CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
The following discussion and analysis of our results of operations and financial
condition for the periods ending September 30, 2021 and 2020 should be read in
conjunction with our unaudited Financial Statements and the notes to those
unaudited Financial Statements that are included elsewhere in this Form 10-Q and
were prepared assuming that we will continue as a going concern. Our discussion
includes forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations, and
intentions. Actual results and the timing of events could differ materially from
those anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the "Risk Factors," "Cautionary Notice
Regarding Forward-Looking Statements" and "Description of Business" sections and
elsewhere in this Form 10-Q. We use words such as "anticipate," "estimate,"
"plan," "project," "continuing," "ongoing," "expect," "believe," "intend,"
"may," "will," "should," "could," "predict," and similar expressions to identify
forward-looking statements. Although we believe the expectations expressed in
these forward-looking statements are based on reasonable assumptions within the
bounds of our knowledge of our business, our actual results could differ
materially from those discussed in these statements. We undertake no obligation
to update publicly any forward-looking statements for any reason even if new
information becomes available or other events occur in the future.
Information regarding market and industry statistics contained in this Report is
included based on information available to us that we believe is accurate. Much
of this general market information is based on industry trade journals, articles
and other publications that are not produced for purposes of SEC filings or
economic analysis. We have not reviewed nor included data from all possible
sources and cannot assure investors of the accuracy or completeness of any such
data that is included in this Report. Forecasts and other forward-looking
information obtained from these sources are subject to the same qualifications
and the additional uncertainties accompanying any estimates of future market
size, revenue and market acceptance of our services. As a result, investors
should not place undue reliance on these forward-looking statements, and we do
not assume any obligation to update any forward-looking statement.
The following discussion and analysis of financial condition, results of
operations, liquidity, and capital resources, should be read in conjunction with
our Annual Form 10-K filed on April 14, 2021. As discussed in Note 2 to these
condensed unaudited consolidated financial statements, our recurring net losses
and inability to generate sufficient cash flows to meet our obligations and
sustain our operations raise substantial doubt about our ability to continue as
a going concern. Management's plans concerning these matters are also discussed
in Note 2 to the condensed unaudited consolidated financial statements. This
discussion contains forward-looking statements that involve risks and
uncertainties, including information with respect to our plans, intentions and
strategies for our businesses. Our actual results may differ materially from
those estimated or projected in any of these forward-looking statements.
In this Form 10-Q, "we," "our," "us," the "Company" and similar terms in this
report, including references to "Greenway" all refer to Greenway Technologies,
Inc., and our wholly-owned subsidiary, Greenway Innovative Energy, Inc., unless
the context requires otherwise.
Overview
We are engaged in the research and development of proprietary gas-to-liquids
("GTL") synthesis gas ("Syngas") conversion systems and micro-plants that can be
scaled to meet specific gas field production requirements. Our patented and
proprietary technologies have been realized in our first commercial G-ReformerTM
unit ("G-Reformer"), a unique component used to convert natural gas into Syngas
which when combined with a Fischer-Tropsch ("FT") reactor and catalyst, produces
a variety of fuels including gasoline, diesel, jet fuel and methanol. G-Reformer
units can be deployed to process a variety of natural gas streams including
pipeline gas, associated gas, flared gas, vented gas, coal-bed methane and/or
biomass gas. When derived from any of these natural gas sources, the liquid
fuels created are incrementally cleaner than conventionally produced oil-based
fuels. Our Company's objective is to become a material direct and licensed
producer of renewable GTL synthesized diesel and jet fuels, with a near -term
focus on U.S. market opportunities. For more information about our Company,
please visit our website located at https://gwtechinc.com/.
Our GTL Technology
In August 2012, we acquired 100% of GIE, pursuant to that certain Purchase
Agreement, by and between us and GIE, dated August 29, 2012, (the "GIE
Acquisition Agreement"). GIE owns patents and trade secrets for a proprietary
technology to convert natural gas into Syngas. Based on a new, breakthrough
process called Fractional Thermal Oxidation™ ("FTO"), we believe that the
G-Reformer, combined with conventional FT processes, offers an economical and
scalable method to converting natural gas to liquid fuel. On February 15, 2013,
GIE filed for its first patent on this GTL technology, resulting in the issue of
U.S. Patent 8,574,501 B1 on November 5, 2013. On November 4, 2013, GIE filed for
a second patent covering other unique aspects of the design and was issued U.S.
Patent 8,795,597 B2 on August 5, 2014. The Company has several other pending
patent applications, both domestic and international, related to various
components and processes relating to our proprietary GTL methods, complementing
our existing portfolio of issued patents and pending patent applications.
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On June 26, 2017, we and the University of Texas at Arlington ("UTA") announced
that we had successfully demonstrated our GTL technology at our sponsored Conrad
Greer Laboratory at UTA, proving the viability of the science behind the
technology.
On March 6, 2018, we announced the completion of our first commercial scale
G-Reformer, a critical component in what we call the Greer-Wright GTL system.
The G-Reformer is the critical component of the Company's innovative GTL system.
A team consisting of individuals from our Company, UTA and our Company's
contracted G-Reformer manufacturer worked together to test and calibrate the
newly built G-Reformer unit. The testing substantiated the units' Syngas
generation capability and demonstrated additional proficiencies within certain
proprietary prior prescribed testing metrics.
On July 23, 2019, we announced that Mabert LLC, a Texas limited liability
company ("Mabert"), controlled by Kevin Jones, one of our directors, acquired
INFRA Technology Group's U.S. GTL plant and technology located in Wharton, Texas
(the "Wharton Plant"). Mabert purchased the entire 5.2-acre site, plant and
equipment, including INFRA's proprietary FT reactor system and operating license
agreement.
On August 29, 2019, to further facilitate the commercialization process, we
announced that it entered into the joint venture, OPM Green Energy, LLC, a Texas
limited liability company ("OPMGE"), for an ownership interest in the Wharton
Plant. The other members of OPMGE are Mabert and Tom Phillips, Vice President of
Operations for GIE. Our involvement in OPMGE is intended to facilitate
third-party certification of our G-Reformer and related equipment and
technology. In addition, we anticipate that OPMGE's operations will demonstrate
that the G-Reformer is a commercially viable technology for producing Syngas and
marketable fuel products. As the first operating GTL plant to use our
proprietary reforming technology and equipment, the Wharton Plant is initially
expected to yield a minimum of 75 - 100 barrels per day of gasoline and diesel
fuels from converted natural gas.
On April 28, 2020, the Company was issued a new U.S. Patent 10,633,594 B1 for
syngas generation for gas-to-liquid fuel conversion. The Company has several
other pending patent applications, both domestic and international, related to
various components and processes involving our proprietary GTL methods, which
when granted, will further complement our existing portfolio of issued patents
and pending patent applications.
On December 8, 2020, the Company announced an exclusive worldwide patent
licensing agreement with the University of Texas at Arlington (UTA) for all
patent applications currently filed with the Patent and Trademark Office
relating to GWTI's natural gas reforming technologies developed under its
sponsored research agreement with UTA.
On December 15, 2020, the Company announced additional information regarding
valuable outputs produced by the company's proprietary G-Reformer™ catalyst
reactor and Fischer-Tropsch (FT) technology which combine to form the
"Greer-Wright" GTL solution. Originally developed to convert natural gas into
ultra-clean synthetic fuel, recent research and development activity has shown
that the technology can also allow the extraction of high-value chemicals and
alcohols. The chemical outputs include n-Hexane, n-Heptane, n-Octane, n-Decane,
n-Dodecane, and n-Tridecane. Alcohols produced include ethanol and methanol. The
company has identified worldwide industrial demand for these outputs which will
significantly improve the economic return on investment (ROI) of GTL plants that
are based on GWTI's technology. GWTI is a development-stage company with plans
to commercialize its unique and patented technology.
Ultimately, we believe that our proprietary G-Reformer is a major innovation in
gas reforming and GTL technology in general. Initial tests have demonstrated
that our Company's solution appears to be superior to legacy technologies, which
are more costly, have a larger footprint, and cannot be easily deployed at field
sites to process associated gas, stranded gas, coal-bed methane, vented gas, or
flared gas. In addition, the Wharton Plant is anticipated to prove out the
economics for the Company's technology and GTL processes.
The technology for the G-Reformer is unique, because it permits for
transportable (mobile) GTL plants with much smaller footprints, compared to
legacy large-scale technologies. Thus, we believe that our technologies and
processes will allow for multiple small-scale GTL plants to be built with
substantially lower up-front and ongoing costs, resulting in more profitable
results for oil and gas operators.
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GTL Industry -Market
GTL converts natural gas - the cleanest-burning fossil fuel - into high-quality
liquid products that would otherwise be made from crude oil. These products
include transport fuels, motor oils, and the ingredients for everyday
necessities like plastics, detergents, and cosmetics. GTL products are
colorless, odorless, and contain almost none of the impurities, (e.g., sulphur,
aromatics, and nitrogen) that are found in crude oil.
Our Company has developed a revolutionary and unique process that converts
natural gas of various origins and compositions into a highly pure variety of
chemicals, high cetane diesel fuel, industrial grade pure water and electrical
energy. GTL technology has existed as a traditional process going back
generations. This process consists of two steps. First, natural gas is converted
into Synthesis Gas (Syngas) which is a non-naturally occurring blend of Hydrogen
and Carbon Monoxide. The front-end part of the GTL process is called "Gas
Reformation". The output of the Gas Reformer is compressed and fed through a
secondary process, called Fischer-Tropsch (FT). This secondary process is widely
used in many forms in the chemical and oil industries. While FT is a common
process, Gas Reformation has been the most difficult step beyond an old and
traditional process typically used in refineries. The invention of our
software-controlled GTL process fronted by our patented and revolutionary gas
reformation unit, the G-Reformer, makes us the innovator in GTL technology. Our
patents are based on scalability, transportability, flexibility and
self-sustainment based on a wide variety of input gasses and output mixtures.
The Company's process is consists of small-sized modularly scalable units which
are portable and self-contained unlike other GTL solutions based on Steam
Methane reformation. While many companies have tried to scale Steam Methane
Reformation down for use in smaller, non-refinery-based GTL plants, efforts have
been largely unsuccessful. In contrast, we plan to build self-sufficient GTL
plants at virtually any location capable of supplying wellhead or pipeline gas
of sufficient ongoing volume. This gives us the ability to eliminate flaring at
the source while keeping remote oil fields in production without flaring. The
conversion of flaring gas to liquids allows for transportation of liquid
chemicals, clean diesel fuel and highly clean water.
Our initial ROI studies of the market for the high purity chemicals we expect to
produce can provide rapid payback of investments. It should be noted that today,
the majority of these chemicals are produced in China. Because they are produced
from oil at a refinery, they are much lower in purity than the same chemicals
produced from gas.
Products created by the GTL process include high cetane diesel, naphtha,
technical grade water, and high value, high purity chemicals. The chemicals
produced in the GWTI GTL plant are vital to many industries including
pharmaceuticals, cosmetics, fragrances, adhesives, and others. Dependency on
China makes the United States captive to shortfalls whether manufacturing
related or intentional. By producing these chemicals in the US, that dependency
is reduced resulting in an increase in jobs, and a reduction of imports.
According to publicly available industry research from Shell Oil,
MarketResearchFuture.com, and others, the market for GTL products was
approximately $11.9 billion in 2019 and is expected to reach $20.4 billion by
2025, growing at a compound annual growth rate of 7.55%.
Development of stringent environmental regulations by numerous governments to
control pollution and promote cleaner fuel sources is expected to complement
industry growth. For example, we believe that U.S. guidelines such as the
Petroleum and Natural Gas Regulatory Board Act, 2006, Oilfields (Regulation and
Development) Act of 1948, and Oil Industry (Development) Act, 1974 are likely to
continue to encourage GTL applications in diverse end-use industries to conserve
natural gas and other resources. Under the Clean Air Act (CAA), the EPA sets
limits on certain air pollutants, including setting limits on how much can be in
the air anywhere in the United States. The Clean Air Act also gives EPA the
authority to limit emissions of air pollutants coming from sources like chemical
plants, refineries, utilities, and steel mills. Individual states or tribes may
have stronger air pollution laws, but they may not have weaker pollution limits
than those set by EPA. Because our G-Reformer based GTL plants are not
considered refineries, they do not fall under any related current EPA air
quality guidelines. More information can be found under the EPA's New Source
Performance Standards which are published under 40 CFR 60.
Competition
Key industry players include: Chevron Corporation; KBR Inc, PetroSA, Qatar
Petroleum, Royal Dutch Shell, and Sasol Limited. In terms of global production
and consumption, Shell had the largest market share in 2019, with virtually all
current production located overseas. Our technology is not designed to compete
with the large refinery-size GTL plants. Our plants are designed to be scaled to
meet individual gas field production requirements on a distributed and mobile
basis. According to a report released in July 2019 by the Global Gas Flaring
Reduction Partnership ("GGFRP"), there are currently only five small-scale GTL
plant technologies that have been proven for flared gas monetization available
in the U.S., including: Greyrock ("Flare to Fuels"), Advantage Midstream
(licensing Greyrock technology), EFT ("Flare Buster"), Primus, GE and GasTechno
("Methanol in a Box"). GWTI was not a direct part of this study, as we had not
received 3rd party certification of our proprietary technology as of the date of
this report.
However, the GGFRP report mentioned GWTI as follows, "Greenway Technologies
announced on July 23 that Mabert LLC, a major investor in Greenway, acquired the
whole INFRA plant including an operating license agreement. The purpose of the
acquisition is the incorporation and commercial demonstration of Greenway's
'G-Reformer' technology. We will see whether the new team will be able to make
the plant with the new reformer operational. (Globe Newswire, Fort Worth, Texas,
Aug 31, 2019)."
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Mining Interests
In December 2010, UMED acquired the rights to approximately 1,440 acres of
placer mining claims located on Bureau of Land Management ("BLM") land in Mohave
County, Arizona (such property, the "Arizona Property"), in an Assignment
Agreement dated December 27, 2010, between Melek Mining, Inc., 4HM Partners,
Inc. and the Company, in exchange for 5,066,000 shares of our common stock.
Early indications from samples taken and processed by Melek Mining provided
reason to believe that the potential recovery value of the metals located on the
Arizona Property could be significant, but only actual mining and processing
will determine the ultimate value that may be realized from this property
holding. While we are not currently conducting mining operations, we are
exploring strategic options to partner or sell our interest in the Arizona
Property, while we focus on our emerging GTL technology sales and marketing
efforts.
Employees
As of the filing date of this Form 10-Q, we have two (2) full-time employees.
Certain of these employees receive no compensation or compensation is deferred
on a periodic basis by mutual written agreement. None of our employees are
covered by collective bargaining agreements. We consider our employee relations
to be satisfactory.
Going Concern
We remain dependent on outside sources of funding for continuation of our
operations. Our independent registered public accounting firm issued a going
concern qualification in their report dated April 14, 2021 and filed with our
annual report on Form 10-K, which is included by reference to our Financial
Statements and raises substantial doubt about our ability to continue as a going
concern.
September 30, December 31,
2021 2020
Net loss $ (1,412,879 ) $ (2,541,972 )
Net cash used in operations (669,861 ) (686,032 )
Negative working capital
(9,795,323 ) (8,844,210 )
Stockholders' deficit (9,795,323 ) (8,844,210 )
As of September 30, 2021, we had total liabilities in excess of assets by
$9,795,323 and used net cash of $669,861 for our operating activities. This is
as compared to the most recent year ended December 31, 2020, when we used net
cash of $686,032 for operating activities. These factors raise substantial doubt
about our ability to continue as a going concern.
The Financial Statements included in our Form 10-Q do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should we be unable to continue in existence. Our ability to continue as a going
concern is dependent upon our ability to generate sufficient new cash flows to
meet our obligations on a timely basis, to obtain additional financing as may be
required, and/or ultimately to attain profitable operations. However, there is
no assurance that profitable operations, financing, or sufficient new cash flows
will occur in the future.
Our ability to achieve profitability will depend upon our ability to finance,
manufacture, and market/operate GTL units. Our growth is dependent on attaining
profit from our operations and our raising additional capital either through the
sale of our Common Stock or borrowing. There is no assurance that we will be
able to raise any equity financing or sell any of our products at a profit. We
will be unable to pay our obligations in the normal course of business or
service our debt in a timely manner throughout 2021 without raising additional
debt or equity capital. There can be no assurance that we will raise additional
debt or equity capital.
20
We are currently evaluating strategic alternatives that include (i) raising new
equity capital and/or (ii) issuing additional debt instruments. The process is
ongoing, lengthy and has inherent costs. There can be no assurance that the
exploration of these strategic alternatives will result in any specific action
to alleviate our 12-month working capital needs or result in any other
transaction.
While we are attempting to commence operations and generate revenues, our cash
position may be insufficient to support our daily operations. Management intends
to raise additional funds by way of an offering of our securities. Management
believes that the actions presently being taken to further implement our
business plan and generate revenues provide the opportunity for us to continue
as a going concern. While we believe in the viability of our strategy to
generate revenues and in our ability to raise additional funds, we may not be
successful. Our ability to continue as a going concern is dependent upon our
capability to further implement our business plan and generate revenues.
Results of Operations
Three-months ended September 30, 2021, compared to Three-months ended September
30, 2020.
We had no revenues for our consolidated operations for the quarters ended
September 30, 2021 and 2020. We reported consolidated net losses for each of
these periods of $474,645 and $903,545, respectively.
Operating Expenses.
General and Administrative Expenses. During the three-months ended September 30,
2021, general and administrative expenses decreased to $277,285 as compared to
$312,444 for the prior year three-months ended September 30, 2020. The decrease
was primarily due to decreased legal fees and salaries in the period offset by
increased consulting fees.
Research and Development Expenses. During the three-months ended September 30,
2021, Research and Development expenses increased to $48,000, as compared to $0
for the prior year three-months ended September 30, 2020. The change was due to
payments for the Sponsored Research Agreement ("SRA") with the University of
Texas at Arlington for the testing and commercialization phase of our GTL
technology.
Net Loss from Operations. Our net loss from operations increased to $325,285 for
the quarter ended September 30, 2021, as compared to $312,444 for the quarter
ended September 30, 2020.
Interest Expense. During the three-months period ended September 30, 2021,
interest expense decreased to $149,360 as compared to interest expense of
$192,391 for the prior year three-months ended September 30, 2020. The decrease
was primarily due to the decreased interest expense from the settlement of the
PowerUp loans in the year ended December 31, 2020.
Change in Fair Value of Derivative Liability and Derivative Expenses. During the
three-months ended September 30, 2021, the loss on the fair value of derivatives
was $0 as compared to a loss of $14,741, for the prior year three-month period
in 2020. The change was due to the execution of the two PowerUp convertible
notes payable in the first quarter of 2020, and the related changes in their
fair values in the three-month period ended September 30, 2020. The convertible
notes payable were settled as of December 31, 2020.
Net Loss. Our net loss decreased to $474,645 for the quarter ended September 30,
2021, as compared to $903,545 for the quarter ended September 30, 2020. The
decrease was due primarily to a reserve of $412,885 being established for the
OPMGE receivable in the quarter ended September 30, 2020.
Nine-months ended September 30, 2021, compared to Nine-months ended September
30, 2020.
We had no revenues for our consolidated operations for the nine-month periods
ended September 30, 2021 and 2020. We reported consolidated net losses for each
of these periods of $1,412,879 and $1,819,729, respectively.
Operating Expenses.
General and Administrative Expenses. During the nine-months ended September 30,
2021, general and administrative expenses decreased to $845,384, as compared to
$890,946 for the prior year nine-months ended September 30, 2020. The decrease
was primarily due to decreased legal fees, salaries, and travel expenses in the
period offset by increased consulting fees.
21
Research and Development Expenses. During the nine-months ended September 30,
2021, Research and Development expenses increased to $126,000, as compared to $0
for the prior year nine-months ended September 30, 2020. The change was due to
the payment of the renewal fee for the Sponsored Research Agreement ("SRA") with
the University of Texas at Arlington and for the monthly payments on the SRA for
the testing and commercialization phase of our GTL technology.
Net Loss from Operations. Our net loss from operations increased to $971,384 for
the nine-months ended September 30, 2021, as compared to $890,946 for the
nine-months ended September 30, 2020. The increase was due primarily to
increased research and development expenses for the period.
Interest Expense. During the nine-months ended September 30, 2021, interest
expense decreased to $441,495 as compared to interest expense of $564,668 for
the prior year nine-months ended September 30, 2020. The decrease was primarily
due to the decreased interest expense due to the settlement of the PowerUp loans
in the year ended December 31, 2020.
Change in Fair Value of Derivative Liability and Derivative Expenses. During the
nine-months ended September 30, 2021, the loss on the fair value of derivatives
was $0 as compared to a gain of $53,023 for the change in the derivative fair
value and a debt expense of $33,978 related to the derivatives, for the prior
year nine-month period in 2020. The change was due to the execution of the two
PowerUp convertible notes payable in the first quarter of 2020, and the related
changes in their fair values through September 30, 2020. The convertible notes
payable were settled as of December 31, 2020.
Net Loss. Our net loss decreased to $1,412,879 for the nine-months ended
September 30, 2021, compared to a loss of $1,819,729 for the same nine-month
period in 2020. The decrease was due primarily to a reserve of $412,885 being
established for the OPMGE receivable in the nine-months ended September 30,
2020.
Liquidity and Capital Resources
We do not currently have sufficient working capital to fund our expected future
operations. We cannot assure investors that we will be able to continue our
operations without securing additional adequate funding. As of September 30,
2021, we had $37,516 in cash, total assets of $37,656, and total liabilities of
$9,832,979. Our total accumulated deficit on September 30, 2021, was
$(34,434,680).
Liquidity is the ability of a company to generate adequate amounts of cash to
meet its needs for cash. In the nine-months ended September 30, 2021, our
working capital deficit increased by $951,113, primarily as the result of
increases in accrued expenses and accrued expenses - related parties of
$418,012, accrued interest payable of $360,566 and increases in notes payable to
related parties of $325,961.
We are exploring various means to increase our working capital, including
completing additional private stock sales and entering into new debt
instruments.
Operating activities
Net cash used in operating activities during the nine-months ended September 30,
2021, was $669,861, as compared to $548,633 for the nine-months ended September
30, 2020.
Investing activities
Net cash used in investing activities for the nine-months ended September 30,
2021, was $0 compared to $25,000 for the period ended September 30, 2020,
consisting of additional advances to OPMGE for deposits on a piece of
specialized commercial equipment required to convert the Wharton, TX
manufacturing facility for use of our GTL technology.
Financing Activities
Net cash provided by financing activities was $705,749 for the nine-months ended
September 30, 2021, consisting of stockholder advances - related party of
$429,249, sales of the Company's Common Stock to private accredited investors of
$416,500, offset by payments on notes payable to related parties of $100,000 and
payments on the note payable to Wildcat of $40,000. Net cash provided by
financing activities was $558,692 for the nine-months ended September 30, 2020,
consisting primarily of the proceeds from a loan made by Director and
shareholder, Kevin Jones, a related party under the Mabert Loan Agreement of
$101,833, two loans from PowerUp totaling $171,000, sales of the Company's
Common Stock to accredited private investors of $75,000, advances by four of our
directors of $113,785, and an advance made by an unrelated party of $20,000,
offset by payments on notes payable to Wildcat of $50,000.
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Our accompanying Financial Statements have been prepared on a going concern
basis, which contemplates realization of assets and the satisfaction of
liabilities in the normal course of business. Our general business strategy is
to first develop our GTL technology to maintain our basic viability, while
seeking significant development capital for full commercialization. Our ability
to continue as a going concern is in doubt and dependent upon achieving a
profitable level of operations and on our ability to obtain necessary financing
to fund ongoing operations.
Seasonality
We do not anticipate that our business will be affected by seasonal factors.
Commitments
Capital Expenditures
The last funded Scope of Work ("SOW") under our SRA with UTA was completed in
the year ended December 2019, with payments made of $120,000 to complete the
work described in the prior SOW. We signed a new SRA with UTA effective March 1,
2021 which relates to the testing and commercialization phase of our GTL
technology. The term of the agreement is through February 15, 2022. The first
payment under the SRA was made in March 2021 for $30,000. Going forward on the
15th of each month we will pay UTA $15,454.54 through February 15, 2022, for a
total commitment of $200,000. For the nine-months ended September 30, 2021, we
have paid UTA a total of $126,000.
Operational Expenditures
Employment Agreements
In August 2012, we entered into an employment agreement with our chairman of the
board, Ray Wright, as president of Greenway Innovative Energy, Inc., for a term
of five years with compensation of $90,000 per year. In September 2014, Wright's
employment agreement was amended to increase such annual pay to $180,000. By its
terms, the employment agreement automatically renews each year for successive
one-year periods, unless otherwise earlier terminated. During the three-months
ended September 30, 2021, the Company paid and/or accrued a total of $45,000 for
the period under the terms of the agreement.
Effective May 10, 2018, we entered into identical employment agreements with
John Olynick, as President, and Ransom Jones, as Chief Financial Officer,
respectively. The terms and conditions of their employment agreements were
identical. John Olynick elected not to renew his employment agreement and
resigned as President on July 19, 2019. Ransom Jones, as Chief Financial
Officer, earns a salary of $120,000 per year. Mr. Jones also serves as the
Company's Secretary and Treasurer. During each year that Mr. Jones' agreement is
in effect, he is entitled to receive a bonus ("Bonus") equal to at least
Thirty-Five Thousand Dollars ($35,000) per year, such amount having been accrued
for the period ended September 2021. Both Mr. Olynick and Mr. Jones received a
grant of common stock (the "Stock Grant") at the start of their employment equal
to 250,000 shares each of the Company's Common Stock, par value $.0001 per share
(the "Common Stock"), such shares vesting immediately. Mr. Jones is also
entitled to participate in the Company's benefit plans when such plans exist.
Mr. Olynick elected not to renew his employment agreement and resigned as
President on July 19, 2019. Upon his resignation, we agreed to pay the balance
of his Employment Agreement then due and owing over time. Accordingly, we
accrued $110,084 for the balance of his Employment Agreement, against which we
have paid $35,000, leaving a balance remaining of $75,084 as of September 30,
2021. In addition, Mr. Olynick had previously entered into a consulting
agreement (the "Olynick Agreement") to provide general advisory services with us
on April 18, 2019, and which included terms for payment of billable time at
$40.00 per hour, plus approved expenses. The Olynick Agreement was terminated
when Mr. Olynick became President of the Company on May 10, 2018. We have
accrued $24,710 in expenses related to such prior consulting agreement expenses.
Effective April 1, 2019, we entered into an employment agreement with Thomas
Phillips, Vice President of Operations, for a term of 12 months with
compensation of $120,000 per year. Mr. Phillips reports to the President of GIE.
Pursuant to his employment agreement, Mr. Phillips is entitled to a no-cost
grant of common stock equal to 4,500,000 shares of the Company's Rule 144
restricted common stock, par value $.0001 per share, with such shares having
been issued in February 2020. In addition, Mr. Phillips resigned from the
Company effective December 15, 2020. We have accrued $175,000 for salary
expenses outstanding as of September 30, 2021.
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Effective April 1, 2019, we entered into an employment agreement with Ryan
Turner for a term of twelve (12) months with compensation of $80,000 per year,
to manage our business development and investor relations. Mr. Turner reports to
the President of Greenway Technologies and is entitled to a no-cost grant of
common stock equal to 2,500,000 shares of the Company's Rule 144 restricted
common stock, par value $.0001 per share, valued at $.06 per share, or $150,000,
which we expensed as of the effective date of the agreement. Mr. Turner is also
entitled to certain additional stock grants based on our performance during the
term of his employment and to participate in our benefit plans, when and if such
plans become available.
Consulting Agreements
On September 7, 2018, Wildcat, a company controlled by Shareholder Marshall
Gleason, filed suit against us alleging claims arising from the Gleason
Agreement, seeking to recover monetary damages, interest, court costs, and
attorney's fees. In a separate lawsuit, Wildcat filed suit claiming that the
Company breached that certain Promissory Note dated on or about November 13,
2017, entered into between Wildcat as lender and Greenway as borrower, and as a
result Wildcat initiated an action in County Court at Law No. 2 of Tarrant
County, Texas, Cause No. 2018-006416-2. On March 6, 2019, we entered into a Rule
11 Agreement with Gleason settling both disputes. Pursuant to the Rule 11
Agreement, the parties agreed to abate both cases until the earlier of a default
of the performance of the Rule 11 Agreement or October 30, 2019, whichever be
sooner. The Rule 11 Agreement provided that if we timely performed through
October 15, 2019, the parties would file a joint motion for dismissal and
present agreed orders of dismissal with prejudice for both lawsuits. The Company
performed in all regards under the Rule 11 Agreement, however Gleason refused to
sign the Wildcat Settlement Agreement at the point of the Company's having
performed its obligations. The parties' respective counsels then mutually agreed
to extend the original October 30, 2019 settlement date until at least the end
of the year while the parties waited for Gleason's signature. Gleason signed the
Compromise Settlement and Release Agreement on February 4, 2020, and all
litigation was dismissed by the Court on February 25, 2020. A copy of the
Dismissal is incorporated by reference as Exhibit 10.59.
Paul Alfano, a director and greater than five percent (5%) shareholder entered
into a consulting agreement with us on April 19, 2018 via Alfano Consulting
Services (the "Alfano Agreement"), to provide board and senior management
advice, including but not limited to corporate strategy, SEC regulatory
adherence, sales and marketing strategies, document and presentation preparation
and fund-raising support. Terms included payment of billable time at $40.00 per
hour, plus approved expenses, retroactive to January 1, 2017. The Alfano
Agreement was terminated when Mr. Alfano became a director on June 26, 2019. The
Company has accrued Consulting Fees and Expenses of $118,705 for all prior
periods through September 30, 2021. There is no payment schedule agreed to by
the parties, and such accrued expenses will be paid only when the Company has
sufficient liquidity to make such payment, or unless or until the parties agree
to some other form of payment provision.
On October 19, 2020, the Company entered into a management consulting services
agreement with Dean Goekel (the "Goekel Agreement" via "Analytical
Professionals"), to manage engineering and vendor relationships, assist in
defining the design and cost of certain capital equipment and to manage the
direction of research, development and other related engineering activities. Mr.
Goekel will also support the Company's ongoing business operations, including
assistance in commercialization and market implementation, strategic planning
and other services. The agreed upon start date under the agreement is July 1,
2020 and the minimum engagement term was for six (6) months. After the initial
term the agreement automatically renews for subsequent six (6) month terms
unless the Company or Mr. Goekel terminates the agreement. Under the agreement,
in exchange for Mr. Goekel's services he will receive a minimum monthly fee of
$10,000 per month in deferred compensation until such time that adequate funds
are available for payment. As of September 30, 2021, we have accrued $150,000 in
compensation expense related to this agreement. Additionally, under the
agreement Mr. Goekel was issued stock warrants for 3,000,000 shares at a strike
price of $0.03 per share effective July 1, 2020 and expiring on June 30, 2022.
The Company recognized compensation expense related to these warrants of $25,137
for the year ended December 31, 2020. After meeting certain deliverables set
forth in the agreement, Mr. Goekel will be issued stock warrants for 1,000,000
shares at a strike price that is an average of the stock price for the 90 days
that the deliverables have been met.
Other
Pursuant to the GIE Acquisition Agreement in August 2012, we agreed to: (i)
issue an additional 7,500,000 shares of Common Stock when the first portable GTL
unit is built and becomes operational, and is capable of producing 2,000 barrels
of diesel or jet fuel per day, and (ii) pay a 2% royalty on all gross production
sales on each unit placed in production, or one percent (1%) each to the
founders and previous owners of GIE. On February 6, 2018, and in connection with
a settlement agreement dated April 5, 2018, by and between the Greer Family
Trust and us, which is the successor in interest one of the founders and prior
owners of GIE, F. Conrad Greer ("Greer"), (the "Trust", and such settlement
agreement the "Trust Settlement Agreement"), we issued 3,000,000 shares of
Common Stock and a convertible promissory note for $150,000 to the Trust in
exchange for: (i) a termination of the Trust's right to receive 3,750,000 shares
of Common Stock in the future and 1% of the royalties owed to the Trust under
the GIE Acquisition Agreement; (ii) the termination of Greer's then current
employment agreement with GIE; and (iii) the Trust's waiver of any future claims
against us for any reason.
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As a result of the transactions consummated by the Trust Settlement Agreement,
we are committed to issue a reduced number of 3,750,000 shares of Common Stock
and 1% of the royalties due on production of our GTL operational units to Ray
Wright, the other founder and prior owner of GIE, pursuant to the GIE
Acquisition Agreement.
Mining Leases
We have a minimum commitment during 2021 of approximately $11,880 for our annual
lease maintenance fees due to Bureau of Land Management ("BLM") for the Arizona
Property, such payment was made prior to the due date of September 1, 2021.
There is no actual lease agreement with the BLM, but we file an annual
maintenance fee form and pay fees to the BLM to hold our claims.
Financing
Related parties
Financing to date has been provided by loans, advances from Shareholders and
Directors and issuances of our Common Stock in various private placements to
accredited investors, related parties and institutions.
During the nine month period ended September 30, 2021, we received related party
loans from the following directors under the Mabert Loan facility: $354,248 from
Kevin Jones, $70,000 from Michael Wykrent and $5,000 from Kent Harer. See also
Note 5 - Convertible Notes Payable and Notes Payable Related Parties herein
above.
For the three months ended September 30, 2021 we received $142,936 in cash and
payment advances from our director, Kevin Jones, a greater than 5% shareholder
which has been accrued as "Advances - related parties" for the period.
For the year ended December 31, 2020, we received $393,702 in related party
loans from Mabert, acting as agent for various lenders to the Company.
Third-party financing
On September 7, 2021, the Company issued 62,500 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $2,500, or $0.04 per share.
On September 3, 2021, the Company issued 125,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $5,000, or $0.04 per share.
On August 31, 2021, the Company issued 600,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $30,000, or $0.05 per share.
On August 30, 2021, the Company issued 200,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $10,000, or $0.05 per share.
On August 27, 2021, the Company issued 300,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
three (3) accredited investors, for $15,000, or $0.05 per share.
On August 13, 2021, the Company issued 400,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $20,000, or $0.05 per share.
On August 10, 2021, the Company issued 800,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
two (2) accredited investors, for $40,000, or $0.05 per share.
On August 9, 2021, the Company issued 100,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $5,000, or $0.05 per share.
On August 5, 2021, the Company issued 400,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
two (2) accredited investors, for $20,000, or $0.05 per share.
On August 3, 2021, the Company issued 500,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $25,000, or $0.05 per share.
On August 2, 2021, the Company issued 200,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $10,000, or $0.05 per share.
25
On June 22, 2021, the Company issued 382,500 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
an accredited investor, in lieu of cash payment for consulting fees of $11,475,
or $0.03 per share.
On June 3, 2021, the Company issued 2,000,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
three (3) accredited investors, for $100,000, or $0.05 per share.
On May 7, 2021, the Company issued 100,000 shares of Rule 144 restricted Common
Stock, par value $.0001 per share pursuant to a private placement sale to an
accredited investor, in lieu of cash payment for consulting fees of $3,000, or
$0.03 per share.
On May 6, 2021, the Company issued 166,667 shares of Rule 144 restricted Common
Stock, par value $.0001 per share pursuant to a private placement sale to an
accredited investor, for $5,000, or $0.03 per share.
On May 6, 2021, the Company issued 2,000,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
an accredited investor, for $50,000, or $0.025 per share.
On May 6, 2021, the Company issued 600,000 shares of Rule 144 restricted Common
Stock, par value $.0001 per share pursuant to a private placement sale to an
accredited investor, for $18,000, or $0.03 per share.
On March 18, 2021, the Company issued 1,200,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
an accredited investor, for $36,000, or $0.03 per share.
Impact of Inflation
While we are subject to general inflationary trends, including for basic
manufacturing production materials, our management believes that inflation in
and of itself does not have a material effect on our operating results. However,
inflation may become a factor in the future. However, the COVID-19 virus and its
current extraordinary impact on the world economy has reduced oil consumption
globally, decreasing crude oil prices, to levels not seen since the early
1980's. The economics of GTL conversion rely in part on the arbitrage between
oil and natural gas prices, with economic models for many producers, including
our own models, using a range of $30-60/bbl (for WTI or Brent Crude as listed
daily on the Nymex and ICE commodities exchanges) to determine relative
profitability of their GTL operations. While the COVID-19 virus may run its
human course in the near term, we believe (as many others in the U.S. government
and media believe), that the economic impacts will be long lasting and for all
practical matters, remain largely unknown at this time.
Off-Balance Sheet Arrangements
During the year ended December 2019, we entered into a revenue interest research
and development venture with Mabert and an employee, Tom Phillips, OPMGE. We
account for our participation under the Equity Method, as further defined herein
below, whereby we may be subject to future gains and losses that are reasonably
likely to have an effect on our reported results of operations and liquidity. We
are not required to invest, participate in any of the ongoing costs, financing
or capital expenditures made by OPMGE. Since inception of this arrangement, we
have advanced a total of $412,885 to OPMGE, and accordingly, had accrued a
receivable from OPMGE. We have evaluated this receivable and have determine that
collectability is uncertain. Accordingly, the Company has fully reserved the
full amount of this equity method receivable with OPMGE as of September 30,
2021.
Critical Accounting Policies and Estimates
Our Financial Statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States ("GAAP").
Preparing our Financial Statements requires management to make estimates and
assumptions that impact the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. Critical accounting policies include revenue
recognition and impairment of long-lived assets.
We evaluate our long-lived assets for financial impairment on a regular basis in
accordance with Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," which evaluates the
recoverability of long-lived assets not held for sale by measuring the carrying
amount of the assets against the estimated discounted future cash flows
associated with them. At the time such evaluations indicate that the future
discounted cash flows of certain long-lived assets are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their fair values.
26
We believe that the critical accounting policies discussed below affect our more
significant judgments and estimates used in the preparation of our financial
statements.
Revenue Recognition
The Financial Accounting Standards Board ("FASB") issued Accounting Standard 606
- Revenue from Contracts with Customers, as guidance on the recognition of
revenue from contracts with customers in May 2014 with amendments in 2015 and
2016. Revenue recognition will depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The guidance
also requires disclosures regarding the nature, amount, timing, and uncertainty
of revenue and cash flows arising from contracts with customers. The guidance
permits two methods of adoption: retrospectively to each prior reporting period
presented or retrospectively with the cumulative effect of initially applying
the guidance recognized at the date of initial application (the cumulative
catch-up transition method). We adopted the guidance on January 1, 2018 and
applied the cumulative catch-up transition method. The transition adjustment to
be recorded to stockholders' deficit upon adoption of the new standard did not
have a material effect upon the condensed unaudited consolidated financial
statements. The Company has not, to date, generated any revenues.
Equity Method Investment
On August 29, 2019, we entered into a research and development venture, OPMGE,
with Mabert and an employee, Tom Phillips. We contributed a limited license to
use our proprietary and patented GTL technology and a working G-Reformer
refractory unit, for no actual cost basis, in exchange for 300 membership units
in OPMGE, equating to an approximately a 42.8% current interest in OPMGE,
pending the expected issuance of an additional 300 membership units, equating to
a net 30% ownership interest in OPMGE at that time. There was not previously and
is no book or asset value attributed to the contributed technology. We evaluated
our interest in OPMGE and determined that we do not control OPMGE. We account
for our interest in OPMGE via the equity method of accounting. To our knowledge,
at September 30, 2021, OPMGE had no material business activity as of such date.
As described in "Note 9 - Related Party Transactions" herein above, we maintain
a related party receivable from OPMGE related to advances made to assist in
certain capital expenditures. As of September 30, 2021, the Company has fully
reserved the full amount of this equity method receivable with OPMGE.
Stock-Based Compensation
Accounting Standard 718, "Compensation - Stock Compensation" ("ASC 718")
established financial accounting and reporting standards for share-based
payments issued to employees and share-based payments issued to nonemployees for
goods and services. It defines a fair value-based method of accounting for an
employee stock option or similar equity instrument. We account for compensation
cost for stock option plans and share-based payments to non-employees in
accordance with ASC 718.
Use of Estimates
The preparation of our Financial Statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of our Financial Statements and the reported amount of revenue and
expenses during the reported period. Actual results could differ materially from
the estimates.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of
3-months or less to be cash equivalents. There were no cash equivalents at
September 30, 2021, or December 31, 2020. Unless otherwise indicated, all
references to "dollars" in this Form 10-Q are to U.S. dollars.
Income Taxes
We account for income taxes in accordance with FASB ASC 740, "Income Taxes,"
which requires that we recognize deferred tax liabilities and assets based on
the differences between the financial statement carrying amounts and the tax
bases of assets and liabilities, using enacted tax rates in effect in the years
the differences are expected to reverse. Deferred income tax benefit (expense)
results from the change in net deferred tax assets or deferred tax liabilities.
A valuation allowance is recorded when it is more likely than not that some or
all deferred tax assets will not be realized.
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We have adopted the provisions of FASB ASC 740-10-05, Accounting for Uncertainty
in Income Taxes ("ASC 750-10-05"). ASC 750-10-05 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial statements
and prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Additionally, ASC 750-10-05 provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. Open tax years, subject to IRS
examination include 2016 - 2020.
Net Loss per Share, Basic and Diluted
We have adopted Accounting Standards Codification Subtopic 260-10, Earnings per
Share, specifying the computation, presentation and disclosure requirements of
earning per share information. Basic loss per share has been computed by
dividing net loss available to common shareholders by the weighted average
number of common shares issued and outstanding for the period. Shares issuable
upon the exercise of warrants (3,000,000), shares convertible for debt
(2,083,333) and shares outstanding but not yet issued (823,500) have been
excluded as a common stock equivalent in the diluted loss per share because
their effect would be anti-dilutive as of September 30, 2021. Shares issuable
upon the exercise of warrants (8,000,000), shares convertible for debt
(3,616,539) and shares outstanding but not yet issued (356,186) have been
excluded as a common stock equivalent in the diluted loss per share because
their effect would be anti-dilutive as of September 30, 2020.
Derivative Financial Instruments
The Company accounts for derivative instruments in accordance with Accounting
Standards Codification 815, Derivatives and Hedging ("ASC 815"), which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. ASC 815 requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value.
If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.
Concentration and Credit Risk
Financial instruments and related items, which potentially subject us to
concentrations of credit risk, consist primarily of cash, cash equivalents, and
trade receivables. We place our cash and temporary cash investments with high
-credit quality institutions. At times, such investments may be in excess of the
Federal Deposit Insurance Corporation insurance limit.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying condensed unaudited consolidated financial statements.
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