GREENWAY TECHNOLOGIES INC - Quarter Report: 2019 June (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 June 30, 2019

[  ] 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)

(800) 289-2515

(Registrant’s telephone number, including area code)

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X] Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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

As of August 14, 2019, Greenway Technologies, Inc. had outstanding 288,088,677 shares of our Class A common stock and no outstanding shares of its Class B common stock.

Table of Contents

PART I – FINANCIAL INFORMATION

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

See the accompanying notes to condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2019 and 2018
(Unaudited)

See the accompanying notes to condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.
Consolidated Statement of Stockholders’ Deficit
For the three months and six ended June 30, 2019
(Unaudited)

See the accompanying notes to condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2019 and 2018
(Unaudited)

See the accompanying notes to condensed consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

NOTE 1 – ORGANIZATION

Nature of Operations

Greenway Technologies, Inc., (“Greenway”, “GTI” or the “Company”) through its wholly owned subsidiary, Greenway Innovative Energy, Inc., is primarily engaged in the research, development and commercialization of a proprietary Gas-to-Liquids (GTL) syngas conversion system that can be economically scaled to meet individual natural gas field/resource requirements. The Company’s proprietary and patented technology has now been realized in Greenway’s recently completed first generation commercial-scale G-Reformer^TM unit, a unique and critical component to the Company’s overall GTL technology solution. Greenway’s objective is to become a material direct and licensed producer of renewable GTL synthesized diesel and jet fuels, with a near term focus on U.S. market opportunities.

Greenway 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.

Greenway’s GTL Technology

In August 2012, Greenway Technologies acquired 100% of Greenway Innovative Energy, Inc. (“GIE”) 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”), the Company believes that GIE’s G-Reformer, combined with conventional Fischer-Tropsch (“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 its GTL technology. On November 4, 2013, GIE filed for a second patent covering other unique aspects of the design. Subsequently, the Company received Patent Nos. 8,574,501 B1 and 8,795,597 B2 covering the mobile GTL conversion technology for the purpose of converting natural gas to clean synthetic fuels The Company has identified several other areas in its technology to file for multiple patents and such efforts are ongoing.

On June 26, 2017, Greenway, in conjunction with the University of Texas at Arlington (“UTA”), announced that they had successfully demonstrated Greenway’s GTL technology at the Company sponsored Conrad Greer Laboratory at UTA, proving the viability of the science behind the technology.

On March 6, 2018, the Company announced the completion of its first commercial scale G-Reformer. The G-Reformer is the critical component of the Company’s innovative Greer-Wright Gas-to-Liquids system. A team consisting of individuals from the Company, UTA and the Company’s contracted fabricator worked together to test and calibrate the newly built G-Reformer unit. The testing substantiated the units’ synthesis gas generation capability and demonstrated additional proficiencies within certain prior prescribed testing metrics.

The Company believes that its proprietary G-Reformer is a major innovation in gas reforming and GTL technology in general. Initial tests have demonstrated that the Company’s solution is superior to legacy technologies which are costly, have a larger footprint and cannot be easily deployed at field sites to process associated gas, stranded gas, coal-bed methane, vented gas, or flared gas, all markets the Company seeks to service. The proprietary technology based around the G-Reformer is unique in that it also allows for transportable GTL plants with a much smaller footprint when compared to legacy large-scale technologies. The Company believes its technologies and processes will allow for GTL plants to be built with substantially lower up-front and ongoing costs resulting in more profitable results for O&G operators. Greenway is now working to commercialize both its G-Reformer and its GTL solutions and is in discussions with a number of oil and gas companies, smaller oil and gas operators and other interested parties to license and obtain joint venture or other forms of capital funding to build its first complete gas-to-liquid plant.

Mining Interest

In December 2010, UMED acquired the rights to approximately 1,440 acres of placer mining claims located on Bureau of Land Management (“BLM”) land in Mohave County, Arizona for 5,066,000 shares of restricted Common A stock. Early indications, from samples taken and processed, provided reason to believe that the potential recovery value of the metals located on the 1,440 acres is significant, but only actual mining and processing will determine the ultimate value which may be realized from this property holding. The Company is currently exploring strategic options to partner or sell its interest in this acreage, while it focuses on its emerging GTL technology sales and marketing efforts.

NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2019. These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Principles of Consolidation

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

The accompanying consolidated financial statements include the accounts of the following entities:

Going Concern Uncertainties

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, as of June 30, 2019, we have an accumulated deficit of $28,924,206. For the six-months ended June 30, 2019, we had no revenue, generated a net loss of $2,105,622 and used cash of $735,119 for operating activities. 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 continue 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 accompanying 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 unaudited 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 estimated useful life of the assets.

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 FASB issued ASC 606 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). The company 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.

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 June 30, 2019, or December 31, 2018.

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 2014 – 2017.

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 (11,499,226) 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 Note 6 below for the related discussion regarding the Company’s current 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.

The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018:

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:

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 consolidated financial statements.

The change in the notes payable at fair value for the three-month period ended June 30, 2019, is as follows:

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 June 30, 2019, 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. There are no uninsured balances as of June 30, 2019.

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 $367,957 and $232,068 for the three months ended June 30, 2019 and 2018, respectively, and for the six months ended June 30, 2019 and 2018, $611,777 and $541,283, respectively.

Issuance of Common Stock

The issuance of common stock for other than cash is recorded by the Company at market values based on the closing price of the stock on the date of any such grant.

Impact of New Accounting Standards

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

NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT

Depreciation expense was $0 for the six-months ended June 30, 2019 and 2018, respectively.

NOTE 5 – TERM NOTES PAYABLE AND NOTES PAYABLE RELATED PARTIES

Term notes payable, including notes payable to related parties consisted of the following at June 30, 2019 and December 31, 2018 respectively:

(1) On September 14, 2018, the Company entered into a loan agreement, with Mabert LLC, an entity owned by a director and stockholder, Kevin Jones, for the purpose of funding working capital and general corporate expenses up to $1,500,000, and as subsequently amended for up to $5,000,000 for the Company. Mabert is acting as the agent for various private lenders to the Company and loaned $1,278,869 through June 30, 2019. The loan is secured and Mabert filed a UCC-1 with the State of Texas. The Loan Agreement, Security Agreement and UCC-1filing are incorporated hereto as Exhibits 10.48–10.50. The Company agreed to issue warrants and/or stock for Class A common stock valued at $0.01 per share on an initial one-time basis at 3.67:1 and subsequently on a 2:1 basis for each dollar borrowed. For the period ended June 30, 2019, the Company issued an additional 1,100,000 shares of Class A common stock, as compared to the Company having issued 1,624,404 warrants as of December 31, 2018. Of these, 766,667 warrants were converted to common stock in January 2019, with 857,737 warrants remaining outstanding related to the 2018 issuance. Pursuant to ACS 470, the fair value attributable to a discount on the debt is $90,118 for the period ended June 30, 2019, and $90,619 for the year ended 2018; this amount is amortized to interest expense on a straight-line basis over the terms of the loans.

On April 30, 2019, the Company executed a Promissory Note with a shareholder for $25,000, at 18% interest per annum, such note being incorporated by reference into and subject to the terms of that certain Mabert LLC as Agent Loan Agreement entered into by the Company on September 14, 2018. Mabert LLC is a Texas Limited Liability Company owned by a Director and shareholder, Kevin Jones and his wife Christine Early. As a cost of the note, the Company issued 50,000 shares of its Class A common stock at a market price of $0.05 per share for a total debt discount of $2,500, subject to standard Rule 144 restrictions.

On April 30, 2019, the Company executed a Promissory Note with a financial institution for $225,000, at 18% interest per annum, such note being incorporated by reference into and subject to the terms of that certain Mabert LLC as Agent Loan Agreement entered into by the Company on September 14, 2018. Mabert LLC is a Texas Limited Liability Company owned by a Director and shareholder, Kevin Jones and his wife Christine Early. As a cost of the note, the Company issued 450,000 shares of its Class A common stock at a market price of $0.05 per share for a total debt discount of $22,500, subject to standard Rule 144 restrictions.

On May 31, 2019, the Company executed a Promissory Note with a shareholder for $300,000, at 18% interest per annum, such note being incorporated by reference into and subject to the terms of that certain Mabert LLC as Agent Loan Agreement entered into by the Company on September 14, 2018. Mabert LLC is a Texas Limited Liability Company owned by a Director and shareholder, Kevin Jones and his wife Christine Early. As a cost of the note, the Company issued 600,000 shares of its Class A common stock at a market price of $0.05 per share for a total debt discount of $30,000, subject to standard Rule 144 restrictions.

(2) On December 20, 2018, the Company issued a convertible promissory note for $166,667, payable by December 20, 2020. This loan is in default for breach of payment. By its terms, the cash interest payable increased to 18% per annum on December 20, 2018 and continues at such rate until the default is cured or is paid at term. See Note 6 below.

(3) On January 16, 2018, the Company issued a convertible promissory note for $150,000, shown about net a $6,000 principal payment. This loan was in default for breach of payment during the period ending June 30, 2019. By its terms, the interest payable increased to 18% per annum on April 1, 2018. On July 24, 2019, the holder noticed the Company of its intent to convert. See: Note 6 and Note 11 – Subsequent Events below.

NOTE 6 – 2018 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). As of December 20, 2018, a material event of default occurred for breach of payment. The holder has the right but has not noticed the Company of its intent to convert.

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. Due to the default, the full discount was expensed in 2018.

The Company issued a $150,000 convertible promissory note in January 2018 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. As of April 1, 2018, only one $6,000 payment had been made, creating a material event of default. In the event of default, the default interest rate becomes 18% and the Company has accrued such default interest since the default. On July 24, 2019, the holder noticed the Company of its intent to convert the principal and accrued interest to 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. During the year ended December 31, 2018, the remaining discount was fully amortized. The derivative liability for this note at June 30, 2019 and December 31, 2018 was $86,400 and $103,479 respectively, calculated as described in Note 3 under the Black-Scholes Model parameters shown below.

NOTE 7 – ACCRUED EXPENSES

Accrued expenses consisted of the following at for the periods ended:

NOTE 8 – CAPITAL STRUCTURE

The Company is currently 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 June 30, 2019, there were 287,988,677 shares of class A common stock issued and outstanding.

During the three-months ended June 30, 2019, the Company: issued 1,100,000 shares of restricted class A common stock to 2 individuals as consideration for loan origination fees. The Company also updated and corrected its stockholder records generating a net decrease in common stock outstanding of 581,905 shares.

During the three-months ended March 31, 2019, the Company: issued 766,667 shares of restricted class A common stock to 3 individuals holding warrants for 366,667, 200,000 and 200,000 shares respectively, priced at $0.01/converted share.

At December 31, 2018, there were 286,703,915 shares of Class A commons stock outstanding.

Class B Stock

At June 30, 2019 and December 31, 2018 respectively, there were no shares of class B stock issued and outstanding.

Stock options, warrants and other rights

At June 30, 2019 and December 31, 2018, the Company has not adopted any employee stock option plans.

As of June 30, 2019, the Company had total warrants issued and outstanding of 11,499,226, with current expiration periods of less than one to fifteen years.

On October 1, 2015, the Company issued 4,000,000 warrants for legal work. The warrants are exercisable at $0.20 per share for a period of five years from the date of issue. The Company valued the warrants as of December 31, 2015, at $386,549 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 189%, expected conversion term of 4.75 years and risk-free interest rate of 1.75%.

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%. Of these, 4,000,000 warrants were not exercised and have expired by their terms.

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 two and three years and risk-free interest rate of 1.37%. These warrants were extinguished in the comprehensive settlement agreement reached in March 2019. See Note 10 – Legal.

On January 8, 2018, the Company issued 4,000,000 warrants at a purchase price of $0.15 per share to a director, Kent Harer, in exchange for his return of 3,000,000 shares of Class A common stock he had been prior granted. The 3,000,000 shares issued were valued and recorded for $490,000 during 2017. The value of $490,000 remained on the books as it reflects the event that occurred in 2017. The warrants shall be void and of no effect and all rights thereunder shall cease at 5:00 pm, Fort Worth, Texas time on January 8, 2021.

In conjunction with the Mabert LLC Loan Agreement described herein above, the Company issued a combined total of 1,624,404 warrants at a purchase price of $0.01 per share for fifteen (15) years in the year ending December 31, 2018. In the third quarter ending September 30, 2018, the Company issued 366,667 warrants. In the fourth quarter, the Company issued 1,257,737 warrants, including 1,057,737 warrants to Kevin Jones, a director, and his spouse for loans they each separately made totaling $428,868 and $100,000 respectively, and 200,000 warrants to a third-party lender. All such warrants, excluding Mr. Jones’, were converted to common stock in January 2019.

NOTE 9 - RELATED PARTY TRANSACTIONS

Through June 30, 2019, Kevin Jones, a director and greater than 5% shareholder, made advances to the Company in the amount of $530,299, of which $329,671 was advanced in the three months ending June 30, 2019, and a former employee made an advance of $1,100.

After approval during a properly called special meeting of the board of directors, on September 14, 2018 Mabert, LLC, a Texas Limited Liability Company owned by a director and stockholder, Kevin Jones and his wife Christine Early, entered into a loan agreement for the purpose of funding working capital and general corporate expenses for the Company of up to $1,500,000, subsequently amended to provide up to $5,000,000. Mabert is acting as the agent for the lenders to the Company. The Company bylaws provide no bar from transactions with Interested Directors, so long as the interested party does not vote on such transaction. Mr. Jones did not vote on this transaction. Since the inception of the Loan Agreement through June 30, 2019, a total of $1,278,869 has been loaned to the Company by four shareholder individuals, including Mr. Jones through Mabert, LLC. See Note 5.

Through Mabert, Mr. Jones along with his wife and his company have loaned $753,869, and two other shareholders have loaned the balance. These loans are secured by the assets of the Company. A financing statement and UCC-1 have been filed according to Texas statutes. Should a default under the loan agreement occur, there could be a foreclosure or a bankruptcy proceeding filed by the Agent for these Shareholders. The actions of the Company in case of default can only be determined by the Shareholders. A foreclosure sale or distribution through bankruptcy could only result in the creditors receiving a pro rata payment based upon the terms of the loan agreement. Mabert did not nor will it receive compensation for its efforts.

Through June 30, 2019, other shareholders have made loans to the Company in the amount of $416,667, including Wildcat Consulting $75,000 (net of a $25,000 principal payment in the period ending June 30, 2019), Tunstall Canyon Group $166,667 and the Greer Family Trust $144,000 (net of a $6,000 principal payment made in March 2018).

NOTE 10 – COMMITMENTS

Employment Agreements

In August 2012, the Company entered into an employment agreement with Ray Wright, president of Greenway Innovative Energy, Inc., now chairman of the board for a term of 5 years with compensation of $90,000 per year. In July 2014, the president’s employment agreement was amended to increase his annual pay to $180,000. By its terms, the employment agreement automatically renewed on August 12, 2018 for a successive one-year period.

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 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. He is also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. 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 become available. The foregoing summary of the Mr. Jones employment agreements is qualified in its entirety by reference to the actual true and correct Employment Agreement, a copy of which is incorporated hereto as Exhibit 10.40.

Effective January 1, 2019, the Company entered into an employment agreement with Thomas Phillips, Vice President of Operations, reporting to the President of Greenway Innovative Energy, Inc., for a term of fifteen (15) months with compensation of $120,000 per year. Phillips is entitled to a no-cost grant of common stock on the effective date equal to 5,000,000 shares of the Company’s Rule 144 restricted Class A common stock, par value $.0001 per share, such shares to be issued at such time as the Company has the ability to issue such number of shares. Mr. Phillips has elected to waive such share issuance for an indefinite period. Mr. Phillips is also entitled to participate in the Company’s benefit plans, when such become available. The foregoing summary of the Phillips’ Employment Agreement is qualified in its entirety by reference to the actual true and correct employment agreement, a copy of which is incorporated hereto as Exhibit 10.53.

In the August 2012 acquisition agreement with Greenway Innovative Energy, Inc. (“GIE”), the Company agreed to: (i) issue an additional 7,500,000 shares of restricted 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. In connection with a settlement agreement with the Greer Family Trust (‘Trust”), the successor owner of one of the two founders and prior owners of GIE on February 6, 2018, the Company exchanged Greer’s half of the 7,500,000 shares (3,750,000 shares) to be issued in the future, Greer’s half of the 2% royalty, a termination of Greer’s then current Employment Agreement and the Trust’s waiver of any future claims against the Company for any reason, for the issuance and delivery to the Trust of three million (3,000,000) restricted shares of the Company’s common stock, and a convertible Promissory Note for $150,000, the balance of which the Trust has notified the Company of its intention to convert. As a result, the remaining 3,750,000 shares are committed to be later issued under the original 2012 acquisition agreement at the point the technology has been deemed of commercial readiness to satisfy the terms of the acquisition agreement. A copy of the Settlement Agreement and Promissory Note is incorporated hereto as Exhibit 10.36.

Consulting Agreements

On July 10, 2017, the Company entered into a one-year consulting agreement with an individual, Ryan Turner, to provide business development services, including but not limited to enhanced digital marketing, assistance with shareholder communications and help in establishing industry relationships. Terms included monthly payments of $5,000 per month, plus approved expenses. After the first twelve-month initial term, the agreement was automatically renewable for successive twelve-month terms, unless otherwise terminated with written notice by the parties, and was subsequently renewed for an additional term. Mr. Turner continues to provide services to the Company under the current 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 the Company’s restricted common stock. Additional payments upon the Company’s common stock reaching certain price points as follows:

Due to a breach of the Agreement by Chisos, on June 22, 2018, the Board of Directors of the Company voted to terminate the Agreement. Based on the termination, all warrants to purchase the Company’s common stock were cancelled. The Company is currently in litigation over such termination action. See “Legal” matters description below in this Note 10.

Leases

In October 2015, the Company entered into a two-year lease for approximately 1,800 square feet a base rate of $2,417 per month. The Company terminated the lease effective August 31, 2018 and has no further financial obligations under the lease.

Greenway rents approximately 600 square feet of office space at 1521 North Cooper St., Suite 205, Arlington, Texas 76011, at a rate of $957 per month, under a one-year lease agreement, renewable annually.

Each September, the Company pays $11,600 in annual maintenance fees on its Arizona BLM mining leases, in addition to 10% royalties based on production, if any. There has been no production to date.

Legal

The Company was 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. 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 the Company sold its shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Company maintained its guaranty on the original loan as a component of the sale transaction. 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, the parties executed a Settlement and Mutual Release Agreement (Agreement). However, the Defendants again defaulted in their payment obligations under this new Agreement. Curtis Borman and Lee Jennison were co-guarantors of the obligations of Mamaki and HBI. To secure their guaranties, each of Curtis Borman and Lee Jennsion posted 1,241,500 and 1,000,000 shares, respectively, of the Company. Under the Agreement, the shares were valued at $.20. Due to the default under the Agreement, these shares were returned to the Company’s treasury shares. Curtis Borman subsequently filed for bankruptcy and the property was liquidated for $600,000, applied against the prior loan amount, leaving a remaining guaranteed loan payment balance of approximately $700,000, including accrued interest and legal fees. The Company has been in negotiations with the note holders and having negotiated a tentative resolution, the terms of which are being drafted into a confidential settlement and release agreement between the parties, has accrued for the estimated expenses on the Company’s Balance Sheet as of June 30, 2019.

On April 9, 2018, 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 was completed in connection with a legal opinion pursuant to Rule 144.

On September 7, 2018, Wildcat Consulting Group, LLC (“Wildcat”), a company controlled by a shareholder, filed suit against the Company alleging claims arising from a Consulting Agreement between the Parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. On September 27, 2018, Wildcat filed a second suit against the Company alleging claims arising from a Promissory Note between the Parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. On February 13, 2019, the Parties attended mediation which resulted in settlement discussions which resulted in a Rule 11 Agreement settling both disputes. Pursuant to the Rule 11 Agreement, the Parties have agreed to abate this case until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019. The Rule 11 Agreement causes and allows the Parties time to draft and sign a Compromise Settlement and Mutual Release Agreement (“Settlement Agreement”), to make payments due on or before October 15, 2019, and to allow for the transfer of stock to effectuate the terms of the Rule 11 Agreement. As of the date of this report, the Company is in compliance with the Rule 11 Agreement, and the Parties have exchanged drafts of the Settlement Agreement to be completed before the abatement period ends. The material terms of the Rule 11 Agreement are as follows:

Provided the Company timely performs through October 15, 2019, the Parties will file a Joint Motion for Dismissal and present Agreed Orders of Dismissal with prejudice for both lawsuits. A copy of the Rule 11 Agreement is incorporated hereto as Exhibit 10.52.

On March 13, 2019, Chisos Equity Consultants, LLC (“Chisos”), a company controlled by a dissident shareholder, Richard Halden, filed suit against the Company alleging claims arising from a consulting agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. The Company answered the lawsuit and asserted a number of affirmative defenses. Greenway is confident in its defenses and intends to vigorously defend its interests.

On March 13, 2019, Richard Halden (“Halden”), a dissident shareholder in his capacity as an individual, filed suit against the Company alleging claims arising from a confidential severance and release agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. The Company answered the lawsuit and asserted a number of affirmative defenses. Greenway is confident in its defenses and intends to vigorously defend its interests.

On March 26, 2019, the Company filed a verified petition for Declaratory Judgement, Ex Parte Application for a Temporary Restraining Order and Application for Injunctive Relief against the members of a dissident shareholders group (including Richard Halden) named the “Greenway Shareholders Committee” in Dallas County. A Temporary Restraining Order was issued by the court enjoining the Defendants (and their officers, agents, servants, employees and attorneys) and those persons in active concert or participation from; holding the special shareholders meeting on April 4, 2019 or calling such meeting to order; attending or participating in the Special Meeting; voting the shares of Plaintiff owned by any Defendant at the Special Meeting, either directly or by granting a proxy to allow a non-defendant to vote said shares; voting any shares of Plaintiff owned by non-defendants with or by proxy at the Special Meeting; and serving as chairman at the Special Meeting. On April 8, 2019, the court issued such Temporary Injunction against the dissident shareholders who received notice. The Injunction will continue until the trial date of December 10, 2019.

NOTE 11-SUBSEQUENT EVENTS

On July 19, 2019, the Company’s President, John Olynick sent the Board a letter of resignation, after notifying the Company in March 2019 that he was terminating his agreement by its terms, i.e, he stated that he cancelled the annual automatic extension provision, and was seeking to amend or enter into a new agreement under different terms and conditions. After the parties mutually agreed to extend his employment after the agreement’s end in May, the Company and Mr. Olynick were not able to agree on Mr. Olynick’s proposed changes and accepted his resignation. Mr. Olynick subsequently sent the Company notice for payment of deferred compensation due, requesting payment within 60-days after the end of his employment. While the Company doesn’t dispute the amount of deferred employment compensation owed to Mr. Olynick, the Company disputes Mr. Olynick’s interpretation of his employment agreement that such payment is due within 90-days of his voluntary resignation from the Company. The parties are in discussions to reach a mutually satisfactory resolution to this dispute. Subsequent to Mr. Olynick’s departure, the board of directors appointed Kent Harer, a current director of the Company, as acting President, while the Company undergoes a search for a new chief executive. Mr. Harer is taking no compensation for his executive duties.

On July 23, 2019, the Company announced that Mabert LLC, a company controlled by Greenway Director, Kevin Jones, which also acts as agent for the Company’s lenders, acquired INFRA Technology Group’s U.S. GTL plant and technology located in Wharton, Texas. Mabert purchased the entire 5.2-acre site, plant and equipment, including INFRA’s proprietary Fischer-Tropsch (“FT”) reactor system and operating license agreement. Greenway and Mabert have agreed in principal to enter into a joint venture whereby GWTI, Mabert and a third-party investment group will jointly fund and participate in plant operations going forward. The Company’s Board of Directors voted on July 19, 2019, to adopt the resolution affirming GWTI’s partnership in the new joint venture. The resolution’s vote was passed with approval from five of the six GWTI Directors, with Kevin Jones abstaining from the vote. The parties are currently working to complete the final joint venture structure and related operating participation agreements. As consideration for its interest in the joint venture, the Company is expected to provide a license to its patent-pending G-Reformer™ natural gas reforming technology and a G-Reformer unit. As the first GTL operating plant using Greenway’s proprietary technology and equipment, this facility is initially expected to yield a minimum of 75 barrels per day of gasoline and diesel fuels from converted natural gas. Greenway is also expected to contribute engineering and operations personnel to the joint venture, who will be responsible for integrating Greenway’s G-Reformer technology with the existing INFRA FT system.

On July 25, 2019, the Trustee for the Greer Family Trust (“Trust”) sent notice to the Company of their election to convert all unpaid principal and accrued interest due under that certain Promissory Note dated January 16, 2018 (the “Note”). Under the terms of the Note, the amount due is convertible by the Trust in its sole discretion into that number of shares of the Company’s common stock as is determined by dividing the total of such principal amount and accrued interest by seventy percent (70%) of the prior twenty (20) day average closing market price for the Company common stuck The principal amount of the Note at the date of conversion was $144,000, with accrued interest of $39,220. The conversion price as calculated according to the Note terms is $0.0469 per share, resulting in a conversion of the Note into 3,906,610 shares of the Company’s common stock. Instructions to the transfer agent for the issuance of such shares will be issued as soon as practicable by the Company.

On July 10, 2019, the Company executed a Promissory Note with a shareholder for $50,000, at 12-1/2% interest per annum, such note being incorporated by reference into and subject to the terms of that certain Mabert LLC as Agent Loan Agreement entered into by the Company on September 14, 2018. Mabert LLC is a Texas Limited Liability Company owned by a Director and shareholder, Kevin Jones and his wife Christine Early. As a cost of the note, the Company issued 100,000 shares of its Class A common stock at a market price of $0.06 per share for a total debt discount of $6,000, subject to standard Rule 144 restrictions.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This quarterly Report on Form 10-Q contains “forward-looking statements,” all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company’s growth strategy and financial results. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed, and actual future results may vary materially.

Information regarding market and industry statistics contained in this Report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of SEC filings or economic analysis. We have not reviewed or included data from all sources and cannot assure investors of the accuracy or completeness of the data 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. We do not assume any obligation to update any forward-looking statement. As a result, investors should not place undue reliance on these forward-looking statements.

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE UNAUDITED CONSOLIDATED 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 the financial statements and related notes included elsewhere in this Report, which were prepared assuming that we will continue as a going concern, and in conjunction with our Annual Form 10-K filed on April 19, 2019. 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.

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

Greenway fka UMED Holdings, Inc. was originally incorporated as Dynalyst Manufacturing Corporation under the laws of the State of Texas on March 13, 2002. Greenway is structured as a holding company with present interests in energy technology and mining property, and primarily focused on the research and development of the Company’s proprietary GTL technology, as more fully described below. Our corporate offices are located at 1521 North Cooper Street, Suite 205, Arlington, Texas 76011.

As a development stage entity, we do not currently generate revenue and will be unable to pay our obligations in the normal course of business or service our debt in a timely manner throughout the remainder of 2019 without raising additional debt or equity capital. Although the Company has been successful in its capital raising efforts in prior years, there can be no assurance that additional debt or equity capital will be raised, or at the levels required to maintain as going concern.

Greenway 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 next 12 months working capital needs or result in any other transaction.

Greenway’s GTL Technology

In August 2012, Greenway Technologies acquired 100% of Greenway Innovative Energy, Inc. (“GIE”) 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”), the Company believes that GIE’s G-Reformer, combined with conventional Fischer-Tropsch (“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 its GTL technology. U.S. Patent number 8,574,501 was issued on November 5, 2013. On November 4, 2013, GIE filed for a second patent covering other unique aspects of the design. The Company has identified several other areas in its technology to file for patent protection and such efforts are ongoing.

On June 26, 2017, Greenway, in conjunction with the University of Texas at Arlington (“UTA”), announced that they had successfully demonstrated Greenway’s GTL technology at the Company sponsored Conrad Greer Laboratory at UTA, proving the viability of the science behind the technology.

On March 6, 2018, the Company announced the completion of its first commercial scale G-Reformer. The G-Reformer is the critical component of the Company’s innovative Greer-Wright Gas-to-Liquids system. A team consisting of individuals from the Company, UTA and the Company’s contracted fabricator worked together to test and calibrate the newly built G-Reformer unit. The testing substantiated the units’ synthesis gas generation capability and demonstrated additional proficiencies within certain prior prescribed testing metrics.

The Company believes that its proprietary G-Reformer is a major innovation in gas reforming and GTL technology in general. Initial tests have demonstrated that the Company’s solution is superior to legacy technologies which are costly, have a larger footprint and cannot be easily deployed at field sites to process associated gas, stranded gas, coal-bed methane, vented gas, or flared gas, all markets the Company seeks to service. The proprietary technology based around the G-Reformer is unique in that it also allows for transportable GTL plants with a much smaller footprint when compared to legacy large-scale technologies. The Company believes its technologies and processes will allow for GTL plants to be built with substantially lower up-front and ongoing costs resulting in more profitable results for O&G operators. Greenway is now working to commercialize both its G-Reformer and its GTL solutions and is in discussions with a number of oil and gas companies, smaller oil and gas operators and other interested parties to license and obtain joint venture or other forms of capital funding to build its first complete gas-to-liquid plant.

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 and odorless. They contain almost none of the impurities, e.g., sulphur, aromatics and nitrogen, that are found in crude oil.

According to industry research metrics, the market for GTL products accounted for $10.98 billion in 2017 and is expected to reach $22.89 billion by 2026, growing at a CAGR of 8.5%. Products created by this process include GTL Diesel, GTL Naphtha, GTL Other (e.g., lubricants), where GTL Diesel accounts for more than 68% of the market. Market share of these products has not changed significantly over the last four years. Increasing population across the globe have led to the increase in the power consumption. There is a high demand for clean natural gas liquids products (“NGL”) in the commercial sector, including as blend-stock for petrochemical plants and refineries, as well as in the automobile and packaging industries, among others. Due to their clean nature, NGL products have wide use as fuel in motor vehicles, furnaces for heating and cooking, and as a household energy source. Greenway’s focus is in the production of gasoline, diesel and Jet A fuels, a multi-billion-dollar market segment.

Development of stringent environmental regulations by numerous governments to control pollution and promote cleaner fuel sources is expected to complement industry growth. U.S. guidelines implemented 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.

Key industry players include: Linc Energy; Gas Techno; Compact GTL; Primus Green Energy; Chevron Corporation; Velocys; Royal Dutch Shell; Sasol Limited; NRG Energy; Ventech Engineers and Petrobras. In terms of production and consumption, Shell had the largest market share in 2018, virtually all of which is located overseas.

Mining Interest

In December 2010, UMED acquired the rights to approximately 1,440 acres of placer mining claims located on Bureau of Land Management (“BLM”) land in Mohave County, Arizona for 5,066,000 shares of restricted Common A stock. Early indications, from samples taken and processed, provided reason to believe that the potential recovery value of the metals located on the 1,440 acres is significant, but only actual mining and processing will determine the ultimate value which may be realized from this property holding. The Company is currently exploring strategic options to partner or sell its interest in this acreage, while it focuses on its emerging GTL technology sales and marketing efforts.

Company History

Greenway Technologies, Inc. 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, the Company changed its 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 Dynalyst’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 its 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, Greenway Technologies, Inc.in recognition of its primary operational activity, approved the amendment of its certificate of formation and filed on June 23, 2017, with the Texas Secretary of State to change its name to: Greenway Technologies, Inc.

On June 26, 2019, the Company held its first annual shareholders meeting in Arlington, Texas. There were seven proposals presenting for stockholder vote, including to approve the Company’s slate of directors, to amend the Company’s Certificate of Formation (Articles) and Bylaws, as well as to ratify the Company’s then current independent public accounting audit firm, which passed by an overwhelming margin at the meeting. The Company’s Form 8-K filed on July 2, 2019 and which is incorporated herein by reference. On August 1, 2019, filed an amended 8-K/A, noting that due to a potential tabulation error, the Company is now in the process of determining the number of shares voted with respect to Proposal 2, which was to amend the Company’s certificate of formation to increase the number of authorized shares of capital stock of the Company, and Proposal 3, which was to amend the Company’s certificate of formation to permit the vote of the holders of the majority of shares entitled to vote on and represented in person or by proxy at a meeting of the shareholders at which a quorum is present, to be the action of the shareholders, including for fundamental actions. At this time, the Company has not completed its review and determination of the vote count and will report the final results at a later date.

Employees

As of August 19, 2019, we have five full-time employees, located in, or near our corporate offices in Arlington, Texas. Our acting President, Kent Harer, is a Director and takes no salary in his current executive role. None of our employees are covered by collective bargaining agreements. We consider our employee relations to be satisfactory.

Going Concern

The accompanying condensed consolidated financial statements to this Report on Form 10-Q 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 of June 30, 2019, we have an accumulated deficit of $28,924,206. For the six-months ended June 30, 2019, we incurred a net loss of $2,105,622 and used $735,119 net cash for operating activities. As a pre-revenue entity, these factors raise substantial doubt about the Company’s ability to continue as a going concern. While the Company is attempting to commence revenue generating operations and thereby generate sustainable revenues, the Company’s current cash position is not sufficient to support its ongoing daily operations and requires the Company to raise addition capital through debt and/or equity sources.

Accordingly, the ability of the Company to continue as a going concern is therefore 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 intends to raise additional funds by way of public or private offerings, or both. Management believes that the actions presently being taken to implement the Company’s business plan to generate revenues will provide the opportunity for the Company 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. The Company’s ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.

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 June 30, 2019, Compared to Three-months Ended June 30, 2018.

Revenues. During the three-months ended June 30, 2019 and 2018, respectively, the Company had no revenues from operations. Management has determined a variety of ways to leverage the Company’s unique GTL technology to develop revenue opportunities and expects to generate revenue in the future.

Operating Expenses.

General and Administrative Expenses. During the three-months ended June 30, 2019, General and Administrative expenses decreased $108,649 to $434,417, as compared to $543,066 for the prior year three-months ended June 30, 2018. The decrease was primarily the result of a decrease use of consulting services in the period.

Research and Development Expenses. During the three-months ended June 30, 2019, Research and Development expenses increased to $284,857, as compared to $232,068 from the prior year three-months ended June 30, 2018. The increase was the result of activities related to the start of field testing and commercialization of the Company’s G-Reformer GTL unit.

Interest Expense. During the three-months ended June 30, 2019, interest expense increased to $87,822 as compared to interest expense of $18,181 from the prior year three-months ended June 30, 2018. The increase was primarily due to the increase in notes payable and amortization of debt discount during the period.

Derivative Adjustment. During the three-months ended June 30, 2019, the loss on derivative adjustment was $29,703 as compared to a gain of $18,199 for the prior year three-months ended June 30, 2018. The change was due to a change in the price per share changes related to a convertible note payable using the Black-Scholes Model for the period.

Net Loss. Our net loss increased to $1,506,674 for the three-months ended June 30, 2019 compared to a loss of $803,116 for the three-months ended June 30, 2018. The increase was primarily due to the increase in litigation settlement expenses for the period.

Six-months Ended June 30, 2019, Compared to Six-months Ended June 30, 2018.

Revenues. During the six-months ended June 30, 2019 and 2018, respectively, the Company had no revenues from operations. Management has determined a variety of ways to leverage the Company’s unique GTL technology to develop revenue opportunities and expects to generate revenue in the future.

Operating Expenses.

General and Administrative Expenses. During the six-months ended June 30, 2019, General and Administrative expenses decreased $50,881 to $760,926, as compared to $811,807 for the prior year six-months ended June 30, 2018. The decrease was primarily the result of a decrease use of consulting services in the period.

Research and Development Expenses. During the six-months ended June 30, 2019, Research and Development expenses decreased to $528,677, as compared to $541,283 from the prior year six-months ended June 30, 2018. The decrease was primarily due to a gain on certain prior accrued expenses related to the development of the Company’s G-Reformer unit.

Interest Expense. During the six-months ended June 30, 2019, interest expense increased to $163,221 as compared to interest expense of $34,236 from the prior year six-months ended June 30, 2018. The increase was primarily due to the increase in notes payable and amortization of debt discount during the period.

Derivative Adjustment. During the six-months ended June 30, 2019, the gain on derivative adjustment was $17,076 as compared to a gain of $37,587 for the prior year six-months ended June 30, 2018. The change was due to a change in the price per share changes related to a convertible note payable using the Black-Scholes Model for the period.

Net Loss. Our net loss increased to $2,105,622 for the six-months ended June 30, 2019 compared to a net loss of $1,377,739 for the six-months ended June 30, 2018. The increase in net loss was primarily due to the increase in litigation settlement expenses over the prior year six-month period.

Liquidity and Capital Resources

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, 2019, our working capital deficit increased by $2,050,623 from 2018 year-end primarily as the result of increases in shareholder advances and notes payable of $529,199 and $550,500, respectively, over the same prior year period.

Operating activities

Net cash used for operating activities increased during the six-months ended June 30, 2019 to $735,119 from $655,947 for the six-months ended June 30, 2018, primarily due to the increase in accrued expenses to $1,271,587, as compared to $270,044 for the same period in the prior year.

Investing activities

We had no investing activities during the six-months ended June 30, 2019 and 2018.

Financing Activities

Net cash provided by financing activities was $829,199 for the six-months ended June 30, 2019, consisting primarily of the proceeds from loans made under the Mabert Loan Agreement totaling $325,000, and advances made directly to and on behalf of the Company totaling $529,199 by Kevin Jones, a director and related party. This is compared to cash primarily provided by sales of the Company’s Class A common stock of $602,500 for the six-months ended June 30, 2018.

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, 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, the Company entered into an employment agreement with Ray Wright, president of Greenway Innovative Energy, Inc., now chairman of the board for a term of 5 years with compensation of $90,000 per year. In July 2014, the president’s employment agreement was amended to increase his annual pay to $180,000. By its terms, the employment agreement automatically renewed on August 12, 2018 for a successive one-year period. During the years ended December 31, 2018 and 2017, the Company paid and accrued a total of $180,000 and $180,000, respectively, for the annual compensation payments, as well as accrued an additional $435,000 as an adjustment for prior periods not correctly accounted for.

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 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. He is also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. Both Mr. Olynick and Mr. Jones received a grant of common stock (the “Stock Grant”) at the start of their employment equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. Mr. Jones is also entitled to participate in the Company’s benefit plans, when such plans exist. The foregoing summary of the Mr. Jones employment agreements is qualified in its entirety by reference to the actual true and correct Employment Agreement, a copy of which is incorporated hereto as Exhibit 10.40.

Effective January 1, 2019, the Company entered into an employment agreement with Thomas Phillips, Vice President of Operations, reporting to the President of Greenway Innovative Energy, Inc., for a term of fifteen (15) months with compensation of $120,000 per year. Phillips is entitled to a no-cost grant of common stock on the effective date equal to 5,000,000 shares of the Company’s Rule 144 restricted Class A common stock, par value $.0001 per share, such shares to be issued at such time as the Company has the ability to issue such number of shares. also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. Phillips is also entitled to participate in the Company’s benefit plans, when such become available. The foregoing summary of the Phillips Employment Agreements is qualified in its entirety by reference to the actual true and correct employment agreements, a copy of which is incorporated hereto as Exhibit 10.53.

In the August 2012 acquisition agreement with Greenway Innovative Energy, Inc. (“GIE”), the Company agreed to: (i) issue an additional 7,500,000 shares of restricted 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. In connection with a settlement agreement with the Greer Family Trust (‘Trust”), the successor owner of one of the two founders and prior owners of GIE on February 6, 2018, the Company exchanged Greer’s half of the 7,500,000 shares (3,750,000 shares) to be issued in the future, Greer’s half of the 2% royalty, a termination of Greer’s then current Employment Agreement and the Trust’s waiver of any future claims against the Company for any reason, for the issuance and delivery to the Trust of three million (3,000,000) restricted shares of the Company’s common stock, and a Promissory Note for $150,000. As a result, only 3,750,000 shares are committed to be later issued under the original 2012 acquisition agreement. A copy of the Settlement Agreement and Promissory Note is incorporated hereto as Exhibit 10.36.

Consulting Agreements

On July 10, 2017, the Company entered into a one-year consulting agreement with an individual, Ryan Turner, to provide business development services, including but not limited to enhanced digital marketing, assistance with shareholder communications and help in establishing industry relationships. Terms included monthly payments of $5,000 per month, plus approved expenses. After the first twelve-month initial term, the agreement was automatically renewable for successive twelve-month terms, unless otherwise terminated with written notice by the parties, and was subsequently renewed for an additional term. Mr. Turner continues to provide services to the Company under the current 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 the Company’s restricted common stock. Additional payments upon the Company’s common stock reaching certain price points as follows:

Due to a breach of the Agreement by Chisos, on June 22, 2018, the Board of Directors of the Company voted to terminate the Agreement. Based on the termination, all warrants to purchase the Company’s common stock were cancelled. The Company is currently in litigation over such termination action. See Note 11 – Legal.

Other

On March 6, 2019, the Company entered into a Rule 11 Agreement to settle all prior disputes with Wildcat Consulting Group. As of the date of this report, the Company is in compliance with the Rule 11 Agreement, and the Parties have exchanged drafts of a Settlement Agreement to be completed before the abatement period ends October 30, 2019. The material terms of the Rule 11 Agreement are as follows:

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

Accounting Standard 718, “Accounting for Stock-Based Compensation” (“ASC 718”) established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. In January 2006, Greenway Technologies implemented ASC 718, and accordingly, we account for compensation cost for stock option plans in accordance with ASC 718.

Greenway accounts for share-based payments to non-employees in accordance with ASC 505-50 “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.

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 as of January 1, 2019.

FASB’s new lease accounting standard (Accounting Standards Update No. 2016-02, Leases (Topic 842)), as provided by FASB in ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, whereby the Company would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, will be applied to any new leases entered into by the Company where this standard would otherwise apply. The Company does not have any lease agreements where such lease accounting standards would apply.

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.

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 June 2019, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this evaluation, management has concluded that as of June 30, 2019, our internal control over financial reporting was ineffective.

We have identified the following deficiencies which together constitute a material weakness in our assessment of the effectiveness of internal control over financial reporting as of June 30, 2019:

Greenway Technologies has inadequate segregation of duties within its cash disbursement control design.

For the period ending June 30, 2019, Greenway internally performed all aspects of its financial reporting process, including, but not limited to the underlying accounting records and record journal entries and responsibility for the preparation of the financial statement due to the fact these duties were performed often times by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

Greenway does not have a sufficient number of independent or qualified directors for its board and audit committee. We currently have three independent directors on our board, which is comprised of six directors, and we do not yet have a functioning audit committee, as the only otherwise qualified director is not independent. As a publicly traded company, we should strive to have a majority of our board of directors be independent.

Greenway is continuing the process of remediating its control deficiencies. However, the material weakness in internal control over financial reporting that has been identified will not be remediated until numerous internal controls are implemented and operate for a period of time, are tested, and Greenway is able to conclude that such internal controls are operating effectively. We cannot provide assurance that these procedures will be successful in identifying material errors that may exist in our financial statements. We cannot make assurances that we will not identify additional material weaknesses in its internal control over financial reporting in the future. Management plans, as capital becomes available to us, to increase the accounting and financial reporting staff and provide future investments in the continuing education and public company accounting training of our accounting and financial professionals.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly report.

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

Changes in Internal Controls over Financial Reporting

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal control over financial reporting that occurred during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

The Company was 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. 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 the Company sold its shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Company maintained its guaranty on the original loan as a component of the sale transaction. 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, the parties executed a Settlement and Mutual Release Agreement (Agreement). However, the Defendants again defaulted in their payment obligations under this new Agreement. Curtis Borman and Lee Jennison were co-guarantors of the obligations of Mamaki and HBI. To secure their guaranties, each of Curtis Borman and Lee Jennsion posted 1,241,500 and 1,000,000 shares, respectively, of the Company. Under the Agreement, the shares were valued at $.20. Due to the default under the Agreement, these shares were returned to the Company’s treasury shares. Curtis Borman subsequently filed for bankruptcy and the property was liquidated for $600,000, applied against the prior loan amount, leaving a remaining guaranteed loan payment balance of approximately $700,000, including accrued interest and legal fees. The Company has been in negotiations with the note holders and having negotiated a tentative resolution, the terms of which are being drafted into a confidential settlement and release agreement between the parties, has accrued for the estimated expenses on the Company’s Balance Sheet as of June 30, 2019.

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 was completed in connection with a legal opinion pursuant to Rule 144.

On September 7, 2018, Wildcat Consulting Group, LLC (“Wildcat”), a company controlled by a shareholder, filed suit against the Company alleging claims arising from a Consulting Agreement between the Parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. On September 27, 2018, Wildcat filed a second suit against the Company alleging claims arising from a Promissory Note between the Parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. On February 13, 2019, the Parties attended mediation which resulted in settlement discussions which resulted in a Rule 11 Agreement settling both disputes. Pursuant to the Rule 11 Agreement, the Parties have agreed to abate this case until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019. The Rule 11 Agreement causes and allows the Parties time to draft and sign a Compromise Settlement and Mutual Release Agreement (“Settlement Agreement”), to make payments due on or before October 15, 2019, and to allow for the transfer of stock to effectuate the terms of the Rule 11 Agreement. As of the date of this report, the Company is in compliance with the Rule 11 Agreement, and the Parties have exchanged drafts of the Settlement Agreement to be completed before the abatement period ends. The material terms of the Rule 11 Agreement are as follows:

Provided the Company timely performs through October 15, 2019, the Parties will file a Joint Motion for Dismissal and present Agreed Orders of Dismissal with prejudice for both lawsuits. A copy of the Rule 11 Agreement is incorporated hereto as Exhibit 10.52.

On March 13, 2019, Chisos Equity Consultants, LLC (“Chisos”), a company controlled by a dissident shareholder, Richard Halden, filed suit against the Company alleging claims arising from a consulting agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. The Company answered the lawsuit and asserted a number of affirmative defenses. Greenway is confident in its defenses and intends to vigorously defend its interests.

On March 13, 2019, Richard Halden (“Halden”), a dissident shareholder in his capacity as an individual, filed suit against the Company alleging claims arising from a confidential severance and release agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. The Company answered the lawsuit and asserted a number of affirmative defenses. Greenway is confident in its defenses and intends to vigorously defend its interests.

On March 26, 2019, the Company filed a verified petition for Declaratory Judgement, Ex Parte Application for a Temporary Restraining Order and Application for Injunctive Relief against the members of a dissident shareholders group (including Richard Halden) named the “Greenway Shareholders Committee” in Dallas County. A Temporary Restraining Order was issued by the court enjoining the Defendants (and their officers, agents, servants, employees and attorneys) and those persons in active concert or participation from; holding the special shareholders meeting on April 4, 2019 or calling such meeting to order; attending or participating in the Special Meeting; voting the shares of Plaintiff owned by any Defendant at the Special Meeting, either directly or by granting a proxy to allow a non-defendant to vote said shares; voting any shares of Plaintiff owned by non-defendants with or by proxy at the Special Meeting; and serving as chairman at the Special Meeting. On April 8, 2019, the court issued such Temporary Injunction against the dissident shareholders who received notice. The Injunction will continue until the trial date of December 10, 2019.

We may not be able to raise the additional capital necessary to execute our business strategy which includes the production, sale and/or licensing of our proprietary GTL technology solutions to oil and gas operators in the United States and elsewhere.

Our ability to successfully execute such transactions may depend on our ability to raise additional debt and/or equity capital. Our ability to raise additional capital is uncertain and dependent upon numerous factors beyond our control, including but not limited to economic conditions, regulatory factors, reduced retail sales, increased taxation, reductions in consumer confidence, changes in levels of consumer spending, changes in preferences in how consumers pay for goods and services, weak housing markets and availability or lack of availability of credit. If we are unable to obtain additional capital, or if the terms thereof are too costly, we may be unable to successfully execute our business strategy.

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

We are a development stage company and have a limited operating history upon which you can evaluate our business and prospects. We have yet to develop sufficient experience regarding actual revenues to be received from our GTL Technology. You must consider the risks and uncertainties frequently encountered by early stage companies in new and evolving markets. If we are unsuccessful in addressing these risks and uncertainties, our business, results of operations and financial condition will be materially and adversely affected. The risks and difficulties we face include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having had a relatively limited time period in which to implement and evaluate our business strategies as compared to older companies with longer operating histories.

We have historically incurred losses.

We are considered a pre-revenue or development stage company. We have incurred significant operating losses since inception. Due to the inherent risk of commercializing new technology, there can be no assurance that the Company will earn net income in the future and it may require additional capital in order to fund its operations, which it may not be able to source on acceptable terms.

Establishing our revenues and achieving profitability will depend on our ability to develop and commercialize our GTL Technology.

Much of our ability to establish revenues and to achieve profitability and positive cash flows from operations will depend on the successful introduction of our GTL technology. Our prospective customers will not use our GTL technology unless they determine that the benefits provided by our GTL solution is greater than those available from competing technologies and providers. Even if the advantages derived from our proprietary GTL technology is well established, prospective customers may elect not to use our GTL technology for a variety of reasons.

We may be required to undertake time-consuming and costly additional development activities and seek regulatory clearance or approval for new GTL technology. The completion of the development and commercialization of our GTL technology remains subject to all the risks associated with the commercialization of any GTL systems based on innovative technologies, including unanticipated technical or other problems, manufacturing difficulties and the possible insufficiency of the funds allocated for the completion of such development.

We may encounter substantial competition in our business and failure to compete effectively may adversely affect our ability to generate revenue.

We expect that we will be required to continue to invest in product development and productivity improvements to compete effectively in our markets. Our competitors could potentially develop a similar or more efficient GTL product or undertake more aggressive and costly marketing campaigns than ours, which may adversely affect our sales and marketing strategies and could have a material adverse effect on our business, results of operations and financial condition. Important factors affecting our ability to compete successfully include:

If substantial competitors enter our targeted markets, we may be unable to compete successfully against such existing or new competition. Most of our potential competitors have far greater resources than the Company today. In addition, there is significant competition for experienced personnel and financial capital in the oil and gas industry. Therefore, it can be difficult for smaller companies such as Greenway to attract the personnel and related investment for its various business activities needed to succeed. We cannot give any assurances that we will be able to successfully compete for such personnel and capital funds, and without adequate financial resources, Management cannot assure that we will be able to compete in our business activities.

The longevity of patents in the United Sates is limited in duration and may affect the Company’s long-term ability to successfully monetize the intellectual property it owns.

As of June 30, 2019, the Company owns United States Patents Nos. 8,574,501 B1 and 8,795,597 B2 covering its mobile GTL conversion technology for the purpose of converting natural gas to clean synthetic fuels. In the United States, a patent’s term may be up to 21 years if the earliest claimed filing date is that of a provisional application. Other legal provisions may, however, shorten or lengthen a patent’s term. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent. Alternatively, a patent’s term may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date.

We are dependent on a limited number of key executives, consultants and equipment fabricators, the loss of any of which could negatively impact our business.

Our business is led by current Director and acting President, Kent Harer, and our Chief Financial Officer, Ransom Jones. Our engineering efforts are led by Thomas Phillips. In addition, we plan to continue to use outside consultants to support and perform the engineering and production work on our GTL technology. In that regard we have a Sponsored Research Agreement with UTA and have contracted manufacturing production with a heavy equipment fabricator in Texas.

If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted, and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and senior personnel in our industry is intense, the pool of qualified candidates is limited, and we may not be able to retain the services of our senior executives or senior personnel or attract and retain high-quality senior executives or senior personnel in the future. Such failure could materially and adversely affect our future growth and financial condition, and the loss of one or more of these executives, consultants or current fabricators could negatively impact our business and operations.

Our quarterly results may fluctuate substantially and if we fail to meet the expectations of our investors or analysts, our stock price could decline substantially.

Our quarterly operating results may fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Some of the important factors that could cause our revenue and operating results to fluctuate from quarter to quarter include:

We may have difficulty in attracting and retaining outside independent directors to our board of directors as a result of their concerns relating to potentially increased personal exposure to lawsuits and shareholder claims by virtue of holding these positions.

The directors and management of companies are increasingly concerned with the extent of their personal exposure to lawsuits and shareholder claims, as well as governmental and creditor claims which may be made against them, particularly in view of recent changes in securities laws imposing additional duties, obligations and liabilities on management and directors. Due to these perceived risks, directors and management are also becoming increasingly concerned with the availability of directors’ and officers’ liability insurance to pay on a timely basis the costs incurred in defending such claims. We currently carry directors’ and officers’ liability insurance. Directors’ and Officers’ liability insurance has recently become much more expensive and difficult to obtain. If we are unable to continue or provide liability insurance at affordable rates or at all, it may become increasingly more difficult to attract and retain qualified outside directors to serve on our board of directors.

We may lose potential independent board members and management candidates to other companies that have greater directors’ and officers’ liability insurance to insure them from liability or to companies that have revenues or have received greater funding to date which can offer more lucrative compensation packages. The fees of directors are also rising in response to their increased duties, obligations and liabilities as well as increased exposure to such risks. As a company with limited operating history and resources, we will have a more difficult time attracting and retaining management and outside independent directors than a more established company due to these enhanced duties, obligations and liabilities.

Our future success relies upon our proprietary GTL Technology. We may not have the resources to enforce our proprietary rights through litigation or otherwise. The loss of exclusive right to our GTL Technology could have a material adverse effect on our business, financial condition and results of operations.

We believe that our GTL technology does not infringe upon the valid proprietary intellectual property rights of others. Even so, third parties may still assert infringement claims against us. If infringement claims are brought against us, we may not have the financial resources to defend against such claims or prevent an adverse judgment against us. In the event of an unfavorable ruling on any such claim, a license or similar agreement to utilize the intellectual property rights in question relied upon by us in the conduct of our business may not be available to us on reasonable terms, if terms are offered at all.

Our ability to obtain field related operating hazards insurance may be constrained by our limited operational history.

The oil and natural gas business involves a variety of operating risks, including the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as oil spills, natural gas leaks, ruptures or discharges of toxic gases. If any of these should occur, we could incur legal defense costs and could suffer substantial losses due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties, and suspension of operations. We plan to carry comprehensive general liability insurance will further provide workers’ compensation insurance coverage to employees in all states in which we will operate.

While these policies are customary in the industry, they do not provide complete coverage against all operating risks, and as a small operator, we may not be able to obtain sufficient coverage. In addition, our insurance may not cover penalties or fines that may be assessed by a governmental authority. A loss not fully covered by insurance could have a material adverse effect on our financial position, results of operations and cash flows. Our insurance coverage may not be sufficient to cover every claim made against us or may not be commercially available for purchase in the future.

Our future revenues are unpredictable, and our quarterly operating results may fluctuate significantly.

We only have a limited operating history and cannot forecast with any degree of certainty whether our GTL technology will generate revenue, or that the amount of revenue to be generated will be profitable. In addition, we cannot predict the consistency of our quarterly operating results. Factors which may cause our operating results to fluctuate significantly from quarter to quarter include:

Our GTL Technology is subject to the changing of applicable U.S. laws and regulations.

Our business is particularly subject to federal and state laws and regulations with respect to the oil and gas and mining industries. Our success depends in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes.

Acts of terrorism, responses to acts of terrorism and acts of war may impact our business and our ability to raise capital.

Future acts of war or terrorism, national or international responses to such acts, and measures taken to prevent such acts may harm our ability to raise capital or our ability to operate, especially to the extent we depend upon activities conducted in foreign countries. In addition, the threat of future terrorist acts or acts of war may have effects on the general economy or on our business that are difficult to predict. We are not insured against damage or interruption of our business caused by terrorist acts or acts of war.

We may fail to establish and maintain strategic relationships.

We believe that the establishment of strategic partnerships and customer relationships will greatly benefit the growth of our business, and the deployment of our GTL technology, and we intend to seek out and enter into strategic alliances, joint ventures and similar production relationships. We may not be able to enter into these strategic partnerships on commercially reasonable terms, or at all. Even if we enter such relationships, our partners may not have sufficient production to provide profitable revenues or otherwise prove advantageous to our business. Our inability to enter into such new relationships or strategic alliances could have a material and adverse effect on our business.

Risks Relating to Our Mining Properties

As discussed above, although we still own mining properties, we do not currently conduct any mining operations. However, there are still risks associated with our mining properties, including those risks described below.

Our mining properties do not have quantified known reserves.

None of the properties in which we have an interest have any known reserves. To date, we have engaged in only limited preliminary exploration and assay activities on the leased properties. Accordingly, we do not have sufficient information upon which to assess the ultimate success of our exploration efforts.

There are uncertainties as to title matters in the mining industry. Any defects in such title could cause us to lose our rights in mineral properties and jeopardize our business operations.

Our mineral properties consist of claims to mineral rights on Bureau of Land Management (“BLM”), a department of the United States Government. Our mining properties in the United States are mining claims located on lands administered by the U.S. Bureau of Land Management (“BLM”), to which we have only mining rights to recover minerals. The mining claims are renewable annual and if not paid, revert back to the BLM. These uncertainties relate to such things as sufficiency of mineral discovery, proper location and posting and marking of boundaries, and possible conflicts with other claims not determinable from descriptions of record. We believe a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, and this uncertainty is inherent in the mining industry.

The present status of our mining claims located on BLM lands allows us the right to mine and remove valuable minerals, such as precious and base metals, from the claims conditioned upon applicable environmental reviews and permitting programs. We also are generally allowed to use the surface of the land solely for purposes related to mining and processing the mineral-bearing ores. However, legal ownership of the land remains with the United States. We remain at risk that the mining claims may be forfeited either to the United States due to failure to comply with statutory requirements. Prior to 1994, a mining claim locator who was able to prove the discovery of valuable, locatable minerals on a mining claim, and to meet all other applicable federal and state requirements and procedures pertaining to the location and maintenance of federal unpatented mining claims, had the right to prosecute a patent application to secure fee title to the mining claim from the Federal government. The right to pursue a patent, however, has been subject to a moratorium since October 1994, through federal legislation restricting the BLM from accepting any new mineral patent applications. There may be challenges to title to the mineral properties in which we hold a material interest. If there are title defects with respect to any properties, we might be required to compensate other persons or perhaps reduce our interest in the affected property. Also, in any such case, the investigation and resolution of title issues would divert our management’s time from ongoing production, exploration and development programs.

We are required to share our profits derived from properties in which we do not own 100% fee title.

Under BLM related law, we are required to pay the BLM ten percent (10%) of any revenues derived from sales of minerals from the leased property.

Risks Relating to Our Stock

We may need to raise additional capital. If we are unable to raise additional capital, our business may fail, or our operating results and our share price may be materially adversely affected.

Because we have no record of profitable operations, we need to secure adequate funding on an ongoing basis. If we are unable to obtain adequate funding, we may not be able to successfully develop and market our GTL Technology and our business will most likely fail. We have limited commitments for financing. To secure additional financing, we may need to borrow money or sell more securities, which may reduce the value of our outstanding securities. We may be unable to secure additional financing on favorable terms, or at all.

Selling additional shares, either privately or publicly, would dilute the equity interests of our shareholders. If we borrow money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. If we are unable to obtain adequate financing, we may have to curtail business operations, which would have a material negative effect on operating results and most likely result in a lower share price.

Issuance of additional common stock in exchange for services or to repay debt would dilute a shareholder’s proportionate ownership and voting rights and could have a negative impact on the market price of our common stock.

Our board of directors may generally issue shares of common stock to pay for debt or services rendered, without further approval by our shareholders based upon such factors as our board of directors may deem relevant in their sole discretion. It is likely that that the Company will issue additional securities to pay for services and reduce debt in the future.

Even though our shares are publicly traded, an investor’s shares may not be “free-trading.”

Investors should understand that their shares of our common stock are not “free-trading” merely because Greenway is a publicly traded company. For shares to become “free-trading,” the shares must be registered, or entitled to an exemption from registration under applicable law.

An investor may be unable to sell his common stock at or above his purchase price, which may result in substantial losses to the investor.

The following factors may add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly or annual operating results; government regulations, announcements of significant acquisitions, strategic partnerships or joint ventures; our capital commitments; and additions or departures of our key personnel. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain the current market price, or as to what effect the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

If we fail to remain current in our reporting requirements, we could be removed from the OTCQB, which would limit the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.

Companies trading on the OTCQB must be reporting issuers under Section 12 of the Exchange Act and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the OTCQB. If we fail to remain current in our reporting requirements, we could be removed from the OTCQB.

Volatility in our share price may subject the Company to securities litigation.

There is a limited market for our shares. The market for our shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share prices will be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

We do not intend to pay dividends.

We have not paid any cash dividends on our common stock since our inception and we do not anticipate paying any cash dividends in the foreseeable future. Earnings, if any, that we may realize will be retained in the business for further development and expansion. Our ability to pay dividends may be restricted under our Loan Agreement.

Our substantial level of indebtedness could adversely affect our financial condition.

We have a substantial amount of indebtedness, which requires significant interest payments. As of June 30, 2019, we had $7,147,309 of total liabilities, including total notes payable of $1,574,418 (net of debt discounts of $90,118), bearing average cash interest of 17.8% per year when current and 18% default interest if loans are not current.

Our substantial level of indebtedness could have important consequences, including the following:

Our ability to meet expenses and to make future principal and interest payments in respect of our debt, depends on, among other things, our future operating performance, competitive developments and financial market conditions, all of which are significantly affected by financial, business, economic and other factors. We are not able to control many of these factors. If industry and economic conditions deteriorate, our cash flow may not be sufficient to allow us to pay principal and interest on our debt and meet our other obligations.

Future sales of large amounts of our common stock could have a negative impact on our stock price.

Future sales of our common stock by existing stockholders pursuant to an effective registration statement covering the resale of such shares or Rule 144 could adversely affect the market price of our common stock and could materially impair our future ability to generate funds through sales of our equity securities.

Our common stock is subject to the “penny stock” rules of the Securities and Exchange Commission, and the trading market in our common stock will be limited, which would make transactions in our stock cumbersome and may reduce the investment value of our stock.

The term “penny stock” generally refers to a security issued by a smaller reporting company that trades at less than $5.00 per share. Penny stocks are generally quoted over-the-counter, such as on the OTCPK or OTCQB which are owned by OTC Markets Group, Inc. (our shares are traded on the OTCQB); penny stocks may, however, also trade on securities exchanges, including foreign securities exchanges. In addition, the definition of penny stock can include the securities of certain private companies with no active trading market.

Penny stocks may trade infrequently, which means that it may be difficult to sell penny stock shares once you own them. Moreover, because it may be difficult to find quotations for certain penny stocks, they may be difficult, or even impossible, to accurately price. For these, and other reasons, penny stocks are generally considered speculative investments. Consequently, investors in penny stocks should be prepared for the possibility that they may lose their whole investment (or an amount in excess of their investment if they purchased penny stocks on margin).

Because of the speculative nature of penny stocks, Congress prohibited broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Exchange Act and the rules thereunder. These SEC rules provide, among other things, that a broker-dealer must (1) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (2) furnish the customer a disclosure document describing the risks of investing in penny stocks; (3) disclose to the customer the current market quotation, if any, for the penny stock; and (4) disclose to the customer the amount of compensation the firm and its broker will receive for the trade. In addition, after executing the sale, a broker-dealer must send to its customer monthly account statements showing the market value of each penny stock held in the customer’s account.

The market for penny stocks has suffered in recent years from patterns of fraud and abuse.

Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

Management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, the Company’s management will strive to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

Section 404 of the Sarbanes-Oxley Act requires us to evaluate annually the effectiveness of our internal controls over financial reporting as of the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial reporting in our annual report. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

While we continue to dedicate resources and management time to ensuring that we have effective controls over financial reporting, failure to achieve and maintain an effective internal control environment could have a material adverse effect on the market’s perception of our business and our stock price.

During the six-month period ended June 30, 2019, we issued 1,866,667 shares of restricted common stock to 3 individuals through the exercise of warrants priced at $0.01/share and direct shares paid as incentive fees related to Promissory Notes the Company entered in 2018 and 2019.

Our unregistered securities were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 506(3) of Regulation D promulgated under the Securities Act. Each investor took his/her securities for investment purposes without a view to distribution and had access to information concerning us and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our securities. Our securities were sold only to accredited investors and current shareholders as defined in the Securities Act with whom we had a direct personal, preexisting relationship, and after a thorough discussion. Each certificate contained a restrictive legend as required by the Securities Act. Finally, our stock transfer agent has been instructed not to transfer any of such securities, unless such securities are registered for resale or there is an exemption with respect to their transfer.

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

Our transfer agent is: Transfer Online, Inc., whose address is 512 SE Salmon Street, Portland, Oregon 97214, 2nd Floor, telephone number (503) 227-2950.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Not applicable.

Not applicable.

None.