GREENWAY TECHNOLOGIES INC - Quarter Report: 2018 March (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________

FORM 10-Q

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2018

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 000-55030

_____________________________________

GREENWAY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes [ ] No [ X ]

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. At May 5, 2018, the registrant had outstanding 283,828,915 shares of our Class A common stock and 126,938 shares of Class B common stock.

Table of Contents

Part I – Financial Information.

PART I – FINANCIAL INFORMATION

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

See the accompanying notes to unaudited condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Statements of Operations – Unaudited

For the three months ended March 31, 2018 and 2017

See the accompanying notes to unaudited condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows - Unaudited

For the three months ended March 31, 2018 and 2017

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

NOTE 1 – ORGANIZATION

Nature of Operations

Greenway Technologies, Inc. (“Greenway Technologies,” “GTI,” or the “Company”) was organized on March 13, 2002, under the laws of the State of Texas as Dynalyst Manufacturing Corporation.  On August 18, 2009, in connection with a merger with Universal Media Corporation, a privately held Nevada company, the Company changed its name to Universal Media Corporation (“Universal Media”).  The Company changed its name to UMED Holdings, Inc. on March 23, 2011, and to Greenway Technologies, Inc. on June 23, 2017.

The Company’s mission is to operate as a holding company through the acquisition of businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid management (2) the ability to grow with steady growth to follow and (3) an emphasis on emerging core industry markets, such as energy and metals.

In September 2010, the Company acquired 1,440 acres of placer mining claims on Bureau of Land Management land in Mohave County, Arizona. See discussion in Note 3.  Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, nor achieving cash flow levels to independently fund the development of its BLM mining leases in December 2010 and not having current resources for an appraisal or assay, the Company recognized an impairment charge of $100,000 during the year ended December 31, 2014.

In August 2012, the Company acquired 100% of Greenway Innovative Energy, Inc. (“GIE”) which owns patents and trade secrets for a proprietary process and related technology to convert natural gas into synthesis gas (syngas), also known as Gas-to-liquids or “GTL” processing. Syngas is an important intermediate gas used by industry in the production of ammonia, methane, liquid fuels, and other downstream products. The Company’s unique process is called Fractional Thermal Oxidation™ (FTO). When combined with Greenway Technologies’ Fischer-Tropsch (FT) system, the Company believes it will be able to offer a new economical, relatively small scale (125 to 2,475 bbls/day) method of converting gas-to-liquids that can be located in field locations where applicable to smaller scale GTL processing requirements.

NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017.

The accompanying condensed consolidated financial statements include the accounts of the following entities. 

Going Concern Uncertainties

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, the Company sustained a loss of approximately $575,000 for the three-month period ended March 31, 2018 and has a working capital deficiency of approximately $2.5 million and an accumulated deficit of approximately $24.2 million at March 31, 2018. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

The Company is in discussions with a number of oil and gas companies, smaller oil and gas operators, and investors regarding joint venture funding for a commercial scale gas-to-liquids (GTL) plant using the Company’s unique GTL system which includes its proprietary G-Reformer®, a Fischer-Tropsch unit, and all necessary components to develop a fully functional GTL plant with a minimum output of ~125 barrels/day of high-cetane blendstock (diesel fuel). Should an agreement be made, the joint venture relationship is expected to provide funding for a plant as well as operating capital for the Company. While there are no assurances that financing for the initial plant will be obtained on acceptable terms and in a timely manner, the failure to obtain the necessary working capital may cause the Company to move in one or more alternate directions to transition this revolutionary GTL system into production.

In parallel, Company is also seeking agreements and/or partnerships with other GTL system providers to use the Company’s proprietary synthesis gas production unit, the G-Reformer®, as part of existing, planned, or new GTL systems in partnership with the Company. While there are no assurances that such agreements and partnerships will be obtained on acceptable terms and in a timely manner, the failure to obtain the necessary working capital may cause the Company to move in one or more alternate directions to commercialize its proprietary G-Reformer® technology. Several alternate paths are under consideration.

The accompanying condensed consolidated financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies applied in the presentation of the condensed consolidated financial statements are as follows.

Property and Equipment

Property and equipment is recorded at cost. Major additions and improvements are capitalized. The cost and related accumulated depreciation of equipment retired or sold, are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale or salvage value are recorded as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the useful life of the assets. The Company continues to use its fully depreciated property and equipment/

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with Accounting Standards Codification, ASC Topic 360, Property, Plant and Equipment.  An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate.  If an asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value.  If estimated fair value is less than the book value, the asset is written down to the estimated fair value and an impairment loss is recognized.

Revenue Recognition

The Company has not, to date, generated any revenues.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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

The Company considers all highly liquid investments purchased with an original maturity of three-months or less to be cash equivalents.  There were no cash equivalents at March 31, 2018, or December 31, 2017.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.  The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  Open tax years, subject to IRS examination include 2013 – 2016.

Net Loss Per Share, basic and diluted

Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon the exercise of warrants and beneficial conversion features (16,600,000) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive.

Derivative Instruments

The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.  They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

See Notes 6 and 7 below for disclosures associated with the Company’s convertible notes payable and warrants.

Fair Value of Financial Instruments

Effective January 1, 2008, fair value measurements are determined by the Company’s adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities, as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three levels as follows:

Level 1 – Valuation based on unadjusted quoted market prices in active markets for identical assets or liabilities.

Level 2 – Valuation based on, observable inputs (other than level one prices), quoted market prices for similar assets such as at the measurement date; quoted prices in the market that are not active; or other inputs that are observable, either directly or indirectly.

Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

Original Issue Discount

For certain convertible debt issued, the Company provides the debt holder with an original issue discount (“OID”).  An OID is the difference between the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the total amount payable. The OID is amortized into interest expense pro-rata over the term of the Note.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The valuation of the Company’s notes recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, receivables, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments.

The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017:

The following assets and liabilities are measured on the balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:

The change in the notes payable at fair value for the nine-month period ended March 31, 2018, is as follows: 

All gains and losses on assets and liabilities measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy are recognized in other interest income and expense in the accompanying condensed consolidated financial statements.

Stock Based Compensation

The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.

At March 31, 2018, the Company did not have any outstanding stock options.

Concentration and Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company places its cash with high credit quality institutions.  At times, such deposits may be in excess of the FDIC insurance limit.

Research and Development

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $309,215 and $177,658 during the three-months ended March 31, 2018 and 2017, respectively.

Issuance of Common Stock

The issuance of common stock for other than cash is recorded by the Company at market values.

Impact of New Accounting Standards

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT

Depreciation expense was $0 and $99 for the three-months ended March 31, 2018 and 2017, respectively.

NOTE 5 – TERM NOTES PAYABLE

Term notes payable consisted of the following at March 31, 2018 and December 31, 2017:

NOTE 6 – 2017 CONVERTIBLE PROMISSORY NOTES

The Company issued a $166,667 convertible promissory note bearing interest at 4.50% per annum to an accredited investor, payable in equal installments of $6,000 commencing February 1, 2018 plus interest at rate of 4% per annum on December 20, 2018 and $80,000 plus

accrued interest on December 20, 2019.   The holder has the right to convert the note into common stock of the Company at a conversion price of $0.08 per share for each one dollar of cash payment which may be due, (which would be 1,083,333 shares for the $86,667 payment and 1,000,000 shares for the $80,000 payment. 

The Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the Convertible Note did not result in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. As of December 31, 2017, the discount related to the beneficial conversion feature on the note was valued at $27,083 based on the $0.013 difference between the market price of $0.093 and the conversion price of $0.08 times the 2,083,325 conversion shares. As of and during the three-months ended March 31, 2018, the remaining discount was $23,697 and $3,386 of the discount was amortized.

The Company issued a $150,000 convertible promissory note bearing interest at 4.50% per annum to an accredited investor, payable in equal installments of $6,000 plus accrued interest until the principal and accrued interest are paid in full.   The holder has the right to convert the note into common stock of the Company at a conversion price of equal to 70% of the prior twenty (20) days average closing market price of the Company’s common stock. 

The Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the Convertible Note resulted in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. The discount related to the beneficial conversion feature on the note was valued at $58,494 based on the difference between the fair value of the 1,578,947 convertible shares at the valuation date and the $150,000 note value. The discount related to the beneficial conversion feature is being amortized over the term of the debt. The discount related to the beneficial conversion feature on the note was valued at $150,000 based on the Black-Scholes Model. As of and during the three-months ended March 31, 2018, the remaining discount was $47,731 and $7,019 of the discount was amortized. The derivative liability for this note at March 31, 2018 was $27,938.   

NOTE 7 – CONVERTIBLE PROMISSORY NOTE

May 2016 Convertible Note

On May 4, 2016, the Company issued a $224,000 convertible promissory note bearing interest at 10.0% per annum to an accredited investor, payable beginning November 10, 2016, in monthly installments of $44,800 plus accrued interest and a cash premium equal to 10.0% of the installment amount.  The convertible promissory note was paid in full on March 4, 2017.  The holder had the right under certain circumstances to convert the note into common stock of the Company at a conversion price equal to 70% of the average of the 3 lowest volume weighted average trading prices during the 20-day period ending on the latest complete trading day prior to the conversion date.

The Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the Convertible Note resulted in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. The discount related to the beneficial conversion feature on the note was valued at $224,000 based on the Black-Scholes Model. The discount related to the beneficial conversion feature ($51,829) was amortized over the term of the debt (10 months).  For the year ended December 31, 2017, the Company recognized interest expense of $9,327 related to the amortization of the discount.

In connection with the issuance of the $224,000 note, the Company recorded debt issue cost and discount as follows:

September 2014 Convertible Note

In connection with the issuance of a $158,000 convertible promissory note in 2014 (repaid in July 2015), the Company issued warrants to purchase shares of common stock.

NOTE 8 – ACCRUED EXPENSES

Accrued expenses consisted of the following at March 31, 2018 and December 31, 2017:

 NOTE 9– CAPITAL STRUCTURE

The Company is authorized to issue 300,000,000 shares of class A common stock with a par value of $.0001 per share and 20,000,000 shares of class B stock with a par value of $.0001 per share.  Each common stock share has one voting right and the right to dividends, if and when declared by the Board of Directors.

Class A Common Stock

At March 31, 2018, there were 283,828,915 shares of class A common stock issued and outstanding.

During the three-months ended March 31, 2018, the Company: issued 4,780,254 shares of restricted class A common stock to 20 individuals through private placements for cash of $536,500 at average of $0.1122 per share.

• issued 3,000,000 of restricted common stock to the estate of a former officer of Greenway Innovative Energy, Inc. to satisfy a $330,000 accrual established at December 31, 2017 at an average of $0.11 per share.
• canceled 11,663,164 shares returned to the Company by shareholders at a value of $1,163 added to paid-in-capital.

Class B Stock 

At March 31, 2018 and 2017, there were 0 and 126,938 shares of class B stock issued and outstanding, respectively.

During the year ended December 31, 2017, the Company; exchanged 630,000 shares of class A common stock for 62,986 class B shares with a shareholder who held class B shares from the 2009 merger agreement between the Company and Dynalyst Manufacturing Corporation which set a conversion rate of 15 to 1. The Company negotiated the 630,000 shares when the class B shareholder elected to convert.

Stock options, warrants and other rights

At March 31, 2018, the Company has not adopted any employee stock option plans.

On February 3, 2017, the Company issued 6,000,000 warrants (4,000,000 at $0.35 for two years and 2,000,000 at $0.45 for three years) as part of a separation agreement with a co-founder and former president. The Company valued the warrants as of March 31, 2017, at $639,284 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 455%, expected conversion term of two and three years and risk-free interest rate of 1.75%.

On November 30, 2017, the Company issued 1,000,000 warrants at $0.30 for three years as part of a settlement of a shareholder dispute with MTG Holdings, Inc. The Company valued the warrants as of December 31, 2017, at $95,846 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 116%, expected conversion term of three years and risk-free interest rate of 1.37%.

On January 8, 2018, the Company issued 4,000,000 warrants, which were in lieu of 3,000,000 shares to a director, at $0.10 that expires in three years.

NOTE 10 - RELATED PARTY TRANSACTIONS

Shareholders made loans and advances to the Company in the amounts of $3,000 during the three-months ended March 31, 2018 and $219,509 (Tunstall Canyon Group $166,667, Kevin Jones $51,342 and Pat Six $1,500) during the year ended December 31, 2017, respectively.  During the three-months ended March 31, 2018 shareholders were repaid $3,500. During the year ended December 31, 2017, a shareholder Richard Halden purchased 2,250,000 shares of class A common stock for $225,000 ($0.10 per share) and Kevin Jones received repayment of a $59,690 loan.

NOTE 11 – INCOME TAXES

At March 31, 2018 and December 31, 2017, the Company had approximately $16.5 million and $16.4 million, respectively, of net operating losses ("NOL") carry forwards for federal and state income tax purposes.  These losses are available for future years and expire through 2034.  Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.  

The provision for income taxes for continuing operations consists of the following components for the three-months ended March 31, 2018 and the year ended December 31, 2017:

A comparison of the provision for income tax expense at the federal statutory rate of 21% for the three-months ended March 31, 2018 and the year ended December 31, 2017, the Company's effective rate is as follows:

The net deferred tax assets and liabilities included in the financial statements consist of the following amounts at March 31, 2018 and December 31, 2017:

The change in the valuation allowance was $135,371 and $12,784,855 for the three-months ended March 31, 2018 and the year ended December 31, 2017, respectively.  The Company has recorded a 100% valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and other income subsequent to the change in ownership, which amounted to $20,843,189 and $20,707,818 at March 31, 2018 and December 31, 2017, respectively. 

Utilization of the Company’s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions.  Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, historical taxable income including available net operating loss carry forwards to offset taxable income, and projected future taxable income in making this assessment.

NOTE 12 – COMMITMENTS 

Employment Agreements 

In August 2012, the Company entered into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of 5 years with compensation of $90,000 per year. In June of 2014, the president's employment agreement was amended to increase his annual pay to $180,000.  The employment agreement terminated August 12, 2017. During the three-months ended March 31, 2017, the Company paid and accrued a total of $45,000 on the employment agreement.

In the August 2012 acquisition agreement with Greenway Innovative Energy, Inc., the Company agreed to issue an additional 7,500,000 shares of restricted common stock when the first GTL unit is built and becomes operational and is capable of producing 2,000 barrels of diesel or jet fuel per day and pay Greenway Innovative Energy a 2% royalty on all gross production sales on each unit placed in production.

Effective May 10, 2018, the Company entered into employment agreements with John Olynick, as President and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements are identical. John Olynick, as President earns a salary of $120,000 per year. 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 their Agreements are in effect, they are each entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year. They are also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. They are each entitled to a grant of common stock (the “Stock Grant”) on the Effective Date equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. They are also entitled to participate in the Company’s benefit plans.

The foregoing summary of the Employment Agreements is qualified in its entirety by reference to the actual true and correct Employment Agreements, copies of which are attached hereto as Exhibit 10.39 and 10.40.

See Subsequent Events Note 13.

Consulting Agreement

On November 28, 2017, the Company entered into a three-year consulting agreement with Chisos Equity Consultants, LLC for public relations, consulting and corporate communications services. The initial payment was 1,800,000 shares of our restricted common stock. Additional payments upon the Company’s common stock reaching certain price points as follows;

• 500,000 shares at the time our common stock reaches $0.25 per share during the first year
• 500,000 shares at the time our common stock reaches $0.45 per share during the first year
• 1,000,000 shares at the time our common stock reaches $0.90 per share during the first or second year
• 2,000,000 shares at the time our common stock reaches $1.50 per share during the first or second year
• 3,000,000 shares at the time our common stock reaches $2.00 per share during the term of the agreement
• 1,000,000 shares at the time our common stock reaches $10.00 per share during the term of the agreement

  Leases

In October 2015, the Company signed a new two-year lease for new office space of approximately 1,800 square feet at the rate of $2,417 for the first twelve months and $2,495 for the second twelve months.  During the three months ended March 31, 2018 and 2017, the Company expensed $13,517 and $8,640, respectively, in rent expense.

Greenway Innovative Energy, Inc. rents approximately 600 square feet of office space at 1511 North Cooper St., Suite 207, Arlington, Texas 76011, at a rate of $1,369 per month.

The Company pays approximately $11,600 in annual maintenance fees on its Arizona BLM mining leases, in addition to 10% royalties based on production.

Legal  

The Company has been named as a co-defendant in an action brought against the Company and Mamaki Tea, Inc., alleging, among other things, that the Company was named as a co-guarantor on an $850,000 foreclosed note. Management does not believe the ultimate resolution will have an adverse impact on the Company’s financial condition or results of operations.

On April 22, 2016, Greenway Technologies filed suit under Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc. (“Mamaki”), Hawaiian Beverages, Inc.(“HBI”), Curtis Borman and Lee Jenison for breach of a Stock Purchase Agreement dated October 29, 2015, wherein we sold our shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Defendants failed to make payments of $150,000 each on November 30, 2015, December 28, 2015 and January 27, 2016. On January 13, 2017, we executed a Settlement and Mutual Release Agreement with the Defendants. However, the Defendants defaulted in their payment obligations under Settlement and Mutual Release Agreement. Due to the bankruptcy proceedings involving Curtis Borman, all action in this matter has been stayed.

See Subsequent Events Note 13.

NOTE 13-SUBSEQUENT EVENTS

During the period from April 1, 2018 through May 15, 2018, the Company issued 50,000 shares of restricted class A common stock to one individual for $6,000 at average price of $0.12 per share.

On April 9, 2108, the Company and Tonaquint, Inc. agreed to settle on Tonaquint’s exercise of a warrant option with a one-time issuance from Greenway Technologies of 1,600,000 shares of our common stock subject to a weekly leak out restriction equal to the greater of $10,000.00 and 8% of the weekly trading volume. Further, the issuance of stock will be done in connection with a legal opinion pursuant to Rule 144.

On May 10, 2018, the Company announced changes to its management team and Board of Directors, including the election of a new Chairman of the Board, current Director Raymond Wright; the appointment of a new independent director, Peter Hauser; the resignation of Patrick Six as President and Chief Financial Officer; the appointment of John Olynick as the new President, and the appointment of Ransom Jones as the Company’s Chief Financial Officer, Secretary and Treasurer.

Effective May 10, 2018, the Company entered into employment agreements with John Olynick, as President and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements are identical. John Olynick, as President earns a salary of $120,000 per year. 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 their Agreements are in effect, they are each entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year. They are also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. The Bonus shall be payable, first in a cash lump sum payment of Fifteen-Thousand Dollars ($15,000) at the conclusion of their first six (6) months of employment, and an additional Twenty-Thousand Dollars ($20,000) no later than thirty (30) days after the end of their first twelve (12) months of employment by the Company, such Bonus being subject to increases based upon the reasonable discretion of the majority of the board of directors of the Company or the designated committee(s) thereof. They are each entitled to a grant of common stock (the “Stock Grant”) on the Effective Date equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. They are also entitled to participate in the Company’s benefit plans. Their employment agreements can be terminated, among the other things, by the Company with or without cause or by the employees at any time during their term upon sixty (60) days’ notice. Their employment agreements also contain customary provisions of confidentiality and non-competition and non-solicitation.

The foregoing summary of the Employment Agreements is qualified in its entirety by reference to the actual true and correct Employment Agreements, copies of which are attached hereto as Exhibit 10.39 and 10.40.

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT ON FORM 10-Q.

The following discussion and analysis of financial condition, results of operations, liquidity, and capital resources, should be read in conjunction with our audited consolidated financial statements and notes thereto appearing elsewhere in this report, which have been prepared assuming that we will continue as a going concern, and in conjunction with our Annual Form 10-K filed on April 5, 2018. As discussed in Note 2 to the 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 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.

Unless the context otherwise suggests, “we,” “our,” “us,” and similar terms, as well as references to “UMED” and “Greenway Technologies,” all refer to Greenway Technologies, Inc, as of the date of this report.

Overview

Greenway Technologies, UMED Holdings, Inc. (“Greenway” or “UMED”) was originally incorporated as Dynalyst Manufacturing Corporation (“Dynalyst”) under the laws of the State of Texas on March 13, 2002.

In connection with the merger with Universal Media Corporation (“UMC”), a Nevada corporation, on August 17, 2009, we changed our name to Universal Media Corporation. The transaction was accounted for as a reverse merger, and Universal Media Corporation was the acquiring company on the basis that Universal Media Corporation’s senior management became the entire senior management of the merged entity and there was a change of control of Dynalyst. The transaction was accounted for as recapitalization of Dyanlyst’s capital structure. In connection with the merger, Dynalyst issued 57,500,000 restricted common shares to the shareholders of Universal Media Corporation for 100% of Universal Media Corporation.

On August 18, 2009, Dynalyst approved the amendment of its Articles of Incorporation and filed with the Texas Secretary of State an amendment to change our name to Universal Media Corporation and approved the increase in authorized shares to 300,000,000 shares of common A stock, par value $0.0001 and 20,000,000 shares of common B, par value $0.0001.

On March 23, 2011, Universal Media Corporation approved the amendment of its Articles of Incorporation and filed with the Texas Secretary of State an amendment to change our name to UMED Holdings, Inc.

On June 22, 2017, UMED Holdings, Inc. approved the amendment of our certificate of formation and filed on June 23, 2017, with the Texas Secretary of State an amendment to change our name to Greenway Technologies, Inc.

Greenway Technologies is a holding company with present interests in energy and mining. We have our corporate offices at 8851 Camp Bowie West, Suite 240, Fort Worth, Texas 76116, consisting of approximately 1,800 square feet. Our wholly-owned subsidiary, Greenway Innovative Energy, Inc. (“GIE”), has offices at 1521 North Cooper Street, Suite 207, Arlington, Texas 76011.

We will be unable to pay our obligations in the normal course of business or service our debt in a timely manner throughout 2018 without raising additional debt or equity capital. There can be no assurance that additional debt or equity capital will be raised.

Greenway Technologies is currently evaluating strategic alternatives that include the following: (i) entering into a joint venture or partnership with an existing oil and gas producer or refiner to exploit the Company’s patented technology, (ii) licensing or selling rights to the technology, (iii) raising additional equity capital or (iv) entering into or issuing debt instruments. This process is ongoing and can be lengthy and has inherent costs and risks. There can be no assurance that the exploration of strategic alternatives will result in any specific action to alleviate our 12 month working capital needs or result in any other transaction.

Energy Interest

In August 2012, Greenway Technologies (formerly, UMED) acquired 100% of Greenway Innovative Energy, Inc. which owns patents and trade secrets for a proprietary technology to convert natural gas into synthesis gas (syngas). Based on a new, breakthrough process called Fractional Thermal Oxidation™ (FTO), Greenway Technologies’ proprietary G-Reformer™, combined with   a Fischer-Tropsch process, is designed to offer an economical and scalable method of converting natural gas to liquid fuel.

On June 26, 2017, Greenway Technologies, in conjunction with UTA, announced that it had successfully demonstrated its GTL technology at the Conrad Greer Laboratory at UTA proving the viability of the GTL system.

On March 6, 2018, the Company announced the completion of its G-Reformer® which converts natural gas into synthesis gas. The G-Reformer® is a critical component of the company’s innovative Greer-Wright Gas-to-Liquids system which converts natural gas into liquid fuels. A team consisting of individuals from Greenway Technologies, Inc. and its wholly-owned subsidiary, Greenway Innovative Energy, the University of Texas at Arlington (UTA), and Industrial Refractory Services, Inc. worked together to calibrate the newly-built G-Reformer®. The G-Reformer® testing performed at that time substantiated the units’ synthesis gas generation capability and demonstrated additional proficiencies within certain prior prescribed testing metrics.

The Company believes that the G-Reformer® is a major innovation in GTL technology. It supersedes legacy technologies which are more costly, have a larger footprint, and cannot be easily deployed at field sites to process stranded gas, coal-bed methane, vented gas, or flared gas, all markets the Company seeks to pursue. This technology, based around the G-Reformer®, is unique in that it allows for GTL plants with a demonstrably smaller footprint, especially in conjunction with the Company’s patented application for deployment on large flat-bed tractor-trailer trucks, versus legacy large-scale technologies, which the Company believes will provide for substantially lower up-front and ongoing costs. Greenway Technologies is now working to commercialize the system and related technology and is in discussions with a number of oil and gas companies, smaller oil and gas operators and interested parties to obtain joint venture or other forms of capital funding to build its first complete gas-to-liquid plant using Greenway’s proprietary GTL conversion processes.

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 our restricted common stock. Early indications, from samples taken and processed, provides reason to believe that the potential recovery value of the metals located on the 1,440 acres is significant, but 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.

Going Concern

As of March 31, 2018, we have an accumulated deficit of $24,198,225. During the three-months ended March 31, 2018, we used net cash of $545,702 for operating activities. These factors raise substantial doubt about our ability to continue as a going concern.

While we are attempting to commence operations and generate revenues, our cash position may not be enough to support our daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for us to continue as a going concern. While management believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.

Three-months Ended March 31, 2018, Compared to Three-months Ended March 31, 2017. 

Revenues. During the three-months ended March 31, 2018, and 2017, we had no revenues from operations. Management is aggressively looking for ways to leverage our technology to develop revenue streams.

Operating Expenses.

Consulting Fees. During the three-months ended March 31, 2018, consulting expense increased to $65,000 as compared to $35,000 from the prior year three-months ended March 31, 2017. The increase was primarily the result of increased fees for consulting services.

Officer Compensation. During the three-months ended March 31, 2018, officer compensation decreased to $90,000 as compared to $125,000 from the prior year three-months ended March 31, 2017. Officer compensation decreased due to the President in 2017 not being with the Company in 2018.

Professional Fees. During the three-months ended March 31, 2018, professional fees increased to $17,902 as compared to $10,040 from the prior year three-months ended March 31, 2017. Professional fees increased because of an increase in filing fees and press releases.

Operating Expenses. During the three-months ended March 31, 2018, operating expenses decreased to $577,956 as compared to $5,226,137 from the prior year three-months ended March 31, 2017. The decrease was primarily due to $4,779,370 stock-based compensation recorded in the three-months ended March 31, 2017, without a comparative charge in the three-months ended March 31, 2018. Travel expenses increased to $10,147 in the three-months ended March 31, 2018, compared to $5,323 in the three-months ended March 31, 2017. Legal expenses increased to $35,021 in the three-months ended March 31, 2018, compared to $29,349 in the three-months ended March 31, 2017. The increase in research and development costs of $309,215 in the three-months ended March 31, 2018, compared to $177,658 in the three-months ended March 31, 2017.

Interest Expense. During the three-months ended March 31, 2018, interest expense increased to $16,055 as compared to interest income of $9,529 from the prior year three-months ended March 31, 2017. The increase was primarily due to the amortization of debt issue cost related to convertible promissory notes issued in the fourth quarter of 2017.

Derivative Adjustment. During the three-months ended March 31, 2018, the gain on derivative adjustment was $19,388 as compared to a loss of $53,385 for the prior year three-months ended March 31, 2017. The change was due to the convertible note payable being paid in first quarter 2017 and the derivative liability for the three-months ended March 31, 2018 being calculated using the Black-Scholes Model only on the warrants.

Net Loss from Operations. Our net loss from operations decreased to $574,623 for the three-months ended March 31, 2018 compared to a loss of $5,269,993 for the three-months ended March 31, 2017. The decrease was primarily due to decrease of $4,779,370 in stock-based compensation.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. The following table provides certain selected balance sheet comparisons between March 31, 2018, and December 31, 2017:

In the three-months ended March 31, 2018, our working capital deficit decreased by $291,877 primarily as a result of a decrease in current assets of $82,543 and a decrease in accounts payable and accrued liabilities of $305,596, and decreases in notes payable and accrued interest of $288,675 and derivative liability of $19,388.

Operating activities

Net cash used in continuing operating activities during the three-months ended March 31, 2018, was $(545,702) as compared to $(499,262) for the three-months ended March 31, 2017. Items totaling approximately $42,309 contributing to the net cash used in continuing operating activities for the three-months ended March 31, 2018, include:

Net cash used for continuing operating activities for the three-months ended March 31, 2017, was $499,262. Items totaling approximately $304,059 contributing to the net cash used in continuing operating activities for the three-months ended March 31, 2017, include: 

$5,269,993 net loss, offset by:

Investing activities

We had no investing activities during the three-months ended March 31, 2018 and 2017. 

Financing Activities

Net cash provided by financing activities was $476,659 for the three-months ended March 31, 2018, composed of $536,500 in sales of common stock and $53,841 of payments on note payable.

Net cash provided by financing activities was $709,497 for the three-months ended March 31, 2017, composed primarily of $833,250 in sales of common stock, $120,753 repayment of convertible note payable, $3,000 payments on note payable.  

Seasonality

We do not anticipate that our business will be affected by seasonal factors.

Impact of Inflation

General inflation in the economy has driven the operating expenses of many businesses higher. We will continuously seek methods of reducing costs and streamlining operations while maximizing efficiency through improved internal operating procedures and controls. While we are subject to inflation as described above, our management believes that inflation currently does not have a material effect on our operating results. However, inflation may become a factor in the future.

Commitments

Employment Agreements.

In August 2012, we entered into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of five years with compensation of $90,000 per year. In September 2014, the president’s employment agreement was amended to increase his annual pay to $180,000. The employment agreement terminated in August 2017. During the three-months ended March 31, 2017, the we paid and accrued a total of $45,000 for the Greenway Innovative Energy president.

Effective May 10, 2018, the Company entered into employment agreements with John Olynick, as President and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements are identical. John Olynick, as President earns a salary of $120,000 per year. 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 their Agreements are in effect, they are each entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year. They are also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. They are each entitled to a grant of common stock (the “Stock Grant”) on the Effective Date equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. They are also entitled to participate in the Company’s benefit plans.

The foregoing summary of the Employment Agreements is qualified in its entirety by reference to the actual true and correct Employment Agreements, copies of which are attached hereto as Exhibit 10.39 and 10.40.

In the August 2012 acquisition agreement with Greenway Innovative Energy, Inc., we agreed to issue an additional 7,500,000 shares of restricted common stock when the first portable GTL unit is build and becomes operational and is capable of producing 2,000 barrels of diesel or jet fuel per day and pay Greenway Innovative Energy a 2% royalty on all gross production sales on each unit placed in production.

Leases.

In October 2015, we entered into a two-year lease for approximately 1,800 square feet a base rate of $2,417 per month. During the three-months ended March 31, 2018, and 2016, we expensed $26,992 and $35,023.

Greenway Innovative Energy, Inc. rents approximately 600 square feet of office space at 1511 North Cooper St., Suite 207, Arlington, Texas 76011, at a rate of $1,369 per month.

Mining Interest. In December 2010, we acquired from Melek Mining, Inc. and 4HM Partners, LLC 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 our restricted common stock. Our minimum commitment for 2018 is approximately $11,160 in annual maintenance fees, which are due September 1, 2018, payable to the United States Bureau of Land Management. Once we enter the production phase, royalties owed to the BLM will be are equal to 10% of production. As of the date of this report, the mining claims are not covered by any lease agreement, we file an annual maintenance fee form to hold the claims.

Consulting Agreement

On November 28, 2017, we entered into a three-year consulting agreement with Chisos Equity Consultants, LLC for public relations, consulting and corporate communications services. The initial payment was 1,800,000 shares of our restricted common stock. Additional payments upon our common stock reaching certain price points as follows;

• 500,000 shares at the time our common stock reaches $0.25 per share during the first year
• 500,000 shares at the time our common stock reaches $0.45 per share during the first year
• 1,000,000 shares at the time our common stock reaches $0.90 per share during the first or second year
• 2,000,000 shares at the time our common stock reaches $1.50 per share during the first or second year
• 3,000,000 shares at the time our common stock reaches $2.00 per share during the term of the agreement
• 1,000000 shares at the time our common stock reaches $10.00 per share during the term of the agreement

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing 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 recognize revenue in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.

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.

Quantitative and Qualitative Disclosures About Market Risk

We conduct all of our transactions, including those with foreign suppliers and customers, in U.S. dollars. We are therefore not directly subject to the risks of foreign currency fluctuations and do not hedge or otherwise deal in currency instruments in an attempt to minimize such risks. Demand from foreign customers and the ability or willingness of foreign suppliers to perform their obligations to us may be affected by the relative change in value of such customer or supplier’s domestic currency to the value of the U.S. dollar. Furthermore, changes in the relative value of the U.S. dollar may change the price of our products relative to the prices of our foreign competitors.

Stock-Based Compensation

We follow Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.

Recently Issued Accounting Pronouncements

In September 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to Greenway Technologies’ current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). We adopted this pronouncement for the three-months ended March 31, 2018.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

There has been no material change in our market risks since the end of the fiscal year 2018.

Disclosure Controls and Procedures

The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a, et seq) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In March 2018, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control -- Integrated Framework,” issued by the Committee of Sponsoring Organizations revised 2013 (“COSO”) of the Treadway Commission. Based upon this assessment, we determined that our internal control over financial reporting is ineffective.

The matters involving internal controls and procedures that our management considers to be material weaknesses under COSO and SEC rules are: (1) lack of a functioning audit committee and lack of independent directors on our board of directors, resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned potential material weaknesses were identified by our chief financial officer in connection with the preparation of our financial statements as of March 31, 2018, who communicated the matters to our management and board of directors.

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, the lack of a functioning audit committee and lack of a majority of independent directors on our board of directors resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures, can impact our financial statements.

Management’s Remediation Initiatives

Although we are unable to meet the standards under COSO because of the limited funds available to a company of our size, we are committed to improving our financial organization. As funds become available, we will undertake to: (1) create positions to segregate duties consistent with control objectives, (2) increase our personnel resources and technical accounting expertise within the accounting function (3) appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and (4) prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Greenway Technologies have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.

 PART II – OTHER INFORMATION

We have been named as a co-defendant in an action brought against us and Mamaki Tea, Inc., alleging, among other things, that the Company was named as a co-guarantor on an $850,000 foreclosed note. Management does not believe the ultimate resolution will have an adverse impact on the our financial condition or results of operations.

On April 22, 2016, Greenway Technologies filed suit under Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc. (“Mamaki”), Hawaiian Beverages, Inc.(“HBI”), Curtis Borman and Lee Jenison for breach of a Stock Purchase Agreement dated October 29, 2015, wherein we sold our shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Defendants failed to make payments of $150,000 each on November 30, 2015, December 28, 2015 and January 27, 2016. On January 13, 2017, we executed a Settlement and Mutual Release Agreement with the Defendants. However, the Defendants defaulted in their payment obligations under Settlement and Mutual Release Agreement. Due to the bankruptcy proceedings involving Curtis Borman, all action in this matter has been stayed.

On April 9, 2108, the Company and Tonaquint, Inc. agreed to settle on Tonaquint’s exercise of a warrant option with a one-time issuance from Greenway Technologies of 1,600,000 shares of our common stock subject to a weekly leak out restriction equal to the greater of $10,000.00 and 8% of the weekly trading volume. Further, the issuance of stock will be done in connection with a legal opinion pursuant to Rule 144.

Not applicable.

During the three-month period ended March 31, 2018, we issued 4,780,254 shares of restricted common stock to 20 individuals through private placements for cash of $536,500 at an average price of $0.1156 per share. There were no selling expenses or commissions with respect to the sale of our common stock.

Subsequent to March 31, 2018, we sold 50,000 shares of our class A restricted common stock to one individual for $6,000 ($0.12 per share).

The proceeds realized from the sale of our common stock were used to pay our general and administrative expenses, salaries for our officers in the amount of $536,500, and expenses associated with our GTL project at The University of Texas at Arlington.

Each investor took his securities for investment purposes without a view to distribution and had access to information concerning Greenway Technologies and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our securities. Our securities were sold only to accredited investors, as defined in Regulation D with whom we had a direct personal preexisting relationship, and after a thorough discussion. Each certificate contained a restrictive legend as required by the Securities Act. Finally, our stock transfer agent has been instructed not to transfer any of such securities, unless such securities are registered for resale or there is an exemption with respect to their transfer.

Each purchaser or recipient of our shares was an accredited investor, and either alone or with his purchaser representative(s) had such knowledge and experience in financial and business matters that he was capable of evaluating the merits and risks of the prospective investment. Greenway Technologies reasonably believed immediately prior to making any sale that such purchaser came within this description.

All of the above described investors who received shares of our common were provided with access to our filings with the SEC, including the following:

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

NONE

Not applicable.

Not applicable.

None.

____________

*         Filed herewith.

**       Previously filed.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENWAY TECHNOLOGIES, INC.

Date: May 21, 2018.

By /s/ John Olynick

John Olynick, President

By /s/ Ransom Jones

Ransom Jones, Chief Financial Officer and

Principal Accounting Officer