurring net losses and inability to generate sufficient cash flows to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 2 to the condensed unaudited consolidated financial statements. This discussion contains forward-looking statements that involve risks and uncertainties, including information with respect to our plans, intentions and strategies for our businesses. Our actual results may differ materially from those estimated or projected in any of these forward-looking statements.
In this Form 10-Q, “we,” “our,” “us,” the “Company” and similar terms in this report, including references to “Greenway” all refer to Greenway Technologies, Inc., and our wholly-owned subsidiary, Greenway Innovative Energy, Inc., unless the context requires otherwise.
Overview
We are engaged in the research and development of proprietary gas-to-liquids (“GTL”) synthesis gas (“Syngas”) conversion systems and micro-plants that can be scaled to meet specific gas field production requirements. Our patented and proprietary technologies have been realized in our first commercial G-ReformerTM unit (“G-Reformer”), a unique component used to convert natural gas into Syngas which when combined with a Fischer-Tropsch (“FT”) reactor and catalyst, produces a variety of fuels including gasoline, diesel, jet fuel and methanol. G-Reformer units can be deployed to process a variety of natural gas streams including pipeline gas, associated gas, flared gas, vented gas, coal-bed methane and/or biomass gas. When derived from any of these natural gas sources, the liquid fuels created are incrementally cleaner than conventionally produced oil-based fuels. Our Company’s objective is to become a material direct and licensed producer of renewable GTL synthesized diesel and jet fuels, with a near -term focus on U.S. market opportunities. For more information about our Company, please visit our website located at https://gwtechinc.com/.
Our GTL Technology
In August 2012, we acquired 100% of GIE, pursuant to that certain Purchase Agreement, by and between us and GIE, dated August 29, 2012, (the “GIE Acquisition Agreement”). GIE owns patents and trade secrets for a proprietary technology to convert natural gas into Syngas. Based on a new, breakthrough process called Fractional Thermal Oxidation™ (“FTO”), we believe that the G-Reformer, combined with conventional FT processes, offers an economical and scalable method to converting natural gas to liquid fuel. On February 15, 2013, GIE filed for its first patent on this GTL technology, resulting in the issue of U.S. Patent 8,574,501 B1 on November 5, 2013. On November 4, 2013, GIE filed for a second patent covering other unique aspects of the design and was issued U.S. Patent 8,795,597 B2 on August 5, 2014. The Company has several other pending patent applications, both domestic and international, related to various components and processes relating to our proprietary GTL methods, complementing our existing portfolio of issued patents and pending patent applications.
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On June 26, 2017, we and the University of Texas at Arlington (“UTA”) announced that we had successfully demonstrated our GTL technology at our sponsored Conrad Greer Laboratory at UTA, proving the viability of the science behind the technology.
On March 6, 2018, we announced the completion of our first commercial scale G-Reformer, a critical component in what we call the Greer-Wright GTL system. The G-Reformer is the critical component of the Company’s innovative GTL system. A team consisting of individuals from our Company, UTA and our Company’s contracted G-Reformer manufacturer worked together to test and calibrate the newly built G-Reformer unit. The testing substantiated the units’ Syngas generation capability and demonstrated additional proficiencies within certain proprietary prior prescribed testing metrics.
On July 23, 2019, we announced that Mabert LLC, a Texas limited liability company (“Mabert”), controlled by Kevin Jones, one of our directors, acquired INFRA Technology Group’s U.S. GTL plant and technology located in Wharton, Texas (the “Wharton Plant”). Mabert purchased the entire 5.2-acre site, plant and equipment, including INFRA’s proprietary FT reactor system and operating license agreement.
On August 29, 2019, to further facilitate the commercialization process, we announced that it entered into the joint venture, OPM Green Energy, LLC, a Texas limited liability company (“OPMGE”), for an ownership interest in the Wharton Plant. The other members of OPMGE are Mabert and Tom Phillips, Vice President of Operations for GIE. Our involvement in OPMGE is intended to facilitate third-party certification of our G-Reformer and related equipment and technology. In addition, we anticipate that OPMGE’s operations will demonstrate that the G-Reformer is a commercially viable technology for producing Syngas and marketable fuel products. As the first operating GTL plant to use our proprietary reforming technology and equipment, the Wharton Plant is initially expected to yield a minimum of 75 - 100 barrels per day of gasoline and diesel fuels from converted natural gas.
On April 28, 2020, the Company was issued a new U.S. Patent 10,633,594 B1 for syngas generation for gas-to-liquid fuel conversion. The Company has several other pending patent applications, both domestic and international, related to various components and processes involving our proprietary GTL methods, which when granted, will further complement our existing portfolio of issued patents and pending patent applications.
On December 8, 2020, the Company announced an exclusive worldwide patent licensing agreement with the University of Texas at Arlington (UTA) for all patent applications currently filed with the Patent and Trademark Office relating to GWTI’s natural gas reforming technologies developed under its sponsored research agreement with UTA.
On December 15, 2020, the Company announced additional information regarding valuable outputs produced by the company’s proprietary G-Reformer™ catalyst reactor and Fischer-Tropsch (FT) technology which combine to form the “Greer-Wright” GTL solution. Originally developed to convert natural gas into ultra-clean synthetic fuel, recent research and development activity has shown that the technology can also allow the extraction of high-value chemicals and alcohols. The chemical outputs include n-Hexane, n-Heptane, n-Octane, n-Decane, n-Dodecane, and n-Tridecane. Alcohols produced include ethanol and methanol. The company has identified worldwide industrial demand for these outputs which will significantly improve the economic return on investment (ROI) of GTL plants that are based on GWTI’s technology. GWTI is a development-stage company with plans to commercialize its unique and patented technology.
Ultimately, we believe that our proprietary G-Reformer is a major innovation in gas reforming and GTL technology in general. Initial tests have demonstrated that our Company’s solution appears to be superior to legacy technologies, which are more costly, have a larger footprint, and cannot be easily deployed at field sites to process associated gas, stranded gas, coal-bed methane, vented gas, or flared gas. In addition, the Wharton Plant is anticipated to prove out the economics for the Company’s technology and GTL processes.
The technology for the G-Reformer is unique, because it permits for transportable (mobile) GTL plants with much smaller footprints, compared to legacy large-scale technologies. Thus, we believe that our technologies and processes will allow for multiple small-scale GTL plants to be built with substantially lower up-front and ongoing costs, resulting in more profitable results for oil and gas operators.
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GTL Industry –Market
GTL converts natural gas – the cleanest-burning fossil fuel – into high-quality liquid products that would otherwise be made from crude oil. These products include transport fuels, motor oils, and the ingredients for everyday necessities like plastics, detergents, and cosmetics. GTL products are colorless, odorless, and contain almost none of the impurities, (e.g., sulphur, aromatics, and nitrogen) that are found in crude oil.
Our Company has developed a revolutionary and unique process that converts natural gas of various origins and compositions into a highly pure variety of chemicals, high cetane diesel fuel, industrial grade pure water and electrical energy. GTL technology has existed as a traditional process going back generations. This process consists of two steps. First, natural gas is converted into Synthesis Gas (Syngas) which is a non-naturally occurring blend of Hydrogen and Carbon Monoxide. The front-end part of the GTL process is called “Gas Reformation”. The output of the Gas Reformer is compressed and fed through a secondary process, called Fischer-Tropsch (FT). This secondary process is widely used in many forms in the chemical and oil industries. While FT is a common process, Gas Reformation has been the most difficult step beyond an old and traditional process typically used in refineries. The invention of our software-controlled GTL process fronted by our patented and revolutionary gas reformation unit, the G-Reformer, makes us the innovator in GTL technology. Our patents are based on scalability, transportability, flexibility and self-sustainment based on a wide variety of input gasses and output mixtures.
The Company’s process is consists of small-sized modularly scalable units which are portable and self-contained unlike other GTL solutions based on Steam Methane reformation. While many companies have tried to scale Steam Methane Reformation down for use in smaller, non-refinery-based GTL plants, efforts have been largely unsuccessful. In contrast, we plan to build self-sufficient GTL plants at virtually any location capable of supplying wellhead or pipeline gas of sufficient ongoing volume. This gives us the ability to eliminate flaring at the source while keeping remote oil fields in production without flaring. The conversion of flaring gas to liquids allows for transportation of liquid chemicals, clean diesel fuel and highly clean water.
Our initial ROI studies of the market for the high purity chemicals we expect to produce can provide rapid payback of investments. It should be noted that today, the majority of these chemicals are produced in China. Because they are produced from oil at a refinery, they are much lower in purity than the same chemicals produced from gas.
Products created by the GTL process include high cetane diesel, naphtha, technical grade water, and high value, high purity chemicals. The chemicals produced in the GWTI GTL plant are vital to many industries including pharmaceuticals, cosmetics, fragrances, adhesives, and others. Dependency on China makes the United States captive to shortfalls whether manufacturing related or intentional. By producing these chemicals in the US, that dependency is reduced resulting in an increase in jobs, and a reduction of imports.
According to publicly available industry research from Shell Oil, MarketResearchFuture.com, and others, the market for GTL products was approximately $11.9 billion in 2019 and is expected to reach $20.4 billion by 2025, growing at a compound annual growth rate of 7.55%.
Development of stringent environmental regulations by numerous governments to control pollution and promote cleaner fuel sources is expected to complement industry growth. For example, we believe that U.S. guidelines such as the Petroleum and Natural Gas Regulatory Board Act, 2006, Oilfields (Regulation and Development) Act of 1948, and Oil Industry (Development) Act, 1974 are likely to continue to encourage GTL applications in diverse end-use industries to conserve natural gas and other resources. Under the Clean Air Act (CAA), the EPA sets limits on certain air pollutants, including setting limits on how much can be in the air anywhere in the United States. The Clean Air Act also gives EPA the authority to limit emissions of air pollutants coming from sources like chemical plants, refineries, utilities, and steel mills. Individual states or tribes may have stronger air pollution laws, but they may not have weaker pollution limits than those set by EPA. Because our G-Reformer based GTL plants are not considered refineries, they do not fall under any related current EPA air quality guidelines. More information can be found under the EPA’s New Source Performance Standards which are published under 40 CFR 60.
Competition
Key industry players include: Chevron Corporation; KBR Inc, PetroSA, Qatar Petroleum, Royal Dutch Shell, and Sasol Limited. In terms of global production and consumption, Shell had the largest market share in 2019, with virtually all current production located overseas. Our technology is not designed to compete with the large refinery-size GTL plants. Our plants are designed to be scaled to meet individual gas field production requirements on a distributed and mobile basis. According to a report released in July 2019 by the Global Gas Flaring Reduction Partnership (“GGFRP”), there are currently only five small-scale GTL plant technologies that have been proven for flared gas monetization available in the U.S., including: Greyrock (“Flare to Fuels”), Advantage Midstream (licensing Greyrock technology), EFT (“Flare Buster”), Primus, GE and GasTechno (“Methanol in a Box”). GWTI was not a direct part of this study, as we had not received 3rd party certification of our proprietary technology as of the date of this report.
However, the GGFRP report mentioned GWTI as follows, “Greenway Technologies announced on July 23 that Mabert LLC, a major investor in Greenway, acquired the whole INFRA plant including an operating license agreement. The purpose of the acquisition is the incorporation and commercial demonstration of Greenway’s ‘G-Reformer’ technology. We will see whether the new team will be able to make the plant with the new reformer operational. (Globe Newswire, Fort Worth, Texas, Aug 31, 2019).”
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Mining Interests
In December 2010, UMED acquired the rights to approximately 1,440 acres of placer mining claims located on Bureau of Land Management (“BLM”) land in Mohave County, Arizona (such property, the “Arizona Property”), in an Assignment Agreement dated December 27, 2010, between Melek Mining, Inc., 4HM Partners, Inc. and the Company, in exchange for 5,066,000 shares of our common stock. Early indications from samples taken and processed by Melek Mining provided reason to believe that the potential recovery value of the metals located on the Arizona Property could be significant, but only actual mining and processing will determine the ultimate value that may be realized from this property holding. While we are not currently conducting mining operations, we are exploring strategic options to partner or sell our interest in the Arizona Property, while we focus on our emerging GTL technology sales and marketing efforts.
Employees
As of the filing date of this Form 10-Q, we have two (2) full-time employees. Certain of these employees receive no compensation or compensation is deferred on a periodic basis by mutual written agreement. None of our employees are covered by collective bargaining agreements. We consider our employee relations to be satisfactory.
Going Concern
We remain dependent on outside sources of funding for continuation of our operations. Our independent registered public accounting firm issued a going concern qualification in their report dated April 14, 2021 and filed with our annual report on Form 10-K, which is included by reference to our Financial Statements and raises substantial doubt about our ability to continue as a going concern.
| September
30, 2021 | December 31, 2020 | |||||||
| Net loss | $ | (1,412,879 | ) | $ | (2,541,972 | ) | ||
| Net cash used in operations | (669,861 | ) | (686,032 | ) | ||||
| Negative working capital | (9,795,323 | ) | (8,844,210 | ) | ||||
| Stockholders’ deficit | (9,795,323 | ) | (8,844,210 | ) | ||||
As of September 30, 2021, we had total liabilities in excess of assets by $9,795,323 and used net cash of $669,861 for our operating activities. This is as compared to the most recent year ended December 31, 2020, when we used net cash of $686,032 for operating activities. These factors raise substantial doubt about our ability to continue as a going concern.
The Financial Statements included in our Form 10-Q do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence. Our ability to continue as a going concern is dependent upon our ability to generate sufficient new cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, and/or ultimately to attain profitable operations. However, there is no assurance that profitable operations, financing, or sufficient new cash flows will occur in the future.
Our ability to achieve profitability will depend upon our ability to finance, manufacture, and market/operate GTL units. Our growth is dependent on attaining profit from our operations and our raising additional capital either through the sale of our Common Stock or borrowing. There is no assurance that we will be able to raise any equity financing or sell any of our products at a profit. We will be unable to pay our obligations in the normal course of business or service our debt in a timely manner throughout 2021 without raising additional debt or equity capital. There can be no assurance that we will raise additional debt or equity capital.
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We are currently evaluating strategic alternatives that include (i) raising new equity capital and/or (ii) issuing additional debt instruments. The process is ongoing, lengthy and has inherent costs. There can be no assurance that the exploration of these strategic alternatives will result in any specific action to alleviate our 12-month working capital needs or result in any other transaction.
While we are attempting to commence operations and generate revenues, our cash position may be insufficient to support our daily operations. Management intends to raise additional funds by way of an offering of our securities. Management believes that the actions presently being taken to further implement our business plan and generate revenues provide the opportunity for us to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in our ability to raise additional funds, we may not be successful. Our ability to continue as a going concern is dependent upon our capability to further implement our business plan and generate revenues.
Results of Operations
Three-months ended September 30, 2021, compared to Three-months ended September 30, 2020.
We had no revenues for our consolidated operations for the quarters ended September 30, 2021 and 2020. We reported consolidated net losses for each of these periods of $474,645 and $903,545, respectively.
Operating Expenses.
General and Administrative Expenses. During the three-months ended September 30, 2021, general and administrative expenses decreased to $277,285 as compared to $312,444 for the prior year three-months ended September 30, 2020. The decrease was primarily due to decreased legal fees and salaries in the period offset by increased consulting fees.
Research and Development Expenses. During the three-months ended September 30, 2021, Research and Development expenses increased to $48,000, as compared to $0 for the prior year three-months ended September 30, 2020. The change was due to payments for the Sponsored Research Agreement (“SRA”) with the University of Texas at Arlington for the testing and commercialization phase of our GTL technology.
Net Loss from Operations. Our net loss from operations increased to $325,285 for the quarter ended September 30, 2021, as compared to $312,444 for the quarter ended September 30, 2020.
Interest Expense. During the three-months period ended September 30, 2021, interest expense decreased to $149,360 as compared to interest expense of $192,391 for the prior year three-months ended September 30, 2020. The decrease was primarily due to the decreased interest expense from the settlement of the PowerUp loans in the year ended December 31, 2020.
Change in Fair Value of Derivative Liability and Derivative Expenses. During the three-months ended September 30, 2021, the loss on the fair value of derivatives was $0 as compared to a loss of $14,741, for the prior year three-month period in 2020. The change was due to the execution of the two PowerUp convertible notes payable in the first quarter of 2020, and the related changes in their fair values in the three-month period ended September 30, 2020. The convertible notes payable were settled as of December 31, 2020.
Net Loss. Our net loss decreased to $474,645 for the quarter ended September 30, 2021, as compared to $903,545 for the quarter ended September 30, 2020. The decrease was due primarily to a reserve of $412,885 being established for the OPMGE receivable in the quarter ended September 30, 2020.
Nine-months ended September 30, 2021, compared to Nine-months ended September 30, 2020.
We had no revenues for our consolidated operations for the nine-month periods ended September 30, 2021 and 2020. We reported consolidated net losses for each of these periods of $1,412,879 and $1,819,729, respectively.
Operating Expenses.
General and Administrative Expenses. During the nine-months ended September 30, 2021, general and administrative expenses decreased to $845,384, as compared to $890,946 for the prior year nine-months ended September 30, 2020. The decrease was primarily due to decreased legal fees, salaries, and travel expenses in the period offset by increased consulting fees.
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Research and Development Expenses. During the nine-months ended September 30, 2021, Research and Development expenses increased to $126,000, as compared to $0 for the prior year nine-months ended September 30, 2020. The change was due to the payment of the renewal fee for the Sponsored Research Agreement (“SRA”) with the University of Texas at Arlington and for the monthly payments on the SRA for the testing and commercialization phase of our GTL technology.
Net Loss from Operations. Our net loss from operations increased to $971,384 for the nine-months ended September 30, 2021, as compared to $890,946 for the nine-months ended September 30, 2020. The increase was due primarily to increased research and development expenses for the period.
Interest Expense. During the nine-months ended September 30, 2021, interest expense decreased to $441,495 as compared to interest expense of $564,668 for the prior year nine-months ended September 30, 2020. The decrease was primarily due to the decreased interest expense due to the settlement of the PowerUp loans in the year ended December 31, 2020.
Change in Fair Value of Derivative Liability and Derivative Expenses. During the nine-months ended September 30, 2021, the loss on the fair value of derivatives was $0 as compared to a gain of $53,023 for the change in the derivative fair value and a debt expense of $33,978 related to the derivatives, for the prior year nine-month period in 2020. The change was due to the execution of the two PowerUp convertible notes payable in the first quarter of 2020, and the related changes in their fair values through September 30, 2020. The convertible notes payable were settled as of December 31, 2020.
Net Loss. Our net loss decreased to $1,412,879 for the nine-months ended September 30, 2021, compared to a loss of $1,819,729 for the same nine-month period in 2020. The decrease was due primarily to a reserve of $412,885 being established for the OPMGE receivable in the nine-months ended September 30, 2020.
Liquidity and Capital Resources
We do not currently have sufficient working capital to fund our expected future operations. We cannot assure investors that we will be able to continue our operations without securing additional adequate funding. As of September 30, 2021, we had $37,516 in cash, total assets of $37,656, and total liabilities of $9,832,979. Our total accumulated deficit on September 30, 2021, was $(34,434,680).
Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. In the nine-months ended September 30, 2021, our working capital deficit increased by $951,113, primarily as the result of increases in accrued expenses and accrued expenses – related parties of $418,012, accrued interest payable of $360,566 and increases in notes payable to related parties of $325,961.
We are exploring various means to increase our working capital, including completing additional private stock sales and entering into new debt instruments.
Operating activities
Net cash used in operating activities during the nine-months ended September 30, 2021, was $669,861, as compared to $548,633 for the nine-months ended September 30, 2020.
Investing activities
Net cash used in investing activities for the nine-months ended September 30, 2021, was $0 compared to $25,000 for the period ended September 30, 2020, consisting of additional advances to OPMGE for deposits on a piece of specialized commercial equipment required to convert the Wharton, TX manufacturing facility for use of our GTL technology.
Financing Activities
Net cash provided by financing activities was $705,749 for the nine-months ended September 30, 2021, consisting of stockholder advances - related party of $429,249, sales of the Company’s Common Stock to private accredited investors of $416,500, offset by payments on notes payable to related parties of $100,000 and payments on the note payable to Wildcat of $40,000. Net cash provided by financing activities was $558,692 for the nine-months ended September 30, 2020, consisting primarily of the proceeds from a loan made by Director and shareholder, Kevin Jones, a related party under the Mabert Loan Agreement of $101,833, two loans from PowerUp totaling $171,000, sales of the Company’s Common Stock to accredited private investors of $75,000, advances by four of our directors of $113,785, and an advance made by an unrelated party of $20,000, offset by payments on notes payable to Wildcat of $50,000.
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Our accompanying Financial Statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. Our general business strategy is to first develop our GTL technology to maintain our basic viability, while seeking significant development capital for full commercialization. Our ability to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on our ability to obtain necessary financing to fund ongoing operations.
Seasonality
We do not anticipate that our business will be affected by seasonal factors.
Commitments
Capital Expenditures
The last funded Scope of Work (“SOW”) under our SRA with UTA was completed in the year ended December 2019, with payments made of $120,000 to complete the work described in the prior SOW. We signed a new SRA with UTA effective March 1, 2021 which relates to the testing and commercialization phase of our GTL technology. The term of the agreement is through February 15, 2022. The first payment under the SRA was made in March 2021 for $30,000. Going forward on the 15th of each month we will pay UTA $15,454.54 through February 15, 2022, for a total commitment of $200,000. For the nine-months ended September 30, 2021, we have paid UTA a total of $126,000.
Operational Expenditures
Employment Agreements
In August 2012, we entered into an employment agreement with our chairman of the board, Ray Wright, as president of Greenway Innovative Energy, Inc., for a term of five years with compensation of $90,000 per year. In September 2014, Wright’s employment agreement was amended to increase such annual pay to $180,000. By its terms, the employment agreement automatically renews each year for successive one-year periods, unless otherwise earlier terminated. During the three-months ended September 30, 2021, the Company paid and/or accrued a total of $45,000 for the period under the terms of the agreement.
Effective May 10, 2018, we entered into identical employment agreements with John Olynick, as President, and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements were identical. John Olynick elected not to renew his employment agreement and resigned as President on July 19, 2019. Ransom Jones, as Chief Financial Officer, earns a salary of $120,000 per year. Mr. Jones also serves as the Company’s Secretary and Treasurer. During each year that Mr. Jones’ agreement is in effect, he is entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year, such amount having been accrued for the period ended September 2021. Both Mr. Olynick and Mr. Jones received a grant of common stock (the “Stock Grant”) at the start of their employment equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. Mr. Jones is also entitled to participate in the Company’s benefit plans when such plans exist.
Mr. Olynick elected not to renew his employment agreement and resigned as President on July 19, 2019. Upon his resignation, we agreed to pay the balance of his Employment Agreement then due and owing over time. Accordingly, we accrued $110,084 for the balance of his Employment Agreement, against which we have paid $35,000, leaving a balance remaining of $75,084 as of September 30, 2021. In addition, Mr. Olynick had previously entered into a consulting agreement (the “Olynick Agreement”) to provide general advisory services with us on April 18, 2019, and which included terms for payment of billable time at $40.00 per hour, plus approved expenses. The Olynick Agreement was terminated when Mr. Olynick became President of the Company on May 10, 2018. We have accrued $24,710 in expenses related to such prior consulting agreement expenses.
Effective April 1, 2019, we entered into an employment agreement with Thomas Phillips, Vice President of Operations, for a term of 12 months with compensation of $120,000 per year. Mr. Phillips reports to the President of GIE. Pursuant to his employment agreement, Mr. Phillips is entitled to a no-cost grant of common stock equal to 4,500,000 shares of the Company’s Rule 144 restricted common stock, par value $.0001 per share, with such shares having been issued in February 2020. In addition, Mr. Phillips resigned from the Company effective December 15, 2020. We have accrued $175,000 for salary expenses outstanding as of September 30, 2021.
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Effective April 1, 2019, we entered into an employment agreement with Ryan Turner for a term of twelve (12) months with compensation of $80,000 per year, to manage our business development and investor relations. Mr. Turner reports to the President of Greenway Technologies and is entitled to a no-cost grant of common stock equal to 2,500,000 shares of the Company’s Rule 144 restricted common stock, par value $.0001 per share, valued at $.06 per share, or $150,000, which we expensed as of the effective date of the agreement. Mr. Turner is also entitled to certain additional stock grants based on our performance during the term of his employment and to participate in our benefit plans, when and if such plans become available.
Consulting Agreements
On September 7, 2018, Wildcat, a company controlled by Shareholder Marshall Gleason, filed suit against us alleging claims arising from the Gleason Agreement, seeking to recover monetary damages, interest, court costs, and attorney’s fees. In a separate lawsuit, Wildcat filed suit claiming that the Company breached that certain Promissory Note dated on or about November 13, 2017, entered into between Wildcat as lender and Greenway as borrower, and as a result Wildcat initiated an action in County Court at Law No. 2 of Tarrant County, Texas, Cause No. 2018-006416-2. On March 6, 2019, we entered into a Rule 11 Agreement with Gleason settling both disputes. Pursuant to the Rule 11 Agreement, the parties agreed to abate both cases until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019, whichever be sooner. The Rule 11 Agreement provided that if we timely performed through October 15, 2019, the parties would file a joint motion for dismissal and present agreed orders of dismissal with prejudice for both lawsuits. The Company performed in all regards under the Rule 11 Agreement, however Gleason refused to sign the Wildcat Settlement Agreement at the point of the Company’s having performed its obligations. The parties’ respective counsels then mutually agreed to extend the original October 30, 2019 settlement date until at least the end of the year while the parties waited for Gleason’s signature. Gleason signed the Compromise Settlement and Release Agreement on February 4, 2020, and all litigation was dismissed by the Court on February 25, 2020. A copy of the Dismissal is incorporated by reference as Exhibit 10.59.
Paul Alfano, a director and greater than five percent (5%) shareholder entered into a consulting agreement with us on April 19, 2018 via Alfano Consulting Services (the “Alfano Agreement”), to provide board and senior management advice, including but not limited to corporate strategy, SEC regulatory adherence, sales and marketing strategies, document and presentation preparation and fund-raising support. Terms included payment of billable time at $40.00 per hour, plus approved expenses, retroactive to January 1, 2017. The Alfano Agreement was terminated when Mr. Alfano became a director on June 26, 2019. The Company has accrued Consulting Fees and Expenses of $118,705 for all prior periods through September 30, 2021. There is no payment schedule agreed to by the parties, and such accrued expenses will be paid only when the Company has sufficient liquidity to make such payment, or unless or until the parties agree to some other form of payment provision.
On October 19, 2020, the Company entered into a management consulting services agreement with Dean Goekel (the “Goekel Agreement” via “Analytical Professionals”), to manage engineering and vendor relationships, assist in defining the design and cost of certain capital equipment and to manage the direction of research, development and other related engineering activities. Mr. Goekel will also support the Company’s ongoing business operations, including assistance in commercialization and market implementation, strategic planning and other services. The agreed upon start date under the agreement is July 1, 2020 and the minimum engagement term was for six (6) months. After the initial term the agreement automatically renews for subsequent six (6) month terms unless the Company or Mr. Goekel terminates the agreement. Under the agreement, in exchange for Mr. Goekel’s services he will receive a minimum monthly fee of $10,000 per month in deferred compensation until such time that adequate funds are available for payment. As of September 30, 2021, we have accrued $150,000 in compensation expense related to this agreement. Additionally, under the agreement Mr. Goekel was issued stock warrants for 3,000,000 shares at a strike price of $0.03 per share effective July 1, 2020 and expiring on June 30, 2022. The Company recognized compensation expense related to these warrants of $25,137 for the year ended December 31, 2020. After meeting certain deliverables set forth in the agreement, Mr. Goekel will be issued stock warrants for 1,000,000 shares at a strike price that is an average of the stock price for the 90 days that the deliverables have been met.
Other
Pursuant to the GIE Acquisition Agreement in August 2012, we agreed to: (i) issue an additional 7,500,000 shares of Common Stock when the first portable GTL unit is built and becomes operational, and is capable of producing 2,000 barrels of diesel or jet fuel per day, and (ii) pay a 2% royalty on all gross production sales on each unit placed in production, or one percent (1%) each to the founders and previous owners of GIE. On February 6, 2018, and in connection with a settlement agreement dated April 5, 2018, by and between the Greer Family Trust and us, which is the successor in interest one of the founders and prior owners of GIE, F. Conrad Greer (“Greer”), (the “Trust”, and such settlement agreement the “Trust Settlement Agreement”), we issued 3,000,000 shares of Common Stock and a convertible promissory note for $150,000 to the Trust in exchange for: (i) a termination of the Trust’s right to receive 3,750,000 shares of Common Stock in the future and 1% of the royalties owed to the Trust under the GIE Acquisition Agreement; (ii) the termination of Greer’s then current employment agreement with GIE; and (iii) the Trust’s waiver of any future claims against us for any reason.
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As a result of the transactions consummated by the Trust Settlement Agreement, we are committed to issue a reduced number of 3,750,000 shares of Common Stock and 1% of the royalties due on production of our GTL operational units to Ray Wright, the other founder and prior owner of GIE, pursuant to the GIE Acquisition Agreement.
Mining Leases
We have a minimum commitment during 2021 of approximately $11,880 for our annual lease maintenance fees due to Bureau of Land Management (“BLM”) for the Arizona Property, such payment was made prior to the due date of September 1, 2021. There is no actual lease agreement with the BLM, but we file an annual maintenance fee form and pay fees to the BLM to hold our claims.
Financing
Related parties
Financing to date has been provided by loans, advances from Shareholders and Directors and issuances of our Common Stock in various private placements to accredited investors, related parties and institutions.
During the nine month period ended September 30, 2021, we received related party loans from the following directors under the Mabert Loan facility: $354,248 from Kevin Jones, $70,000 from Michael Wykrent and $5,000 from Kent Harer. See also Note 5 – Convertible Notes Payable and Notes Payable Related Parties herein above.
For the three months ended September 30, 2021 we received $142,936 in cash and payment advances from our director, Kevin Jones, a greater than 5% shareholder which has been accrued as “Advances – related parties” for the period.
For the year ended December 31, 2020, we received $393,702 in related party loans from Mabert, acting as agent for various lenders to the Company.
Third-party financing
On September 7, 2021, the Company issued 62,500 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $2,500, or $0.04 per share.
On September 3, 2021, the Company issued 125,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $5,000, or $0.04 per share.
On August 31, 2021, the Company issued 600,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $30,000, or $0.05 per share.
On August 30, 2021, the Company issued 200,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $10,000, or $0.05 per share.
On August 27, 2021, the Company issued 300,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to three (3) accredited investors, for $15,000, or $0.05 per share.
On August 13, 2021, the Company issued 400,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $20,000, or $0.05 per share.
On August 10, 2021, the Company issued 800,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to two (2) accredited investors, for $40,000, or $0.05 per share.
On August 9, 2021, the Company issued 100,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $5,000, or $0.05 per share.
On August 5, 2021, the Company issued 400,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to two (2) accredited investors, for $20,000, or $0.05 per share.
On August 3, 2021, the Company issued 500,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $25,000, or $0.05 per share.
On August 2, 2021, the Company issued 200,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to one (1) accredited investor, for $10,000, or $0.05 per share.
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On June 22, 2021, the Company issued 382,500 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to an accredited investor, in lieu of cash payment for consulting fees of $11,475, or $0.03 per share.
On June 3, 2021, the Company issued 2,000,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to three (3) accredited investors, for $100,000, or $0.05 per share.
On May 7, 2021, the Company issued 100,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to an accredited investor, in lieu of cash payment for consulting fees of $3,000, or $0.03 per share.
On May 6, 2021, the Company issued 166,667 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to an accredited investor, for $5,000, or $0.03 per share.
On May 6, 2021, the Company issued 2,000,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to an accredited investor, for $50,000, or $0.025 per share.
On May 6, 2021, the Company issued 600,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to an accredited investor, for $18,000, or $0.03 per share.
On March 18, 2021, the Company issued 1,200,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to a private placement sale to an accredited investor, for $36,000, or $0.03 per share.
Impact of Inflation
While we are subject to general inflationary trends, including for basic manufacturing production materials, our management believes that inflation in and of itself does not have a material effect on our operating results. However, inflation may become a factor in the future. However, the COVID-19 virus and its current extraordinary impact on the world economy has reduced oil consumption globally, decreasing crude oil prices, to levels not seen since the early 1980’s. The economics of GTL conversion rely in part on the arbitrage between oil and natural gas prices, with economic models for many producers, including our own models, using a range of $30-60/bbl (for WTI or Brent Crude as listed daily on the Nymex and ICE commodities exchanges) to determine relative profitability of their GTL operations. While the COVID-19 virus may run its human course in the near term, we believe (as many others in the U.S. government and media believe), that the economic impacts will be long lasting and for all practical matters, remain largely unknown at this time.
Off-Balance Sheet Arrangements
During the year ended December 2019, we entered into a revenue interest research and development venture with Mabert and an employee, Tom Phillips, OPMGE. We account for our participation under the Equity Method, as further defined herein below, whereby we may be subject to future gains and losses that are reasonably likely to have an effect on our reported results of operations and liquidity. We are not required to invest, participate in any of the ongoing costs, financing or capital expenditures made by OPMGE. Since inception of this arrangement, we have advanced a total of $412,885 to OPMGE, and accordingly, had accrued a receivable from OPMGE. We have evaluated this receivable and have determine that collectability is uncertain. Accordingly, the Company has fully reserved the full amount of this equity method receivable with OPMGE as of September 30, 2021.
Critical Accounting Policies and Estimates
Our Financial Statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparing our Financial Statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies include revenue recognition and impairment of long-lived assets.
We evaluate our long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.
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We believe that the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
The Financial Accounting Standards Board (“FASB”) issued Accounting Standard 606 – Revenue from Contracts with Customers, as guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We adopted the guidance on January 1, 2018 and applied the cumulative catch-up transition method. The transition adjustment to be recorded to stockholders’ deficit upon adoption of the new standard did not have a material effect upon the condensed unaudited consolidated financial statements. The Company has not, to date, generated any revenues.
Equity Method Investment
On August 29, 2019, we entered into a research and development venture, OPMGE, with Mabert and an employee, Tom Phillips. We contributed a limited license to use our proprietary and patented GTL technology and a working G-Reformer refractory unit, for no actual cost basis, in exchange for 300 membership units in OPMGE, equating to an approximately a 42.8% current interest in OPMGE, pending the expected issuance of an additional 300 membership units, equating to a net 30% ownership interest in OPMGE at that time. There was not previously and is no book or asset value attributed to the contributed technology. We evaluated our interest in OPMGE and determined that we do not control OPMGE. We account for our interest in OPMGE via the equity method of accounting. To our knowledge, at September 30, 2021, OPMGE had no material business activity as of such date. As described in “Note 9 – Related Party Transactions” herein above, we maintain a related party receivable from OPMGE related to advances made to assist in certain capital expenditures. As of September 30, 2021, the Company has fully reserved the full amount of this equity method receivable with OPMGE.
Stock-Based Compensation
Accounting Standard 718, “Compensation – Stock Compensation” (“ASC 718”) established financial accounting and reporting standards for share-based payments issued to employees and share-based payments issued to nonemployees for goods and services. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. We account for compensation cost for stock option plans and share-based payments to non-employees in accordance with ASC 718.
Use of Estimates
The preparation of our Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our Financial Statements and the reported amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of 3-months or less to be cash equivalents. There were no cash equivalents at September 30, 2021, or December 31, 2020. Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.
Income Taxes
We account for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that we recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.
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We have adopted the provisions of FASB ASC 740-10-05, Accounting for Uncertainty in Income Taxes (“ASC 750-10-05”). ASC 750-10-05 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, ASC 750-10-05 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Open tax years, subject to IRS examination include 2016 – 2020.
Net Loss per Share, Basic and Diluted
We have adopted Accounting Standards Codification Subtopic 260-10, Earnings per Share, specifying the computation, presentation and disclosure requirements of earning per share information. Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares issued and outstanding for the period. Shares issuable upon the exercise of warrants (3,000,000), shares convertible for debt (2,083,333) and shares outstanding but not yet issued (823,500) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive as of September 30, 2021. Shares issuable upon the exercise of warrants (8,000,000), shares convertible for debt (3,616,539) and shares outstanding but not yet issued (356,186) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive as of September 30, 2020.
Derivative Financial Instruments
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. ASC 815 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.
Concentration and Credit Risk
Financial instruments and related items, which potentially subject us to concentrations of credit risk, consist primarily of cash, cash equivalents, and trade receivables. We place our cash and temporary cash investments with high -credit quality institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed unaudited consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a smaller reporting company, as defined by Rule12b-2 of the Securities Exchange Act of 1934 and Item 10(f)(1) of Regulation S-K, we are not required to provide information requested by this item.
Item 4. Controls and Procedures.
The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and our principal financial officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. |
Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In September 2021, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this evaluation, management has concluded that as of September 30, 2021, our internal control over financial reporting was ineffective.
We have identified at least the following deficiencies, which together constitute a material weakness in our assessment of the effectiveness of internal control over financial reporting as of September 30, 2021:
| 1. | We have inadequate segregation of duties within our cash disbursement control design. |
| 2. | During the quarter ended September 30, 2021, we internally performed all aspects of our financial reporting process including, but not limited to, the underlying accounting records and record journal entries and internally maintained responsibility for the preparation of the financial statements. Due to the fact these duties were often performed by the same people, a lack of independent review process was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. |
| 3. | We do not have a sufficient number of independent or qualified directors for our Board of Directors and a qualified Audit Committee. We currently have only two (2) independent directors on our board, which is fully comprised of six directors, and accordingly we do not yet have a functioning audit committee, as the only otherwise qualified director is not independent. Further, as a publicly traded company, we should strive to have a majority of our board of directors be independent. |
For the period ending September 30, 2021, Greenway internally performed all aspects of its financial reporting process, including, but not limited to the underlying accounting records and record journal entries and responsibility for the preparation of the financial statement due to the fact these duties were performed often times by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.
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We are continuing the process of remediating our control deficiencies. However, the material weakness in internal control over financial reporting that have been identified will not be remediated until numerous new internal controls are implemented and operate for a period of time, are tested, and we are able to conclude that such internal controls are operating effectively. We cannot provide assurance that these procedures will be successful in identifying material errors that may exist in our Financial Statements. We cannot make assurances that we will not identify additional material weaknesses in our internal control over financial reporting in the future. Our management plans, as capital becomes available to us, to increase the accounting and financial reporting staff and provide future investments in the continuing education and public company accounting training of our accounting and financial professionals.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly report.
Management believes that the material weaknesses set forth above did not have a material effect on our financial results. However, the lack of a functioning audit committee and lack of a majority of independent directors on our board of directors resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures, can impact our financial statements.
Changes in Internal Controls over Financial Reporting
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal control over financial reporting that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
On October 19, 2019 the Company was served with a lawsuit by Norman Reynolds, a previously engaged counsel by the Company. The suit was filed in Harris County District Court, Houston, Texas, asserting claims for unpaid fees of $90,378. The jurisdiction for the case was moved to Tarrant County District Count, Fort Worth, Texas. While fully reserved, Greenway vigorously disputes the total amount claimed. Greenway has asserted counterclaims based upon alleged conflicts of interest, breaches of fiduciary duty and violations of the Texas Deceptive Trade Practices Act (“DTPA”). During the fourth quarter of 2021, the two parties met for mediation but no conclusion was reached. Greenway is confident in its defenses and counterclaims and intends to vigorously defend its interests and prosecute its claims.
On September 7, 2021, the Company was served with a demand for mediation and potential arbitration by Gregory Sanders, a previous employee of the Company. The demand claims Mr. Sanders had an employment agreement with the Company entitling him to certain compensation payments under the contract. No conclusion was met during mediation which occurred in the fourth quarter of 2021. Greenway is confident in its defenses and counterclaims and intends to vigorously defend its interests and prosecute its claims.
There are no other active material legal matters as of the date of this report. See also Note 10 - Commitments and Contingencies – Legal Matters herein above to the unaudited condensed consolidated financial statements included elsewhere in this report and incorporated herein by reference.
Item 1A. Risk Factors
Information regarding risk factors appears in the Form 10-K Part I, Item 1A, Risk Factors. There have been no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three-months ended September 30, 2021, the Company: issued 3,911,628 shares of Rule 144 restricted Common Stock, including 3,687,500 shares issued in private placement to fifteen (15) accredited investors at an average price of $0.05 per share for $182,500, and 224,128 shares for costs related to the issuance of promissory notes at an average price of $0.03 per share. As of September 30, 2021, the Company has 198,500 shares of common stock to be issued to Kevin Jones, a related party, for costs related to issuance of promissory notes, and 625,000 shares of common stock to be issued in private placement to one (1) accredited investor, these shares will be issued in the fourth quarter of 2021.
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During the three-month period ended June 30, 2021, we: issued 6,222,797 shares of Rule 144 restricted Common Stock, including 4,766,667 shares issued in private placement to five (5) accredited investors at an average price of $0.04 per share for $173,000, and 482,500 shares issued for payment of consulting fees at a price of $0.03 per share, and 973,630 shares for costs related to the issuance of promissory notes at an average price of $0.05 per share.
During the three-month period ended March 31, 2021, we issued a total of 1,200,000 through a private sale to an accredited investor.
Our unregistered securities were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 506(3) of Regulation D promulgated under the Securities Act. Each investor took his/her securities for investment purposes without a view to distribution and had access to information concerning us and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our securities. Our securities were sold only to accredited investors and current shareholders as defined in the Securities Act with whom we had a direct personal, preexisting relationship, and after a thorough discussion. Each certificate contained a restrictive legend as required by the Securities Act. Finally, our stock transfer agent has been instructed not to transfer any of such securities, unless such securities are registered for resale or there is an exemption with respect to their transfer.
All of the above described investors who received shares of our common stock were provided with access to our filings with the SEC, including the following:
| ● | The information contained in our annual report on Form 10-K under the Exchange Act. | |
| ● | The information contained in any reports or documents required to be filed by Greenway Technologies under sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act since the distribution or filing of the reports specified above. | |
| ● | A brief description of the securities being offered, and any material changes in our affairs that were not disclosed in the documents furnished. |
Our transfer agent is: Transfer Online, Inc., whose address is 512 SE Salmon Street, Portland, Oregon 97214, 2nd Floor, telephone number (503) 227-2950.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
On December 20, 2017, the Company issued a convertible promissory note for $166,667, fully payable by December 20, 2019. This loan is in default for breach of payment. By its terms, the cash interest payable increased to 18% per annum on December 20, 2018 and continues at such rate until the default is cured or is paid at term. See Note 6 – Notes Payable and Convertible Notes Payable.
On September 26, 2019, the Company entered into a Settlement Agreement with Southwest Capital Funding Ltd., as part of the consideration for an agreed stipulated judgement, we agreed to provide Southwest a Promissory Note in the amount of $525,000, providing for a three-year term, at 7.7% simple interest only, payable semi-annually, with interest due calculated on a 365-day year, default interest at 18%, with the principal amount due at maturity. Since the note was issued, two semiannual payments of interest have been paid. The Company was in default of its semiannual interest payment due on February 15, 2021. In May 2021, the Company made the semi-annual interest payment (including late fees) and cured the default. See Note 6 – Notes Payable and Convertible Notes Payable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
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* Filed herewith.
** Previously filed.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GREENWAY TECHNOLOGIES, INC. | ||
| Date: November 15, 2021 | ||
| By | /s/ Kent Harer | |
| Kent Harer, President | ||
| By | /s/ Ransom Jones | |
| Ransom
Jones, Chief Financial Officer and Principal Accounting Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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