The following discussion and analysis of our results of operations and financial
condition for the fiscal years ended December 31, 2021 and 2020 should be read
in conjunction with our Financial Statements and the notes to those Financial
Statements that are included elsewhere in this Form 10-K 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-K. 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.
In the below discussion, "we," "our," "us," the "Company" and similar terms in
this report, as well as 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.
Greenway Technologies, Inc. is engaged in the research and development of
proprietary gas-to-liquids syngas conversion systems and micro-plants that can
be scaled to meet specific gas field production requirements. The company's
patented and proprietary technologies have been realized in its first commercial
G-Reformer unit, a unique component used to convert natural gas into synthesis
gas, which when combined with a Fischer-Tropsch 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. 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.
The Company believes that its proprietary G-Reformer is a major innovation in
gas reforming and GTL technology in general. Initial tests have demonstrated
that the Company's solution appears to be superior to legacy technologies which
are more costly, have a larger footprint and cannot be easily deployed at field
sites to process associated gas, stranded gas, coal-bed methane, vented gas, or
flared gas - all markets the Company seeks to service.
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.
-14-
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 continue its unique and patented technology.
In February 2021, the Company was issued Patent 10,907,104, the fourth patent
relating to the company's proprietary G-Reformer™ technology which allows for
the conversion of natural gas into synthesis gas. The newly issued patent
extends the methods and details of generating syngas using the apparatus
described in a previously issued patent No. 10,633,594, the company's third
patent. As described in the patent, methane, oxygen, and steam are continuously
injected into the combustion section of the apparatus to generate carbon
monoxide along with unreacted methane and steam. The carbon monoxide, unreacted
methane, and steam then enter the catalyst chamber where these components react
to generate syngas. The pressure inside the reaction vessel is controlled at no
higher than 5 psig.
Further, the Company believes its 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 O&G operators. In
addition, the proprietary technology based around the G-Reformer is unique in
that it also allows for transportable (mobile) GTL plants with a much smaller
footprint as compared to legacy large-scale technologies. Greenway is in
discussions with a number of oil and gas operators and other interested parties
to license and obtain joint venture or other forms of capital funding to build
its first third-party customer gas-to-liquid plant.
Mining Interest
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 for 5,066,000 shares of restricted Common A stock. Early
indications, from samples taken and processed, provided reason to believe that
the potential recovery value of the metals located on the 1,440 acres is
significant, but only actual mining and processing will determine the ultimate
value which may be realized from this property holding. The Company is currently
exploring strategic options to partner or sell its interest in this acreage,
while it focuses on its emerging GTL technology sales and marketing efforts.
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 8, 2022, which is included
with our consolidated Financial Statements and raises substantial doubt about
our ability to continue as a going concern.
2021 2020
Net loss $ (1,744,376 ) $ (2,541,972 )Net cash used in operations (791,906 ) (686,032 )
Negative working capital (9,886,820 ) (8,844,210 )
Stockholders' deficit
(9,886,820 ) (8,844,210 )
As of December 31, 2021, we had total liabilities in excess of assets by
$9,886,820. Also, during the year ended December 31, 2021, we used net cash of
$791,906 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-K 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.
-15-
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 2022 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.
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
For Year Ended December 31, 2021 as Compared to Year Ended December 31, 2020:
We had no revenues for consolidated operations for the years ended December 31,
2021 and 2020. We reported consolidated net losses during the years ended
December 31, 2021 and 2020 of $1,744,376 and $2,541,972, respectively.
The following table summarizes consolidated operating expenses and other income
and expenses for the years ended December 31, 2021, and December 31, 2020:
2021 2020
General and administrative $ 998,103 $ 1,341,512
Research and development 158,000 30,000
Gain on change in fair value of derivative - 62,645
Interest expense (588,273 ) (769,170 )
Settlement loss - loan agreement - (17,881 )
Gain on settlement of accounts payable - 809
Reserve for equity method investment receivable - (412,885 )
Convertible debt derivative expense - (33,978 )
Operating Expenses. During the year ended December 31, 2021, operating expenses
decreased to $1,156,103, as compared to $1,371,512 for the year ended December
31, 2020. The decrease was due primarily to a $139,667 decrease in salaries, a
$84,591 decrease in legal expense and a $42,000 decrease in compensation expense
related to warrants in 2020 offset by a $128,000 increase in research and
development expenses in 2021 compared to the same period in 2020. Major
operating expense categories consisted of the following:
Salaries. During the year ended December 31, 2021, total salaries decreased to
$390,333 as compared to $530,000 for the year ended December 31, 2020. The
decrease is due to one employee leaving in the fourth quarter of 2020 and
another leaving in the fourth quarter of 2021.
-16-
Consulting Fees. During the year ended December 31, 2021, consulting expense
decreased to $325,899, as compared to $332,961 for the year ended December 31,
2020.
Travel Expenses. During the year ended December 31, 2021, travel expenses
decreased to $0, as compared to $18,487 in the year ended December 31, 2020. The
decrease in travel expenses was due no travel in 2021 compared air travel during
the first quarter of 2020.
Legal Expenses. During the year ended December 31, 2020, legal expenses
decreased to $122,205, as compared to $206,796 in the year ended December 31,
2020. The decrease in legal fees was due primarily to decreased legal matters in
progress during 2021 and settlement of various matters year to year.
Research and Development Costs. During the year ended December 31, 2021,
research and development costs increased to $158,000, as compared to $30,000 in
the year ended December 31, 2020. The change was due to the payment of the
renewal fee for the 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.
Interest Expense. During the year ended December 31, 2021, interest expense
decreased to $588,273, including interest to related parties of $478,646, as
compared to $769,170 for the year ended December 31, 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
year ended December 31, 2021, the gain on the fair value of derivatives was $0
as compared to a gain of $62,645 for the change in the derivative fair value and
a debt expense of $33,978 related to the derivatives for the year ended December
31, 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 2020. The convertible notes payable were settled as of
December 31, 2020
Loss from Operations. Our net loss from operations decreased to $1,156,103 in
the year ended December 31, 2021, as compared to $1,371,512 for the year ended
December 31, 2020, for the reasons listed above.
Net Loss. Our consolidated net loss decreased to $1,744,376, or a negative $0.01
per basic and diluted earnings share for the year ended December 31, 2021, as
compared to a net loss of $2,541,972, or a negative $0.01 per basic and diluted
earnings share for the same period ended 2020. The weighted-average number of
shares of Common Stock used in the earnings per share for the basic and dilutive
computation was 342,400,231 for the year ended December 31, 2021, and
312,854,191 for the year ended December 31, 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. We had $60,549 in cash,
total assets of $60,605, and total liabilities of $9,947,425 as of December 31,
2021. Total accumulated deficit at December 31, 2021, was ($34,766,177).
Liquidity is the ability of a company to generate adequate amounts of cash to
meet all of its financial obligations. The following table provides certain
selected balance sheet comparisons between December 31, 2021, and December 31,
2020:
$ %
2021 2020 Change Change
Cash $ 60,549 $ 1,628 $ 58,921 3619 %
Total current assets $ 60,605 $ 12,863 $ 47,742 371 %
Total assets $ 60,605 $ 12,863 $ 47,742 371 %
Accounts payable and accrued
liabilities $ 5,225,368 $ 4,908,321 $ 317,047 6 %
Notes payable and accrued
interest $ 4,722,057 $ 3,948,752 $ 773,305 20 %
Total current liabilities $ 9,947,425 $ 8,857,073 $ 1,090,352 12 %
Total long-term debt $ 0 $ 0 $ 0 0 %
Total liabilities $ 9,947,425 $ 8,857,073 $ 1,090,352 12 %
-17-
To increase our working capital we have considered completing additional private
stock sales and entering into new debt instruments. During the year ended
December 31, 2021, sales of our Common Stock provided $656,500. During the year
ended December 31, 2020, sales of our Common Stock provided $155,000. In January
2020, we entered into a Securities Purchase Agreement (the "Purchase
Agreement"), with PowerUp Lending Group, Ltd., a Virginia corporation
("PowerUp"), that specializes in making funding commitments to small-cap public
companies. PowerUp had agreed to provide up to $1,000,000 to us over a twelve
(12) month period, subject to period determined stock price and trading
attributes, and we borrowed $171,000 during the first quarter of 2020 under this
from of Purchase Agreement. During the third and fourth quarters of 2020, the
lenders converted the outstanding convertible notes to equity.
Operating Activities
Net cash used in operating activities during the year ended December 31, 2021,
was $791,906, as compared to $686,032 for the year ended December 31, 2020.
Investing activities
Net cash used in investing activities for the year ending December 31, 2021 was
$0, as compared to $25,000 for the year ended December 31, 2020.
Financing Activities
Net cash provided by financing activities was $850,827 for the year ended
December 31, 2021, comprised of $656,500 in sales of our Common Stock, $354,327
received from stockholder advances, less $100,000 of payments on notes payable
to related parties and $60,000 on other notes payable.
Net cash provided by financing activities was $696,617 for the year ended
December 31, 2020, comprised of $155,000 in sales of our Common Stock, $171,000
in proceeds from convertible notes payable, $215,609 in proceeds from Notes -
Related Parties, $270,008 received from stockholder advances, less $115,000 of
payments on notes payable related to legal settlements.
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. As shown in
the accompanying Financial Statements, we have incurred an accumulated deficit
of $34,766,177 and $33,021,801 as of December 31, 2021, and 2020, respectively.
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.
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 year ended December 31, 2021, we have paid
UTA a total of $158,000.
Operational Expenditures
Employment Agreements
In August 2012, we entered into an employment agreement with Raymond Wright, for
the position of president of GIE, for a term of five years with compensation of
$90,000 per year. In September 2014, Mr. Wright's employment agreement was
amended to increase his annual pay to $180,000. By its terms, Mr. Wright's
employment agreement automatically renewed on August 12, 2020 and 2021, for a
successive one-year periods. During the twelve-months ended December 31, 2021,
we paid and/or accrued a total of $180,000 for this fiscal year under the terms
of the agreement. Mr. Wright is also the chairman of our Board of Directors.
-18-
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 December 31, 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.
The foregoing summary of Mr. Olynick's and Mr. Jones's employment agreement is
qualified in its entirety by reference to the actual true and correct Employment
Agreements by and between Mr. Olynick, Mr. Jones and our Company, dated Mary 10,
2018, copies of which are filed as Exhibits 10.39 and 10.40 to this Form 10-K
and incorporated by reference herein.
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 for the year ending
December 31, 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 $25,510 in expenses related to such prior consulting agreement
expenses. See Exhibit 10.42 incorporated by reference herein.
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. The foregoing summary of the Mr. Phillips's
employment agreement is qualified in its entirety by reference to the actual
true and correct Employment Agreement by and between Thomas Phillips and our
Company, dated April 1, 2019, a copy of which is filed as Exhibit 10.53 to this
Form 10-K and incorporated by reference herein.
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. The foregoing summary of the Mr.
Turner's employment agreement is qualified in its entirety by its reference to
the actual true and correct Employment Agreement by and between Ryan Turner and
our Company, dated April 1, 2019, a copy of which is filed as Exhibit 10.58 to
this Form 10-K and incorporated by reference herein.
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 to this Form 10-K 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. Note 11 - Commitments
and Contingencies to our Financial Statements.
-19-
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 has accrued Consulting Fees and Expenses of $120,988 for all prior
periods through the year ending December 31, 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 December 31, 2021, we have accrued $180,000 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 valued and 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. 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-K 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 2021 of approximately $11,880 for our annual
lease maintenance fees due to Bureau of Land Management ("BLM") for the Arizona,
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. The next payment will be due on
September 1, 2022.
-20-
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 year ended December 31, 2021, we received $429,247 in related party
loans from Mabert, acting as agent for various lenders to the Company. See also
Note 5 - Term Notes Payable and Notes Payable Related Parties to our Financial
Statements.
As of December 31, 2021, we received $68,014 in cash and payment advances, net
of repayments, 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 December 23, 2021, the Company 333,333 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 $0.03 per share.
On December 22, 2021, the Company issued 1,500,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
two (2) accredited investors, for $45,000, or $0.03 per share.
On December 20, 2021, the Company issued 1,000,000 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 $0.03 per share.
On December 2, 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
one (1) accredited investor, for $5,000, or $0.03 per share.
On November 29, 2021, the Company issued 1,000,000 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 $0.03 per share.
On November 24, 2021, the Company 166,667 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 $0.03 per share.
On November 23, 2021, the Company 333,333 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 $0.03 per share.
On November 18, 2021, the Company issued 1,666,667 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $50,000, or $0.03 per share.
On November 3, 2021, the Company issued 1,000,000 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 $0.03 per share.
On November 1, 2021, the Company issued 666,667 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 $0.03 per share.
On October 8, 2021, the Company issued 625,000 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 $0.04 per share.
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.
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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.
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.
We have also received loans from external lenders. In January 2020, we entered
into a Securities Purchase Agreement (the "Purchase Agreement"), with PowerUp
Lending Group, Ltd., a Virginia corporation ("PowerUp"), that specializes in
making funding commitments to small-cap public companies. PowerUp agreed to
provide up to $1,000,000 to us over a twelve (12) month period, subject to
period determined stock price and trading attributes, and we received $171,000
during the first quarter of 2020 under this from of Purchase Agreement. As of
the period ending December 31, 2020, PowerUp has converted their notes payable
to shares issued. The Purchase Agreement contains customary representations and
warranties, covenants, and conditions to closing. The foregoing description of
the Purchase Agreement and the Notes do not purport to be complete and are
qualified in their entirety by reference to the full text of the Purchase
Agreement and the Notes, which are filed herewith as Exhibits 10.63 - 10.66,
respectively, and incorporated herein by reference. See Note 6 - Notes Payable
and Convertible Notes Payable to our Financial Statements.
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On November 11, 2020, 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 $20,000, or $0.01 per share.
On November 17, 2020, the Company issued 800,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
an accredited investor, for $40,000, or $0.05 per share.
On November 17, 2020, the Company issued 666,667 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
an accredited investor, for $20,000, or $0.03 per share.
On April 8, 2020, the Company issued 375,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
an accredited investor, for $15,000, or $0.04 per share.
On February 11, 2020, 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 $60,000, or $0.10 per share.
Seasonality
We do not anticipate that our business will be affected by seasonal factors.
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 has
fully reserved for this amount as of December 31, 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.
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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.
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.
Stock-Based Compensation
Accounting Standard 718, "Accounting for Stock-Based Compensation" ("ASC 718")
established financial accounting and reporting standards for stock-based
employee compensation plans. It defines a fair value-based method of accounting
for an employee stock option or similar equity instrument. In January 2006, we
implemented ASC 718, and accordingly, we account for compensation cost for stock
option plans 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
December 31, 2021, or December 31, 2020. Unless otherwise indicated, all
references to "dollars" in this Form 10-K are to U.S. dollars.
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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.
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 (365,166) have been
excluded as a common stock equivalent in the diluted loss per share because
their effect would be anti-dilutive as of December 31, 2021. Shares issuable
upon the exercise of warrants (7,000,000), shares of Common Stock convertible
for debt (2,083,333) and shares of Common Stock outstanding but not yet issued
(537,762) have been excluded as a common stock equivalent in the diluted loss
per share because their effect would be anti-dilutive as of December 31, 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 consolidated financial statements.
Subsequent Events
From January 1, 2022 through the period ended April 8, 2022, the Company issued
2,565,166 shares of common stock comprised of: 2,366,666 shares of Rule 144
restricted Common Stock issued in a private placement to four accredited
investors at an average price of $0.02 per share and 198,500 shares issued to
Kevin Jones, a related party, for costs related to issuance of promissory notes.
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