CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
The following discussion and analysis of our results of operations and financial
condition for the periods ending June 30, 2022 and 2021 should be read in
conjunction with our Financial Statements and the notes to those Financial
Statements that are included elsewhere in this Form 10-Q and were prepared
assuming that we will continue as a going concern. Our discussion includes
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations, and intentions.
Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the "Risk Factors," "Cautionary Notice
Regarding Forward-Looking Statements" and "Description of Business" sections and
elsewhere in this Form 10-Q. We use words such as "anticipate," "estimate,"
"plan," "project," "continuing," "ongoing," "expect," "believe," "intend,"
"may," "will," "should," "could," "predict," and similar expressions to identify
forward-looking statements. Although we believe the expectations expressed in
these forward-looking statements are based on reasonable assumptions within the
bounds of our knowledge of our business, our actual results could differ
materially from those discussed in these statements. We undertake no obligation
to update publicly any forward-looking statements for any reason even if new
information becomes available or other events occur in the future.
Information regarding market and industry statistics contained in this Report is
included based on information available to us that we believe is accurate. Much
of this general market information is based on industry trade journals, articles
and other publications that are not produced for purposes of SEC filings or
economic analysis. We have not reviewed nor included data from all possible
sources and cannot assure investors of the accuracy or completeness of any such
data that is included in this Report. Forecasts and other forward-looking
information obtained from these sources are subject to the same qualifications
and the additional uncertainties accompanying any estimates of future market
size, revenue and market acceptance of our services. As a result, investors
should not place undue reliance on these forward-looking statements, and we do
not assume any obligation to update any forward-looking statement.
The following discussion and analysis of financial condition, results of
operations, liquidity, and capital resources, should be read in conjunction with
our Annual Form 10-K filed on April 11, 2022. 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 "UMED" and "Greenway" all refer to Greenway
Technologies, Inc., and our wholly-owned subsidiary, Greenway Innovative Energy,
Inc., unless the context requires otherwise.
Overview
We are engaged in the research and development of proprietary gas-to-liquids
("GTL") synthesis gas ("Syngas") conversion systems and micro-plants that can be
scaled to meet specific gas field production requirements. Our patented and
proprietary technologies have been realized in our first commercial G-ReformerTM
unit ("G-Reformer"), a unique component used to convert natural gas into Syngas,
which when combined with a Fischer-Tropsch ("FT") reactor and catalyst, produces
fuels including gasoline, diesel, jet fuel and methanol. G-Reformer units can be
deployed to process a variety of natural gas streams including pipeline gas,
associated gas, flared gas, vented gas, coal-bed methane and/or biomass gas.
When derived from any of these natural gas sources, the liquid fuels created are
incrementally cleaner than conventionally produced oil-based fuels. Our
Company's objective is to become a material direct and licensed producer of
renewable GTL synthesized diesel and jet fuels, with a near -term focus on U.S.
market opportunities. For more information about our Company, please visit our
website located at https://gwtechinc.com/.
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Our GTL Technology
In August 2012, we acquired 100% of GIE, pursuant to that certain Purchase
Agreement, by and between us and GIE, dated August 29, 2012, and filed as
Exhibit 10.5 to this Form 10-K, and incorporated by reference herein (the "GIE
Acquisition Agreement"). GIE owns patents and trade secrets for a proprietary
technology to convert natural gas into Syngas. Based on a new, breakthrough
process called Fractional Thermal Oxidation™ ("FTO"), we believe that the
G-Reformer, combined with conventional FT processes, offers an economical and
scalable method to converting natural gas to liquid fuel. On February 15, 2013,
GIE filed for its first patent on this GTL technology, resulting in the issue of
U.S. Patent 8,574,501 B1 on November 5, 2013. On November 4, 2013, GIE filed for
a second patent covering other unique aspects of the design and was issued U.S.
Patent 8,795,597 B2 on August 5, 2014. The Company has several other pending
patent applications, both domestic and international, related to various
components and processes relating to our proprietary GTL methods, complementing
our existing portfolio of issued patents and pending patent applications.
On June 26, 2017, we and the University of Texas at Arlington ("UTA") announced
that we had successfully demonstrated our GTL technology at our sponsored Conrad
Greer Laboratory at UTA, proving the viability of the science behind the
technology.
On March 6, 2018, we announced the completion of our first commercial scale
G-Reformer, a critical component in what we call the Greer-Wright GTL system.
The G-Reformer is the critical component of the Company's innovative GTL system.
A team consisting of individuals from our Company, UTA and our Company's
contracted G-Reformer manufacturer worked together to test and calibrate the
newly built G-Reformer unit. The testing substantiated the units' Syngas
generation capability and demonstrated additional proficiencies within certain
proprietary prior prescribed testing metrics.
On July 23, 2019, we announced that Mabert LLC, a Texas limited liability
company ("Mabert"), 100% owned by Kevin Jones, acquired INFRA Technology Group's
U.S. GTL plant and technology located in Wharton, Texas (the "Wharton Plant").
Mabert purchased the entire 5.2-acre site, plant and equipment, including
INFRA's proprietary FT reactor system and operating license agreement.
On August 29, 2019, to further facilitate the commercialization process, we
announced that Greenway entered into a joint venture with OPM Green Energy, LLC,
a Texas limited liability company ("OPMGE"), for a 42.857% ownership interest in
OPMGE. In exchange for its 42.857% ownership of OPMGE, Greenway agreed to
contribute a G-Reformer to the entity. The other members of OPMGE are Mabert,
which owns 42.857% and Tom Phillips, our former Vice President of Operations for
GIE, who owns 14.286%. Additionally, OPMGE entered a LEASE AGREEMENT with Mabert
whereby OPMGE leased the Wharton Plant from Mabert. Our involvement in OPMGE was
intended to facilitate third-party certification of our G-Reformer and related
equipment and technology. In addition, we anticipated that OPMGE's operations
would demonstrate that the G-Reformer is a commercially viable technology for
producing Syngas and marketable fuel products. As the first operating GTL plant
to use our proprietary reforming technology and equipment, the Wharton Plant was
initially expected to yield a minimum of 75 - 100 barrels per day of gasoline
and diesel fuels from converted natural gas.
Greenway never transferred the G-Reformer to OPMGE, as required by the LIMITED
LIABILITY COMPANY AGREEMENT OF OPM GREEN ENERGY, LLC. Accordingly, it defaulted
on its obligation under the agreement. Under the LEASE AGREEMENT between Mabert
and OPMGE, OPMGE was required to pay rent and to pay the following expenses
relating to the operation of the Wharton Plant:
? Utilities
? Trash removal and lawn maintenance
? Taxes
? Insurance
? Maintenance, Repairs or Alterations
The lease stated that this transaction was a "Triple Net Lease."
If OPMG did not pay rent or the other expenses outlined above, it represented
Events of Default, which allowed Mabert the right to terminate the lease. Based
on the Events of Default that occurred, Mabert exercised its right to terminate
the lease.
On April 28, 2020, the Company was issued a new U.S. Patent 10,633,594 B1 for
syngas generation for gas-to-liquid fuel conversion. The Company has several
other pending patent applications, both domestic and international, related to
various components and processes involving our proprietary GTL methods, which
when granted, will further complement our existing portfolio of issued patents
and pending patent applications.
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.
16
On December 15, 2020, the Company announced additional information regarding
valuable outputs produced by the company's proprietary G-Reformer™ catalyst
reactor and Fischer-Tropsch (FT) technology which combine to form the
"Greer-Wright" GTL solution. Originally developed to convert natural gas into
ultra-clean synthetic fuel, recent research and development activity has shown
that the technology can also allow the extraction of high-value chemicals and
alcohols. The chemical outputs include n-Hexane, n-Heptane, n-Octane, n-Decane,
n-Dodecane, and n-Tridecane. Alcohols produced include ethanol and methanol. The
company has identified worldwide industrial demand for these outputs which will
significantly improve the economic return on investment (ROI) of GTL plants that
are based on GWTI's technology. GWTI is a development-stage company with plans
to commercialize its unique and patented technology.
Ultimately, we believe that our proprietary G-Reformer is a major innovation in
gas reforming and GTL technology in general. Initial tests have demonstrated
that our Company's solution appears to be superior to legacy technologies, which
are more costly, have a larger footprint, and cannot be easily deployed at field
sites to process associated gas, stranded gas, coal-bed methane, vented gas, or
flared gas.
The technology for the G-Reformer is unique, because it permits for
transportable (mobile) GTL plants with much smaller footprints, compared to
legacy large-scale technologies. Thus, we believe that our technologies and
processes will allow for multiple small-scale GTL plants to be built with
substantially lower up-front and ongoing costs, resulting in more profitable
results for oil and gas operators.
GTL Industry -Market
GTL converts natural gas - the cleanest-burning fossil fuel - into high-quality
liquid products that would otherwise be made from crude oil. These products
include transport fuels, motor oils, and the ingredients for everyday
necessities like plastics, detergents, and cosmetics. GTL products are
colorless, odorless, and contain almost none of the impurities, (e.g., sulphur,
aromatics, and nitrogen) that are found in crude oil.
Our Company has developed a revolutionary and unique process that converts
natural gas of various origins and compositions into a highly pure variety of
chemicals, high cetane diesel fuel, industrial grade pure water and electrical
energy. GTL technology has existed as a traditional process going back
generations. This process consists of two steps. First, natural gas is converted
into Synthesis Gas (Syngas) which is a non-naturally occurring blend of Hydrogen
and Carbon Monoxide. The front-end part of the GTL process is called "Gas
Reformation". The output of the Gas Reformer is compressed and fed through a
secondary process, called Fischer-Tropsch (FT). This secondary process is widely
used in many forms in the chemical and oil industries. While FT is a common
process, Gas Reformation has been the most difficult step beyond an old and
traditional process typically used in refineries. The invention of our
software-controlled GTL process fronted by our patented and revolutionary gas
reformation unit, the G-Reformer®, makes us the innovator in GTL technology. Our
patents are based on scalability, transportability, flexibility and
self-sustainment based on a wide variety of input gasses and output mixtures.
The Company's process is made of small sized modularly scalable units which are
portable and self-contained unlike other GTL solutions based on Steam Methane
reformation. While many companies have tried to scale Steam Methane Reformation
down for use in smaller, non-refinery based GTL plants, they have been largely
unsuccessful. As a result, we can build self-sufficient GTL plants at virtually
any location capable of supplying wellhead or pipeline gas of sufficient ongoing
volume. This gives us the ability to eliminate flaring at the source while
keeping remote oil fields in production without flaring. The conversion of
flaring gas to liquid allows trucks to easily move liquid chemicals, clean
diesel fuel, highly clean water and the power grid to move electricity from
virtually any location.
Our initial ROI studies of the market for high purity chemicals we produce can
provide incredibly rapid payback of investments. It should be noted the vast
majority of these chemicals produced are made in China. Further, because they
originate from a barrel of oil at a refinery, they are much lower in purity.
Products created by the GTL process include High Cetane Diesel, Naphtha,
Technical Grade Water, and high value, high purity chemicals. The chemicals
which would be produced in the GTL plant would be vital to many industries
including pharmaceutical, cosmetics, fragrances, adhesives, and others. The vast
majority of these chemicals are produced in China. Such dependency makes America
captive to shortfalls whether they are manufacturing related or intentional. By
making these chemicals in the USA, we reduce that dependency and keep the
product, the jobs, and the profits in America.
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.
17
Competition
Key industry players include: Chevron Corporation; KBR Inc, PetroSA, Qatar
Petroleum, Royal Dutch Shell; and Sasol Limited. In terms of global production
and consumption, Shell had the largest market share in 2021, with virtually all
current production located overseas. Our technology is not designed to compete
with the large refinery-size GTL plants operated by such large industry
operators. Our plants are designed to be scaled to meet individual gas field
production requirements on a distributed and mobile basis. According to a report
released in July 2019 by the Global Gas Flaring Reduction Partnership ("GGFRP"),
there are currently only 5 small-scale GTL plant technologies that have been
proven and are now available for flared gas monetization available in the U.S.,
including: Greyrock ("Flare to Fuels"); Advantage Midstream (licensing Greyrock
technology); EFT ("Flare Buster"); Primus GE and GasTechno ("Methanol in a
Box"). We were not a direct part of this study, as we had not received 3rd party
certification of our proprietary technology as of the date of this report.
However, the GGFRP report mentioned us as follows, "Greenway Technologies
announced on July 23 that Mabert LLC, a major investor in Greenway, acquired the
whole INFRA plant including an operating license agreement. The purpose of the
acquisition is the incorporation and commercial demonstration of Greenway's
'G-Reformer' technology. We will see whether the new team will be able to make
the plant with the new reformer operational. (Globe Newswire, Fort Worth, Texas,
Aug 31, 2019)."
Mining Interests
In December 2010, UMED acquired the rights to approximately 1,440 acres of
placer mining claims located on Bureau of Land Management ("BLM") land in Mohave
County, Arizona (such property, the "Arizona Property"), in an Assignment
Agreement dated December 27, 2010, and filed as Exhibit 10.31 to this Form 10-K,
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 8, 2022 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.
June 30, December 31,
2022 2021
Net loss $ (753,376 ) $ (1,744,376 )
Net cash used in operations $ (241,056 ) $ (791,906 )
Negative working capital $ (10,286,760 ) $ (9,886,820 )
Stockholders' deficit $ (10,286,760 ) $ (9,886,820 )
As of June 30, 2022, we had total liabilities in excess of assets by $10,286,760
and used net cash of $241,056 for our operating activities. This is as compared
to the most recent year ended December 31, 2021, when 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-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.
18
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
Three-months ended June 30, 2022, compared to the three-months ended June 30,
2021.
We had no revenues for our consolidated operations for the quarters ended June
30, 2022 and 2021. We reported consolidated net losses for each of these periods
of $351,775 and $473,628, respectively.
Operating Expenses.
General and Administrative Expenses. During the three-months ended June 30,
2022, general and administrative expenses decreased to $247,733, as compared to
$277,731 for the prior year three-months ended June 30, 2021. The decrease was
primarily due to decreased salaries and legal fees in the period.
Research and Development Expenses. During the three-months ended June 30, 2022,
Research and Development expenses decreased to $0, as compared to $48,000 for
the prior year three-months ended June 30, 2021. The change was due to the
expiration of the Sponsored Research Agreement ("SRA") with the University of
Texas at Arlington in the February of 2022, compared to three payments on the
SRA in the prior year three month period ended June 30, 2021.
Net Loss from Operations. Our net loss from operations decreased to $247,733 for
the quarter ended June 30, 2022, as compared to $325,731 for the quarter ended
June 30, 2021. The decrease was due primarily to decreased salaries, legal fees
and research and development expenses for the current period compared to the
quarter ended June 30, 2021.
Interest Expense. During the three-months period ended June 30, 2022, interest
expense increased to $174,419 as compared to interest expense of $147,897 for
the prior year three-months ended June 30, 2021. The increase was due to an
increase in discount amortization for the current period compared to the quarter
ended June 30, 2021.
Settlement Gain. During the three-months period ended June 30, 2022, we
recognized a $70,377 gain on the settlement of the Norman Reynolds legal matter.
In the settlement we agreed to pay Mr. Reynolds $20,000 in cash payments, which
have all been paid as of June 30, 2022.
Net Loss. Our net loss decreased to $351,775 for the three-months ended June 30,
2022, compared to a loss of $473,628 for the same three-months period in 2021.
The decrease was primarily due to the decreased general and administrative and
research and development expenses and the gain on settlement of the legal matter
in the period ended June 30, 2022.
Six-months ended June 30, 2022, compared to six-months ended June 30, 2021.
We had no revenues for our consolidated operations for the six-month periods
ended June 30, 2022 and 2021. We reported consolidated net losses for each of
these periods of $753,376 and $938,234, respectively.
19
Operating Expenses.
General and Administrative Expenses. During the six-months ended June 30, 2022,
general and administrative expenses decreased to $485,732, as compared to
$568,099 for the prior year six-months ended June 30, 2021. The decrease was
primarily due to decreased consulting fees, salaries and legal fees in the
period.
Research and Development Expenses. During the six-months ended June 30, 2022,
Research and Development expenses decreased to $16,000, as compared to $78,000
for the prior year six-months ended June 30, 2021. The change was due to the
expiration of the Sponsored Research Agreement ("SRA") with the University of
Texas at Arlington in the February of 2022.
Net Loss from Operations. Our net loss from operations decreased to $501,732 for
the six-months ended June 30, 2022, as compared to $646,099 for the prior year
six-months ended June 30, 2021. The decrease was due primarily to decreased
salaries, legal fees and research and development expenses for the current
period compared to the prior year period.
Interest Expense. During the six-months ended June 30, 2022, interest expense
increased to $322,021 as compared to interest expense of $292,135 for the prior
year six-months ended June 30, 2021. The increase was due to an increase in
discount amortization for the current period compared to the prior year period
ended June 30, 2021.
Settlement Gain. During the six-months period ended June 30, 2022, we recognized
a $70,377 gain on the settlement of the Norman Reynolds legal matter. In the
settlement we agreed to pay Mr. Reynolds $20,000 in cash payments, which have
all been paid as of June 30, 2022.
Net Loss. Our net loss decreased to $753,376 for the six-months ended June 30,
2022, compared to a loss of $938,234 for the same six-months period in 2021. The
decrease was primarily due to the decreased general and administrative and
research and development expenses and the gain on the settlement of the legal
matter in the six-month period ended June 30, 2022.
Liquidity and Capital Resources
We do not currently have sufficient working capital to fund our expected future
operations. We cannot assure investors that we will be able to continue our
operations without securing additional adequate funding. As of June 30, 2022, we
had $35,193 in cash, total assets of $39,785, and total liabilities of
$10,326,545. Our total accumulated deficit on June 30, 2022, was $(35,519,553).
Liquidity is the ability of a company to generate adequate amounts of cash to
meet its needs for cash. In the six-months ended June 30, 2022, our working
capital deficit increased by $399,940 from the recent year-ended December 31,
2021 primarily as the result of increases in accrued expenses and accrued
expenses - related parties of $177,500 and accrued interest payable of $262,442.
To increase our working capital we have considered completing additional private
stock sales and entering into new debt instruments.
Operating activities
Net cash used in continuing operating activities during the six-months ended
June 30, 2022 was $214,056 as compared to $425,817 for the six-months ended June
30, 2021.
Investing activities
Net cash used in investing activities for the six-months periods ending June 30,
2022 and 2021 was $0.
Financing Activities
Net cash provided by financing activities was $188,700 for the six-months ended
June 30, 2022, consisting of stockholder advances made by Director and
shareholder, Michael Wykrent, a related party of $3,500, sales of the Company's
Common Stock to private accredited investors for $180,200 and proceeds from a
note payable of $30,000, offset by payments on the note payable to Wildcat of
$25,000. Net cash provided by financing activities was $480,313 for the
six-months ended June 30, 2021, consisting of stockholder advances - related
party of $286,313, sales of the Company's Common Stock to private accredited
investors of $219,000, offset by payments on the note payable to Wildcat of
$25,000.
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.
20
Seasonality
We do not anticipate that our business will be affected by seasonal factors.
Commitments
Capital Expenditures
The last funded Scope of Work ("SOW") under our SRA with UTA was completed in
the year ended December 2019, with payments made of $120,000 to complete the
work described in the prior SOW. We signed a new SRA with UTA effective March 1,
2021 which relates to the testing and commercialization phase of our GTL
technology. The term of the agreement is through February 15, 2022. The first
payment under the SRA was made in March 2021 for $30,000. Going forward on the
15th of each month we were to pay UTA $15,454.54 through February 15, 2022, for
a total commitment of $200,000. We have paid UTA a total of $174,000 as of June
30, 2022 under the SRA.
Operational Expenditures
Employment Agreements
In August 2012, we entered into an employment agreement with our chairman of the
board, Ray Wright, as president of Greenway Innovative Energy, Inc., for a term
of five years with compensation of $90,000 per year. In September 2014, Wright's
employment agreement was amended to increase such annual pay to $180,000. By its
terms, the employment agreement automatically renews each year for successive
one-year periods, unless otherwise earlier terminated. During the three-months
ended June 30, 2022, 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 June 30, 2022. 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 June 30, 2022.
In addition, Mr. Olynick had previously entered into a consulting agreement (the
"Olynick Agreement") to provide general advisory services with us on April 18,
2019, and which included terms for payment of billable time at $40.00 per hour,
plus approved expenses. The Olynick Agreement was terminated when Mr. Olynick
became President of the Company on May 10, 2018. We have accrued $26,310 in
expenses related to such prior consulting agreement expenses as of June 30,
2022.
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 June 30, 2022.
Effective April 1, 2019, we entered into an employment agreement with Ryan
Turner for a term of twelve (12) months with compensation of $80,000 per year,
to manage our business development and investor relations. Mr. Turner reports to
the President of Greenway Technologies and is entitled to a no-cost grant of
common stock equal to 2,500,000 shares of the Company's Rule 144 restricted
common stock, par value $.0001 per share, valued at $.06 per share, or $150,000,
which we expensed as of the effective date of the agreement. Mr. Turner's
employment was terminated on September 7, 2021.
21
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.
Paul Alfano, a director and greater than five percent (5%) shareholder entered
into a consulting agreement with us on April 19, 2018 via Alfano Consulting
Services (the "Alfano Agreement"), to provide board and senior management
advice, including but not limited to corporate strategy, SEC regulatory
adherence, sales and marketing strategies, document and presentation preparation
and fund-raising support. Terms included payment of billable time at $40.00 per
hour, plus approved expenses, retroactive to January 1, 2017. A copy is
available by Exhibit 10.44 incorporated by reference herein. The Alfano
Agreement was terminated when Mr. Alfano became a director on June 26, 2019. The
Company paid all accrued Expense Reports, Interest and Consulting Fees due to
Mr. Alfano (totaling $140,000), plus Mr. Alfano paid an additional $15,000 to
the Company, for a total issuance of 6.2 million shares of stock on April 13,
2022 ($155,000 at $0.025 per share).
On October 19, 2020, the Company entered into a management consulting services
agreement with Dean Goekel (the "Goekel Agreement" via "Analytical
Professionals"), to manage engineering and vendor relationships, assist in
defining the design and cost of certain capital equipment and to manage the
direction of research, development and other related engineering activities. Mr.
Goekel will also support the Company's ongoing business operations, including
assistance in commercialization and market implementation, strategic planning
and other services. The agreed upon start date under the agreement is July 1,
2020 and the minimum engagement term was for six (6) months. After the initial
term the agreement automatically renews for subsequent six (6) month terms
unless the Company or Mr. Goekel terminates the agreement. Under the agreement,
in exchange for Mr. Goekel's services he will receive a minimum monthly fee of
$10,000 per month in deferred compensation until such time that adequate funds
are available for payment. As of June 30, 2022, we have accrued $240,000 in
compensation expense related to this agreement. Additionally, under the
agreement Mr. Goekel was issued stock warrants for 3,000,000 shares at a strike
price of $0.03 per share effective July 1, 2020 and which expired on June 30,
2022. After meeting certain deliverables set forth in the agreement, Mr. Goekel
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.
Mr. Goekel has not met the criteria for this agreement as June 30, 2022.
Other
Pursuant to the GIE Acquisition Agreement in August 2012, we agreed to: (i)
issue an additional 7,500,000 shares of Common Stock when the first portable GTL
unit is built and becomes operational, and is capable of producing 2,000 barrels
of diesel or jet fuel per day, and (ii) pay a 2% royalty on all gross production
sales on each unit placed in production, or one percent (1%) each to the
founders and previous owners of GIE. On February 6, 2018, and in connection with
a settlement agreement dated April 5, 2018, by and between the Greer Family
Trust and us, which is the successor in interest one of the founders and prior
owners of GIE, F. Conrad Greer ("Greer"), (the "Trust", and such settlement
agreement the "Trust Settlement Agreement"), we issued 3,000,000 shares of
Common Stock and a convertible promissory note for $150,000 to the Trust in
exchange for: (i) a termination of the Trust's right to receive 3,750,000 shares
of Common Stock in the future and 1% of the royalties owed to the Trust under
the GIE Acquisition Agreement; (ii) the termination of Greer's then current
employment agreement with GIE; and (iii) the Trust's waiver of any future claims
against us for any reason. A copy of the Trust Settlement Agreement and related
promissory note dated April 5, 2018, by us in favor of the Trust is filed as
Exhibit 10.36 to this Form 10-Q and incorporated by reference herein.
As a result of the transactions consummated by the Trust Settlement Agreement,
we are committed to issue a reduced number of 3,750,000 shares of Common Stock
and 1% of the royalties due on production of our GTL operational units to Ray
Wright, the other founder and prior owner of GIE, pursuant to the GIE
Acquisition Agreement.
22
Mining Leases
We have a minimum commitment during 2022 of approximately $11,880 for our annual
lease maintenance fees due to Bureau of Land Management ("BLM") for the Arizona
Property, with such payment due by September 1, 2022. There is no actual lease
agreement with the BLM, but we file an annual maintenance fee form and pay fees
to the BLM to hold our claims.
Financing
Related parties
Financing to date has been provided by loans, advances from Shareholders and
Directors and issuances of our Common Stock in various private placements to
accredited investors, related parties and institutions.
For the period ended June 30, 2022, we received $51,769 in related party loans
from a former director, Kevin Jones, under the Mabert Loan facility. See also
Note 5 - Term Notes Payable and Notes Payable Related Parties herein above.
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.
Third-party financing
On June 1, 2022, the Company issued 3,000,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $60,000, or $0.02 per share.
On May 31, 2022, the Company issued 2,603,538 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
two (2) accredited investors, for $51,991, or $0.02 per share.
On April 14, 2022, the Company issued 6,768,000 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
two (2) accredited investors, for $169,200, or $0.03 per share.
During the second quarter of 2022, the Company retroactively, as of February 18,
2022, issued 2,500,000 shares of Rule 144 restricted Common Stock, par value
$.0001 per share pursuant to a private placement sale to one (1) accredited
investor, for $50,000, or $0.03 per share.
During the second quarter of 2022, the Company retroactively, as of November 11,
2021, issued 3,333,333 shares of Rule 144 restricted Common Stock, par value
$.0001 per share pursuant to a private placement sale to one (1) accredited
investor, for $100,000, or $0.03 per share.
On February 23, 2022, 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
one (1) accredited investor, for $32,000, or $0.02 per share.
On January 25, 2022, 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 $6,000, or $0.03 per share.
On January 7, 2022, the Company issued 83,333 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $2,500, or $0.03 per share.
On January 6, 2022, the Company issued 83,333 shares of Rule 144 restricted
Common Stock, par value $.0001 per share pursuant to a private placement sale to
one (1) accredited investor, for $2,500, 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.
23
Off-Balance Sheet Arrangements
During the year ended December 2019, we entered into a revenue interest research
and development venture with Mabert and an employee, Tom Phillips, OPMGE.
However, based on events of default in their agreement with the Company, Mabert
no longer has any formal arrangements with OPMGE or Tom Phillips. Since
inception of this arrangement, we have advanced a total of $412,885 to OPMGE.
Given the uncertainty of the collectability of this receivable, the Company
fully reserved for this amount as of December 31, 2021 and June 30, 2022. As of
December 31, 2021 and June 30, 2022, there are no assets, liabilities, or equity
within OPMGE.
Critical Accounting Policies and Estimates
Our Financial Statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States ("GAAP").
Preparing our Financial Statements requires management to make estimates and
assumptions that impact the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. Critical accounting policies include revenue
recognition and impairment of long-lived assets.
We evaluate our long-lived assets for financial impairment on a regular basis in
accordance with Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," which evaluates the
recoverability of long-lived assets not held for sale by measuring the carrying
amount of the assets against the estimated discounted future cash flows
associated with them. At the time such evaluations indicate that the future
discounted cash flows of certain long-lived assets are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their fair values.
We believe that the critical accounting policies discussed below affect our more
significant judgments and estimates used in the preparation of our financial
statements.
Revenue Recognition
The Financial Accounting Standards Board ("FASB") issued Accounting Standard 606
- Revenue from Contracts with Customers, as guidance on the recognition of
revenue from contracts with customers in May 2014 with amendments in 2015 and
2016. Revenue recognition will depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The guidance
also requires disclosures regarding the nature, amount, timing, and uncertainty
of revenue and cash flows arising from contracts with customers. The guidance
permits two methods of adoption: retrospectively to each prior reporting period
presented or retrospectively with the cumulative effect of initially applying
the guidance recognized at the date of initial application (the cumulative
catch-up transition method). We adopted the guidance on January 1, 2018 and
applied the cumulative catch-up transition method. The transition adjustment to
be recorded to stockholders' deficit upon adoption of the new standard did not
have a material effect upon the consolidated financial statements. The Company
has not, to date, generated any revenues.
Equity Method Investment
On August 29, 2019, we entered into a research and development venture, OPMGE,
with Mabert and an employee, Tom Phillips. We contributed a limited license to
use our proprietary and patented GTL technology and a working G-Reformer
refractory unit, for no actual cost basis, in exchange for 300 membership units
in OPMGE, equating to an approximately a 42.857% current interest in OPMGE,
pending the expected issuance of an additional 300 membership units, equating to
a net 30% ownership interest in OPMGE at that time. OPMGE is no longer operating
and no longer a viable entity. There was not previously and is no book or asset
value attributed to the contributed technology. Any advances made to OPMGE have
been fully reserved for by the Company due to the lack of collectability.
Concentration and Credit Risk
Financial instruments and related items, which potentially subject us to
concentrations of credit risk, consist primarily of cash, cash equivalents, and
trade receivables. We place our cash and temporary cash investments with high
-credit quality institutions. At times, such investments may be in excess of the
Federal Deposit Insurance Corporation insurance limit.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying condensed unaudited consolidated financial statements.
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