Greenway Technologies, Inc. & Subsidiaries 10-Q/A for FY2023 Q3
Greenway Technologies, Inc. & Subsidiaries (GWTI)
About this 10-Q/A
Greenway Technologies, Inc. & Subsidiaries filed this 10-Q/A on November 17, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $338.08K
- compared with a net loss of $415.88K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
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 17, 2023 was .
Explanatory Note
| 2 |
Table of Contents
| 3 |
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements & Notes (Unaudited)
Greenway Technologies, Inc. and Subsidiaries
| 4 |
Greenway Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaids and other | ||||||||
| Total Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable and accrued expenses - related party | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Note payable | ||||||||
| Notes payable - related parties - net | ||||||||
| Notes payable | ||||||||
| Convertible note payable - net | ||||||||
| Advances - related parties | ||||||||
| Total Current Liabilities | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock - $ par value, shares authorized and and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Common stock to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 5 |
Greenway Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on debt settlement | ||||||||||||||||
| Total other income (expense) - net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 6 |
Greenway Technologies, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Deficit
For the Three and Nine Months Ended September 30, 2023
(Unaudited)
| Shares | Amount | Capital | Issued | Receivable | Deficit | Deficit | ||||||||||||||||||||||
| Additional | Common Stock | Total | ||||||||||||||||||||||||||
| Common Stock | Paid-in | to be | Subscription | Accumulated | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Issued | Receivable | Deficit | Deficit | ||||||||||||||||||||||
| December 31, 2022 | $ | $ | $ | | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Issuance of previously issuable shares | ( | ) | ||||||||||||||||||||||||||
| Stock issued in exchange for debt – related party | ||||||||||||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||||||||||
Stock issued in exchange for debt – related party | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 7 |
Greenway Technologies, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Deficit
For the Three and Nine Months Ended September 30, 2022
(Unaudited)
| Additional | Common Stock | Total | ||||||||||||||||||||||||||
| Common Stock | Paid-in | to be | Subscription | Accumulated | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Issued | Receivable | Deficit | Deficit | ||||||||||||||||||||||
| December 31, 2021 | $ | $ | $ | | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Stock issued as debt discount | ( | ) | ||||||||||||||||||||||||||
| Collection of subscription receivable - warrants | - | |||||||||||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued as debt discount | ( | ) | ||||||||||||||||||||||||||
| Stock issued for cash | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for services | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| June 30, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||||||||||
| Stock issued for services | ||||||||||||||||||||||||||||
| Collection of subscription receivable | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 8 |
Greenway Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| 2023 | 2022 | |||||||
For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations | ||||||||
| Amortization of debt discount | ||||||||
| Stock issued for services | ||||||||
| Gain on debt settlement | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| (Increase) decrease in | ||||||||
| Prepaids and other | ( | ) | ||||||
| Increase (decrease) in | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses - related party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Financing investing | ||||||||
| Proceeds from advances - related parties | ||||||||
| Repayments of advances - related parties | ( | ) | ||||||
| Proceeds from issuance of note payable | ||||||||
| Repayments on notes payable | ( | ) | ( | ) | ||||
| Repayments on notes payable - related parties | ( | ) | ||||||
| Proceeds from stock issued for cash | ||||||||
| Collection of subscription receivable | ||||||||
| 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 for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Stock issued as debt discount | $ | $ | ||||||
| Conversion of stockholder advances to notes payable - related parties | $ | $ | ||||||
| Shares issued for settlement of liability – related party | $ | $ | ||||||
| Collection of subscription receivable - warrants | $ | $ | ||||||
| Issuance of common stock issuable | $ | |||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 9 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Note 1 - Organization and Nature of Operations
Organization and Nature of Operations
Greenway Technologies, Inc. (collectively, “we,” “us,” “our” 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.
Both of the Company’s wholly-owned subsidiaries: Universal Media Corp and Logistix Technology Systems, Inc. are currently inactive.
| 10 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Liquidity, Going Concern and Management’s Plans
These unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying unaudited consolidated financial statements, for the nine months ended September 30, 2023, the Company had:
| ● | Net
loss of $ |
| ● | Net
cash used in operations was $ |
Additionally, at September 30, 2023, the Company had:
| ● | Accumulated
deficit of $ |
| ● | Stockholders’
deficit of $ |
| ● | Working
capital deficit of $ |
The
Company has cash on hand of $
These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these financial statements are issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
| 11 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Management’s strategic plans include the following:
| ● | Execute business operations more fully during the year ended December 31, 2023. During 2024, the Company plans have secured contracts to manufacture G-Reformers, which will result in commercializing the Company’s technology. | |
| ● | Explore and execute of prospective strategic and partnership opportunities (See Note 10). |
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited 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 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, 2023. These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the financial statements of Greenway and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Business Segments
The
Company uses the “management approach” to identify its reportable segments. The management approach requires companies to
report segment financial information consistent with information used by management for making operating decisions and assessing performance
as the basis for identifying the Company’s reportable segments. The Company has identified
| 12 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Use of Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.
Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and other assumptions, which include both quantitative and qualitative assessments that it believes to be reasonable under the circumstances.
Significant estimates during the nine months ended September 30, 2023 and 2022 include valuation of stock-based compensation, estimated useful lives of property and equipment, uncertain tax positions, and the valuation allowance on deferred tax assets.
Fair Value of Financial Instruments
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
| ● | Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; | |
| ● | Level 2 - Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and | |
| ● | Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
| 13 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.
The Company’s financial instruments, including cash, accounts payable and accrued expenses, are carried at historical cost. At September 30, 2023 and December 31, 2022, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.
Equity Method Investment
On
August 29, 2019, the Company entered into a Material Definitive Agreement related to the formation of OPMGE.
| 14 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Cash and Cash Equivalents and Concentration of Credit Risk
For purposes of the statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.
At
September 30, 2023 and December 31, 2022, respectively, the Company did
The
Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent
account balances exceed the amount insured by the FDIC, which is $
Impairment of Long-lived Assets
Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.
If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Property and Equipment
Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.
Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
| 15 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Derivative Liabilities
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. The Company uses a binomial pricing model to determine fair value of these instruments.
Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock at fair value, relieves all related debt, derivatives, and debt discounts, and recognizes a net gain or loss on debt extinguishment.
Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.
At
September 30, 2023 and December 31, 2022, the Company had
Debt Discount
For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.
Debt Issue Cost
Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.
| 16 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Income Taxes
The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using
that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. As of September 30, 2023 and December 31, 2022, respectively, the Company
had
The
Company recognizes interest and penalties related to uncertain income tax positions in other expense.
Research and Development
The Company accounts for research and development costs in accordance with ASC 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 $ and $
| 17 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options.
The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value, the Company considers the following assumptions in the Black-Scholes model:
| ● | Exercise price, |
| ● | Expected dividends, |
| ● | Expected volatility, |
| ● | Risk-free interest rate; and |
| ● | Expected life of option |
Stock Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance if there is not a service period.
| 18 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND SUBSIDIARIES
SEPTEMBER 30, 2023
(UNAUDITED)
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
Schedule of Potentially Dilutive Equity Securities
| September 30, 2023 | September 30, 2022 | |||||||
| Convertible debt | ||||||||
| Total | ||||||||
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.
Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
| 19 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Recent Accounting Standards
Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the financial statements of the Company.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation.
The Company combined various accrued liabilities into one caption called accounts payable and accrued expenses.
The Company combined various accrued liabilities with related parties into one caption called accounts payable and accrued expenses – related parties.
The Company separately disclosed its notes payable and convertible notes payable.
These reclassifications had no effect on the consolidated results of operations, stockholders’ deficit, or cash flows.
Note 3 – Notes Payable
Notes payable and related terms were as follows:
Schedule of Notes Payable and Related Terms
| 1 | 2 | 3 | ||||||||||||||
| Terms | Note Payable | Note Payable | Note Payable | Total | ||||||||||||
| Issuance date of note | ||||||||||||||||
| Maturity date | ||||||||||||||||
| Interest rate | % | N/A | N/A | |||||||||||||
| Default interest rate | % | N/A | N/A | |||||||||||||
| Collateral | ||||||||||||||||
| Original amount | $ | $ | $ | |||||||||||||
| Total | In-Default | |||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Proceeds | ||||||||||||||||||||
| Debt discount | ( | ) | ( | ) | ||||||||||||||||
| Amortization of debt discount (interest expense) | ||||||||||||||||||||
| Repayments | ( | ) | ( | ) | ||||||||||||||||
| Balance – December 31, 2022 | ||||||||||||||||||||
| Repayments | ( |
) | ( |
|||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| 1 | ||
| 2 | ||
| 3 |
| 20 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Note 4 – Notes Payable – Related Parties
The
Company executed a loan agreement for up to $
The Company also has executed various loans with other stockholders and members of the Board Directors.
The
notes bear interest ranging from
Typically, with each of these notes, the Company has issued shares of common stock, which have been recognized as a debt discount and amortized over the life of the note.
During
2022, the Company issued shares of common stock under these arrangements
and recoded a corresponding debt discount of $
| 21 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Notes payable – related parties consist of loans from various members of management and the Board of Directors, typically for use as working capital. Related terms were as follows:
Schedule of Notes Payable - Related Parties and Related Terms
| Notes Payable | ||||
| Terms | Related Parties | |||
| Issuance date of notes | ||||
| Maturity date | Various | |||
| Interest rate | % | |||
| Collateral | ||||
| Balance - December 31, 2021 | $ | |||
| Conversion of stockholder advances to notes payable - related parties | ||||
| Debt discount | ( | ) | ||
| Amortization of debt discount (interest expense) | ||||
| Balance - December 31, 2022 | $ | |||
| No activities in 2023 | - | |||
| Balance September 30, 2023 | $ | |||
As of September 28, 2023, Mabert, LLC filed a UCC financing statement amendment, which continued the security interests of Mabert, LLC on the assets of the Company to October 10, 2028, as provided under applicable Texas law.
Note 5 – Convertible Note Payable
Convertible note payable and related terms were as follows:
Schedule of Convertible Notes Payable and Related Items
| Convertible | ||||
| Terms | Note Payable | |||
| Issuance dates of note | ||||
| Maturity date | ||||
| Interest rate | % | |||
| Default interest rate | % | |||
| Collateral | ||||
| Conversion rate | $ | |||
| Equivalent common shares | ||||
| In-Default | ||||||||
| Balance - December 31, 2022 | $ | $ | ||||||
| No activity in 2023 | - | |||||||
| Balance - September 30, 2023 | $ | $ | ||||||
| 22 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Note 6 – Advances – Related Parties
As of September 30, 2023, there were no Advances – Related Parties.
Schedule of Advances - Related Parties and Related Terms
| Balance December 31, 2022 | $ | |||
| Proceeds | ||||
| Repayments | ( | ) | ||
| Conversion of stockholder advances to common stock | ( | ) | ||
| Balance September 30, 2023 | $ |
During
2022, the Company reduced amounts owed to a stockholder for $
In
2023, the Company received $
Note 7 – Commitments and Contingencies
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
November 17, 2021, Greenway and Mr. Reynolds settled the matter agreeing to cash payments from GWTI totaling $
| 23 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
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 or as of September 30, 2023. Mr. Sanders filed a motion for summary judgement. A hearing was held on October 25, 2023 to consider the motion for summary judgement. On November 1, 2023, the judge issued a proposed order denying all motions that were asserted by Mr. Sanders in the hearing to consider his motion for summary judgement. The case is scheduled for trial on December 18, 2023. Greenway is confident in its defenses and counterclaims and intends to vigorously defend its interests and prosecute its claims.
On November 2, 2023, the Company received a complaint filed by Ric Halden, Randy Moseley, Tunstall Canyon Group, LLC and Chisos Equity Consultants, LLC. It is the Company’s belief that Tunstall Canyon Group, LLC and Chisos Equity Consultants, LLC are controlled by Ric Halden. Both Ric Halden and Randy Moseley are former employees of the Company and continue to hold significant number of shares of the Company. The lawsuit asserts claims against the Company for amounts owed to the parties but remain unpaid. The Company will evaluate the merits of the allegations and respond to the matters.
Note 8 – Stockholders’ Deficit
The Company has one (1) class of stock:
Common Stock
| - | shares authorized | |
| - | $ par value | |
| - |
Equity Transactions for the Nine Months Ended September 30, 2023
Stock Issued of Previously Issuable Shares
The
Company issued shares of common stock to a shareholder in 2023 that were funded prior to December 31, 2022.The Company received
$
Stock Issued for Cash
The
Company issued shares of common stock for $
Stock Issued for Settlement of Liabilities
The
Company issued shares of common stock in settlement of $
The
Company issued shares of common stock in settlement of accrued liabilities totaling $
| 24 |
GREENWAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Equity Transactions for the Year Ended December 31, 2022
Stock Issued as Debt Issue Costs
The
Company issued shares of common stock in connection with the issuance of notes payable – related parties. The fair value
of these shares was $
Stock Issued for Services
The
Company issued shares of common stock for services rendered, having a fair value of $
Stock Issued for Cash
The
Company issued shares of common stock for $
Stock Issued for Settlement of Liabilities
The
Company issued shares of common stock in settlement of liabilities totaling $
Note 9 – Warrants
Warrant activity for the nine months ended September 30, 2023 and the year ended December 31, 2022 is summarized as follows:
Schedule of Warrant Activity
| Weighted | ||||||||||||||||
| Average | ||||||||||||||||
| Weighted | Remaining | Aggregate | ||||||||||||||
| Number of | Average | Contractual | Intrinsic | |||||||||||||
| Warrants | Exercise Price | Term (Years) | Value | |||||||||||||
| Outstanding - December 31, 2021 | $ | $ | ||||||||||||||
| Vested and Exercisable - December 31, 2021 | $ | $ | ||||||||||||||
| Unvested - December 31, 2021 | $ | $ | ||||||||||||||
| Granted | $ | - | - | |||||||||||||
| Exercised | ( | ) | $ | - | - | |||||||||||
| Cancelled/Forfeited | $ | - | ||||||||||||||
| Unvested and non-exercisable – December 31, 2022 | $ | $ | ||||||||||||||
| Unvested and non-exercisable – September 30, 2023 | ||||||||||||||||
Note 10 – Subsequent Events
On October 13, 2023, the Company executed a non-binding Letter of Intent (“LOI”) with GME Hydro LP (“GME Hydro”). Under the LOI, GME Hydro will purchase from the Company 2 GWTI G-Reformer units. The G-Reformers will convert natural gas to hydrogen. The hydrogen will be used to power and electrical generation system. The parties will work together to create a definitive purchase agreement. Under the LOI, GME Hydro will purchase million shares of the Company’s stock at a 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, 2023 and 2022 should be read in conjunction with our consolidated Financial Statements and the notes to those 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, 2023. As discussed in Note 1 to these 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 1 to the 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 “UMED” and “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 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/.
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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, and filed as Exhibit 10.5, and incorporated by reference herein (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.
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”), 100% owned by Kevin Jones, 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 Greenway entered into a joint venture with OPM Green Energy, LLC, a Texas limited liability company (“OPMGE”), for a 42.857% ownership interest in OPMGE. In exchange for its 42.857% ownership of OPMGE, Greenway agreed to contribute a G-Reformer to the entity. The other members of OPMGE are Mabert, which owns 42.857% and Tom Phillips, our former Vice President of Operations for GIE, who owns 14.286%. Additionally, OPMGE entered a LEASE AGREEMENT with Mabert whereby OPMGE leased the Wharton Plant from Mabert. Our involvement in OPMGE was intended to facilitate third-party certification of our G-Reformer and related equipment and technology. In addition, we anticipated that OPMGE’s operations would 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 was initially expected to yield a minimum of 75 - 100 barrels per day of gasoline and diesel fuels from converted natural gas.
Greenway never transferred the G-Reformer to OPMGE, as required by the LIMITED LIABILITY COMPANY AGREEMENT OF OPM GREEN ENERGY, LLC. Accordingly, it defaulted on its obligation under the agreement. Under the LEASE AGREEMENT between Mabert and OPMGE, OPMGE was required to pay rent and to pay the following expenses relating to the operation of the Wharton Plant:
| ● | Utilities | |
| ● | Trash removal and lawn maintenance | |
| ● | Taxes | |
| ● | Insurance | |
| ● | Maintenance, Repairs or Alterations |
The lease stated that this transaction was a “Triple Net Lease.”
If OPMG did not pay rent or the other expenses outlined above, it represented Events of Default, which allowed Mabert the right to terminate the lease. Based on the Events of Default that occurred, Mabert exercised its right to terminate the lease.
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.
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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.
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.
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 made 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, they have been largely unsuccessful. As a result, we can 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 liquid allows trucks to easily move liquid chemicals, clean diesel fuel, highly clean water and the power grid to move electricity from virtually any location.
Our initial ROI studies of the market for high purity chemicals we produce can provide incredibly rapid payback of investments. It should be noted the vast majority of these chemicals produced are made in China. Further, because they originate from a barrel of oil at a refinery, they are much lower in purity.
Products created by the GTL process include High Cetane Diesel, Naphtha, Technical Grade Water, and high value, high purity chemicals. The chemicals which would be produced in the GTL plant would be vital to many industries including pharmaceutical, cosmetics, fragrances, adhesives, and others. The vast majority of these chemicals are produced in China. Such dependency makes America captive to shortfalls whether they are manufacturing related or intentional. By making these chemicals in the USA, we reduce that dependency and keep the product, the jobs, and the profits in America.
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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 2021, with virtually all current production located overseas. Our technology is not designed to compete with the large refinery-size GTL plants operated by such large industry operators. 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 5 small-scale GTL plant technologies that have been proven and are now available 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”). We were 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 us 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).”
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, and filed as Exhibit 10.31, 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, 2023 and filed with our annual report on Form 10-K, which is included by reference to our consolidated Financial Statements and raises substantial doubt about our ability to continue as a going concern.
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| September 30, 2023 | December 31, 2022 | |||||||
| Net loss | $ | (1,183,947 | ) | $ | (1,512,692 | ) | ||
| Net cash used in operations | $ | (268,805 | ) | $ | (496,654 | ) | ||
| Negative working capital | $ | (11,632,523 | ) | $ | (10,737,576 | ) | ||
| Stockholders’ deficit | $ | (11,632,523 | ) | $ | (10,737,576 | ) | ||
As of September 30, 2023, we had total liabilities in excess of assets by $11,632,523 and used net cash of $268,805 for our operating activities. This is as compared to the most recent year ended December 31, 2022, when we used net cash of $496,654 for operating activities. These factors raise substantial doubt about our ability to continue as a going concern.
The consolidated 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 2023 and into 2024 without raising additional debt or equity capital. There can be no assurance that we will raise additional debt or equity capital.
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.
We have entered into a non-binding Letter Of Intent (“LOI”), by which an investor will purchase stock in the amount of $600,000, representing 6 million shares at $.10 per share. Additionally, the LOI provides for the purchase of 2 G-Reformers for $7 million each.
While we are attempting to commence operations and generate revenues, our cash position may not be significant enough 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, 2023, compared to the three—months ended September 30, 2022.
We had no revenues for our consolidated operations for the quarters ended September 30, 2023 and 2022.
Operating Expenses.
General and Administrative Expenses. During the three-months ended September 30, 2023, general and administrative expenses decreased to $181,909, as compared to $230,826 for the prior year three-months ended September 30, 2022. The decrease was primarily due to decreased legal fees and other professional fees, increased consulting fees and decreased interest expense in the period.
Loss from Operations. Our loss from operations decreased to $181,909 for the quarter ended September 30, 2023, as compared to $230,826 for the quarter ended September 30, 2022. The decrease was due the changes in general and administrative expenses, as discussed above.
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Interest Expense. During the three-months period ended September 30, 2023, interest expense decreased to $156,174 as compared to interest expense of $185,052 for the prior year three-months ended September 30, 2022. The decrease was due to an decrease in amortization of debt discount for the current period compared to the quarter ended September 30, 2022.
Net Loss. Our net loss decreased to $338,083 for the three-months ended September 30, 2023, compared to a loss of $415,878 for the same three-months period in 2022. The decrease was primarily due to the decreased general and administrative expense and interest expenses in the period ended September 30, 2023.
Nine-months ended September 30, 2023, compared to nine-months ended September 30, 2022.
We had no revenues for our consolidated operations for the nine-month periods ended September 30, 2023 and 2022.
Operating Expenses.
General and Administrative Expenses. During the nine-months ended September 30, 2023, general and administrative expenses increased to $720,077, as compared to $716,558 for the prior year nine-months ended September 30, 2022. The decrease was primarily due to the following:
| - | Decrease in consulting fees from $215,733 in the nine-months ended September 30, 2022 compared to $184,220 in the nine-months ended September 30, 2023. | |
| - | Decrease in directors and officers liability insurance premiums from $48,876 in the nine-months ended September 30, 2022 compared to -0- in the nine months ended September 30, 2023. | |
| - | Increase in legal fees from $105,066 in the nine-months ended September 30, 2022 compared to $133,794 in the nine-months ended September 30, 2023. | |
| - | Increase in professional fees from $11,497 in the nine-months ended September 30, 2022 compared to $23,500 in the nine-months ended September 30, 2023. |
Research and Development Expenses. During the nine-months ended September 30, 2023, Research and Development expenses decreased to $ 0, as compared to $16,000 for the prior year nine-months ended September 30, 2022. The change was due to the expiration of the Sponsored Research Agreement (“SRA”) with the University of Texas at Arlington in the February of 2022.
Loss from Operations. Our loss from operations decreased to $720,077 for the nine-months ended September 30, 2023, as compared to $732,558 for the prior year nine-months ended September 30, 2022. The reasons for the decrease are increases and decreases in general and administrative expenses and research and development expenses, as detailed above.
Interest Expense. During the nine-months ended September 30, 2023, interest expense decreased to $463,870 as compared to interest expense of $507,073 for the prior year nine-months ended September 30, 2022. The decrease was due to a decrease in amortization of debt discount for the current period compared to the prior year period ended September 30, 2022.
Settlement Gain. During the nine-months period ended September 30, 2022, we recognized a $70,377 gain on the settlement of the Norman Reynolds legal matter. In the settlement, we agreed to pay Mr. Reynolds $20,000 in cash payments, which have all been paid as of September 30, 2022. There was no such gain in the nine-months ended September 30, 2023.
Net Loss. Our net loss increased to $1,183,947 for the nine-months ended September 30, 2023, compared to a loss of $1,169,254 for the same nine-months period in 2022. The decrease was primarily due to the decreased general and administrative and research and development expenses and the gain on the settlement of the legal matter in the nine-month period ended September 30, 2022.
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, 2023, we had $1,290 in cash, total assets of $1,290, and total liabilities of $11,633,813. Our total accumulated deficit on September 30, 2023, was $37,462,816.
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, 2023, our working capital deficit increased by $894,947 from the recent year-ended December 31, 2022 primarily as the result of increases in accounts payable and accrued expenses of $341,005 and accounts payable and accrued expenses – related parties of $551,192.
To increase our working capital we have considered raising additional debt and equity based financing from both third parties and related parties. However, terms of these financings may not be favorable to the Company.
Operating activities
Net cash used in continuing operating activities during the nine-months ended September 30, 2023 was $268,805 as compared to $387,333 for the nine-months ended September 30, 2022.
Investing activities
Net cash used in investing activities for the nine-months periods ending September 30, 2023 and 2022 was $0 and $0, respectively.
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Financing Activities
Net cash provided by financing activities was $245,500 for the nine-months ended September 30, 2023, consisting of repayments on notes payable of $20,000 and proceeds from the stock issued for cash of $265,500.
Net cash provided by financing activities was $361,420 for the nine-months ended September 30, 2022, consisting of proceeds from advances – related parties of $3,500, repayments on notes payable of $40,000, repayments on notes payable – related parties of $7,280, proceeds from the stock issued for cash of $225,250 and collection of subscription receivable in the amount of $150,000.
Our accompanying 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. 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 were to pay UTA $15,454.54 through February 15, 2022, for a total commitment of $200,000. We have paid UTA a total of $174,000 as of September 30, 2023 under the SRA.
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 nine-months ended September 30, 2023, the Company paid and/or accrued a total of $135,000 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 30, 2023. 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.
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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, 2023. 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 $26,310 in expenses related to such prior consulting agreement expenses as of September 30, 2023.
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, 2022.
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’s employment was terminated on September 7, 2021.
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, a copy of which is filed as Exhibit 10.52 and incorporated by reference. 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. A copy is available by Exhibit 10.44 incorporated by reference herein. The Alfano Agreement was terminated when Mr. Alfano became a director on June 26, 2019. The Company paid all accrued Expense Reports, Interest and Consulting Fees due to Mr. Alfano (totaling $140,000), plus Mr. Alfano paid an additional $15,000 to the Company, for a total issuance of 6.2 million shares of stock on April 13, 2022 ($155,000 at $0.025 per share).
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, 2023, we have accrued $390,000 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 which expired on June 30, 2022. After meeting certain deliverables set forth in the agreement, Mr. Goekel is eligible to receive an additional 1,000,000 stock warrants for 1,000,000 shares of common stock at a strike price that is an average of the stock price for the 90 days that the deliverables have been met. Mr. Goekel has not met the criteria for this agreement as September 30, 2023. Currently, the Company does not expect this deliverable will occur.
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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. A copy of the Trust Settlement Agreement and related promissory note dated April 5, 2018, by us in favor of the Trust is filed as Exhibit 10.36 to this Form 10-Q and incorporated by reference herein.
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 2023 of approximately $11,880 for our annual lease maintenance fees due to Bureau of Land Management (“BLM”) for the Arizona Property. That payment was made prior to August 31, 2023. 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.
For the period ended September 30, 2023, the Company issued 2,750,000 shares of Rule 144 restricted Common Stock to 2 related parties, par value $.0001 per share for $27,500, or $.01 per share.
For the period ended September 30, 2023, the Company issued 2,350,000 shares of Rule 144 restricted Common Stock, par value $.0001 per share to two related parties. The stock was issued in exchange for debt owned by the Company to the related parties.
For the year ended December 31, 2022, we received $3,500 as an advance from a related party.
Third-party financing
During various dates throughout the year ended December 31, 2022, The Company issued 20,667,999 shares of Rule 144 Common Stock, par value $0.0001 per share pursuant to private placements of sales to various accredited investors, for $482,200 ($0.02 - $$.03/share). For the nine months ended September 30, 2023, the Company issued 15,883,333 shares of Rule 144 restricted Common Stock, par value $.0001 per share pursuant to private placement sales to various accredited investors, for $.01 - $.02 per share.
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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. However, based on events of default in their agreement with the Company, Mabert no longer has any formal arrangements with OPMGE or Tom Phillips. Since inception of this arrangement, we have advanced a total of $412,885 to OPMGE. Given the uncertainty of the collectability of this receivable, the Company fully reserved for this amount as of September 30, 2023 and December 31, 2022. As of September 30, 2023 and December 31, 2022, there are no assets, liabilities, or equity within OPMGE.
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.
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 consolidated financial statements. The Company has not, to date, generated any revenues.
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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 42.857% 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. OPMGE is no longer operating and no longer a viable entity. There was not previously and is no book or asset value attributed to the contributed technology. Any advances made to OPMGE have been fully reserved for by the Company due to the lack of collectability.
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 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.
Based on an evaluation performed by the principal executive officer and the principal finance officer, the disclosure controls and procedures were not effective.
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. |
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Our management, including our chief executive officer and chief financial officer, do 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 2023, 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, 2023, our internal control over financial reporting was ineffective.
Also, based on the evaluation described in the prior paragraph, management has concluded that, as of September 30, 2023, our Disclosure Controls and Procedures were 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, 2023:
| 1. | We have inadequate segregation of duties within our cash disbursement control design. | |
| 2. | During the quarter ended September 30, 2023, 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 person, 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 five 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, 2023, 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.
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, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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. 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”). On November 17, 2021, Greenway and Mr. Reynolds settled the matter agreeing to cash payments from GWTI totaling $20,000. This settlement resulted in a gain of $70,377 during the nine months ended September 30, 2022.
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. On October 25, 2023, there was a hearing on a motion for summary judgement filed by Mr. Sanders. As of October 30, 2023, the judge has not ruled on the motion for summary judgement. A trial is scheduled for mid-December 2023. Greenway is confident in its defenses and counterclaims and intends to vigorously defend its interests and prosecute its claims.
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, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine-month period ended September 30, 2023, the Company: issued 21,233,337 shares of Rule 144 restricted Common Stock as follows:
7,500,000 shares of common stock for cash in private placements at $.02/share for $150,000
1,333,333 shares of common stock for cash in private placements at $.015/share for $20,000
10,050,000 shares of common stock for cash in private placements at $.01/share for $100,500
2,350,000 shares of common stock in exchange for debt settlement at $.01 per share for total debt settlement of $23,500.
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. |
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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.
In May 2022, the Company issued a note payable for $67,500, with an original issue debt discount of $37,500, resulting in net proceeds of $30,000. The note was due on September 30, 2022 and remains in default.
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.
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 judgment, 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.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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 17, 2023. | ||
| 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.
| 43 |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kent Harer, certify that:
1. I have reviewed this Form 10-Q/A of Greenway Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 17, 2023.
| /s/ Kent Harer | |
| Kent Harer, President |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ransom Jones, certify that:
1. I have reviewed this Form 10-Q/A of Greenway Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 17, 2023
| /s/ Ransom Jones | |
| Ransom Jones, Chief Financial Officer and Principal | |
| Accounting Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report on Form 10-Q/A of Greenway Technologies, Inc. for the quarter ending September 30, 2023, I, Kent Harer, President and chief executive of Greenway Technologies, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
1. Such Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2023, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in such Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2023, fairly presents, in all material respects, the financial condition and results of operations of Greenway Technologies, Inc.
Date: November 17, 2023
| /s/ Kent Harer | |
| Kent Harer, President |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report on Form 10-Q/A of Greenway Technologies, Inc. for the quarter ending September 30, 2023, I, Ransom Jones, Chief Financial Officer of Greenway Technologies, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
1. Such Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2023, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in such Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2023, fairly presents, in all material respects, the financial condition and results of operations of Greenway Technologies, Inc.
Date: November 17, 2023
| /s/ Ransom Jones | |
| Ransom Jones | |
| Chief Financial Officer and Principal Accounting |
Exhibit 32.3
