GREENWAY TECHNOLOGIES INC - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021

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

For the transition period from _______ to _______

Commission File No. 000-55030

GREENWAY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (800) 289-2515

Securities registered pursuant to Section 12(b) of the Act:

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 ☒ 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 ☒ 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.

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 by Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, par value $0.0001 per share, outstanding as of November 15, 2021 was 348,894,167.

Table of Contents

PART I – FINANCIAL INFORMATION

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

See accompanying notes to the condensed unaudited consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 2021 and 2020

(Unaudited)

See accompanying notes to the condensed unaudited consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the nine months ended September 30, 2021 and 2020
(Unaudited)

See accompanying notes to the condensed unaudited consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2021 and 2020
(Unaudited)

See accompanying notes to the condensed unaudited consolidated financial statements.

GREENWAY TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(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 been realized in Greenway’s first generation commercial-scale G-Reformer^TM unit (“G-Reformer”), a unique and critical component of 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’s GTL Technology

In August 2012, Greenway Technologies acquired 100% of Greenway Innovative Energy, Inc. (“GIE”) which owns patents and trade secrets for proprietary technologies to convert natural gas into synthesis gas (“syngas”). Based on a breakthrough process named Fractional Thermal Oxidation™ (“FTO”), the Company believes that its G-Reformer unit, combined with conventional and proprietary Fischer-Tropsch (“FT”) processes, offers an economical and scalable method to convert natural gas to liquid fuel.

To facilitate the commercialization process, Greenway announced in August 2019 that it had entered into an agreement to partially own and operate an existing GTL plant located in Wharton, Texas. Originally acquired by Mabert, a company controlled by director, Kevin Jones, members include OPMGE (a company formed to facilitate the joint venture), Mabert and Tom Phillips, an employee of the Company. The Company’s involvement in the venture is intended to facilitate third-party certification of the Company’s G-Reformer technology, related equipment and technology. In addition, the Company anticipates that OPMGE’s operations will demonstrate that the G-Reformer is a commercially viable technology for producing syngas and marketable fuel products. As the first operating GTL plant to use Greenway’s proprietary reforming technology and equipment, the Wharton joint venture facility is initially expected to yield a minimum of 75 - 100 barrels per day of gasoline and diesel fuels from converted natural gas. To date, the Company has not raised sufficient funding to achieve the aforementioned objectives but continues to work toward that end.

The Company believes that its proprietary G-Reformer is a major innovation in gas reforming and GTL technology in general. Initial tests have demonstrated that the Company’s solution appears to be superior to legacy technologies which are more costly, have a larger footprint and cannot be easily deployed at field sites to process associated gas, stranded gas, coal-bed methane, vented gas, or flared gas, all markets the Company seeks to service. The new plant is anticipated to prove out the economics for the Company’s technology and GTL processes.

NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

Basis of Presentation

The accompanying unaudited condensed 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 condensed 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, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Principles of Consolidation

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

 SCHEDULE OF SUBSIDIARIES

Greenway’s investments in unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. See Note 3 – Summary of Significant Accounting Policies.

Going Concern Uncertainties

The condensed unaudited 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 of September 30, 2021, we have an accumulated deficit of $34,434,680. For the nine-months ended September 30, 2021, we had no revenue, generated a net loss of $1,412,879 and used cash of $669,861 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 obtain necessary financing to fund ongoing operations. 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. Management believes that its current and future plans will enable it to continue as a going concern for the next twelve months from the date of this report.

The outbreak of COVID-19 (coronavirus), caused by a novel strain of the coronavirus, was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in each of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental directives, reduced business and consumer spending due to both job losses, reduced investing activity and M&A transactions, among many other effects attributable to the COVID-19 (coronavirus), and there continue to be many unknowns. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and other measures. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak. The extent to which the COVID-19 (coronavirus) outbreak will impact our operations, the operations of OPMGE and/or ability to obtain financing or future financial results is uncertain.

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

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies applied in the presentation of the condensed 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. There were no long-lived assets or impairment charges for the period ended September 30, 2021.

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 Company has not, to date, generated any revenues.

Equity Method Investment

On August 29, 2019, the Company entered into a Material Definitive Agreement related to the formation of OPM Green Energy, LLC (OPMGE). The Company contributed a limited license to use its proprietary and patented GTL technology for no actual cost basis in exchange for 42.86% (300 of 700 currently owned member units) revenue interest in OPMGE, expected to be later reduced to a 30% interest upon the completion of certain expected third-party investments for the remining 300 of 1,000 member units available. The Company evaluated its interest in OPMGE and determined that the Company does not control OPMGE. The Company accounts for its interest in OPMGE via the equity method of accounting. At September 30, 2021, there was no change in the investment cost of $0. At September 30, 2021, OPMGE had no material business activity as of such date. As described in Note 9, the Company maintains a Related Party receivable with OPMGE for $412,885 related to our advancing capital for certain of OPMGE’s capital expenditures that the Company believes are in their best interests. Due to the uncertainty of the collectability of the OPMGE receivable, the Company has fully reserved the full amount of this equity method receivable with OPMGE as of September 30, 2021.

Use of Estimates

The preparation of condensed unaudited consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include allowance for collectible receivables, derivative liability valuations and deferred tax valuation allowances. Actual results could differ from such 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 September 30, 2021 or December 31, 2020, respectively.

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 2016 – 2020, with no corporate tax returns filed for the years ending 2016 to 2020.

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 issued and outstanding for the period. For the nine months ended September 30, 2021, shares issuable upon the exercise of warrants (3,000,000), shares convertible for debt (2,083,333) and shares outstanding but not yet issued (823,500) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive. For the nine months ended September 30, 2020, shares issuable upon the exercise of warrants (8,000,000), shares convertible for debt (3,616,539) and shares outstanding but not yet issued (356,186) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive.

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. The Company did not have any derivative liabilities as of September 30, 2021. During the year ended December 31, 2020, the Company entered into two convertible notes creating derivative liabilities which were converted into shares and settled during the year.

Fair Value of Financial Instruments

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 September 30, 2021 and December 31, 2020:

 SCHEDULE OF COMPANY'S ASSETS AND LIABILITIES BY LEVEL MEASURED AT FAIR VALUE ON A RECURRING BASIS

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

As of and for the nine months ended September 30, 2021, the Company did not have a derivative or derivative activity.

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

The change in the convertible notes payable derivative liabilities at fair value for the nine-month period ended September 30, 2020, is as follows:

 SCHEDULE OF CHANGE IN NOTES PAYABLE AT FAIR VALUE

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 September 30, 2021, 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 of $250,000. The Company did not have cash on deposit in excess of such limit on September 30, 2021 and December 31, 2020.

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 $48,000 and $0 for the three months ended September 30, 2021 and 2020, and $126,000 and $0 for the nine months ended September 30, 2021 and 2020, 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 condensed unaudited consolidated financial statements.

NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT

 SCHEDULE OF PROPERTY PLANT, AND EQUIPMENT

Depreciation expense was $0 for the nine months ended September 30, 2021 and 2020, respectively.

NOTE 5 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE RELATED PARTIES

Convertible notes payable, including notes payable to related parties consisted of the following at September 30, 2021 and December 31, 2020 respectively:

 SCHEDULE OF NOTES PAYABLE

Under the Loan Agreement, various private lenders have loaned gross loan proceeds of $2,754,005 (excluding a debt discount of $16,439, for a net $2,737,566 book debt) through September 30, 2021. Mr. Jones, and his late wife have loaned $2,821,586 from inception through September 30, 2021, including $142,936 in the three-month period ended September 30, 2021, and have received $100,000 in loan repayments. Pursuant to ACS 470, the fair value attributable to a discount on the debt is $16,439 and $26,389 for the nine months ended September 30, 2021 and 2020, respectively; this amount is amortized to interest expense on a straight-line basis over the terms of the loans.

The private party loans with the Company are often established by converting the Company’s outstanding stockholder advances due to related parties into a new note payable under the Loan Agreement in the quarter following the advance. There have been instances in which private lenders, under the Loan Agreement, enter into loans directly with the Company (not through an advance). As of December 31, 2020, the Company had a total of $142,934 in stockholder advances. In 2021, the Company received proceeds of $429,249 in the form of stockholder advances. Additionally, during the nine months ended September 30, 2021, a total of $429,247 has been converted to notes payables with related parties and the Company has made payments of $100,000 on the notes payable to related parties. The remaining $142,936 in stockholder advances will be converted into a note payable with related parties during the fourth quarter of 2021.

On March 31, 2020, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $101,823, at 18% interest per annum. As a cost of the note, the Company agreed to issue 203,646 shares of its Common Stock at a market price of $0.06 per share for a total debt discount of $10,901, subject to standard Rule 144 restrictions.

On July 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $128,093, at 18% interest per annum. As a cost of the note, the Company agreed to issue 256,186 shares of its Common Stock at a market price of $0.04 per share for a total debt discount of $9,488, subject to standard Rule 144 restrictions.

On July 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Ransom Jones, a Director and shareholder for $25,000, at 10% interest per annum. As a cost of the note, the Company agreed to issue 50,000 shares of its Common Stock at a market price of $0.04 per share for a total debt discount of $1,852, subject to standard Rule 144 restrictions.

On July 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kent Harer, a Director and shareholder for $25,000, at 10% interest per annum. As a cost of the note, the Company agreed to issue 50,000 shares of its Common Stock at a market price of $0.04 per share for a total debt discount of $1,852, subject to standard Rule 144 restrictions.

On August 28, 2020, the Company executed a Promissory Note under the Loan Agreement with Michael Wykrent, a Director and shareholder for $10,000, at 18% interest per annum. As a cost of the note, the Company agreed to issue 20,000 shares of its Common Stock at a market price of $0.02 per share for a total debt discount of $293, subject to standard Rule 144 restrictions.

On October 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $95,352, at 18% interest per annum. As a cost of the note, the Company agreed to issue 190,704 shares of its Common Stock at a market price of $0.02 per share for a total debt discount of $2,795, subject to standard Rule 144 restrictions.

On October 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Ransom Jones, a Director and shareholder for $3,433, at 10% interest per annum. As a cost of the note, the Company agreed to issue 6,867 shares of its Common Stock at a market price of $0.02 per share for a total debt discount of $101, subject to standard Rule 144 restrictions.

On October 1, 2020, the Company executed a Promissory Note under the Loan Agreement with Kent Harer, a Director and shareholder for $5,000, at 10% interest per annum. As a cost of the note, the Company agreed to issue 10,000 shares of its Common Stock at a market price of $0.02 per share for a total debt discount of $147, subject to standard Rule 144 restrictions.

On January 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $142,934, at 18% interest per annum. As a cost of the note, the Company agreed to issue 285,868 shares of its Common Stock at a market price of $0.03 per share for a total debt discount of $8,014, subject to standard Rule 144 restrictions

On April 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Michael Wykrent, a Director and shareholder for $70,000, at 18% interest per annum. As a cost of the note, the Company agreed to issue 140,000 shares of its Common Stock at a market price of $0.03 per share for a total debt discount of $3,962, subject to standard Rule 144 restrictions.

On April 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kent Harer, a Director and shareholder for $5,000, at 18% interest per annum. As a cost of the note, the Company agreed to issue 10,000 shares of its Common Stock at a market price of $0.03 per share for a total debt discount of $283, subject to standard Rule 144 restrictions.

On April 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $112,064, at 18% interest per annum. As a cost of the note, the Company agreed to issue 224,128 shares of its Common Stock at a market price of $0.03 per share for a total debt discount of $6,343, subject to standard Rule 144 restrictions.

On July 1, 2021, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $99,250, at 18% interest per annum. As a cost of the note, the Company agreed to issue 198,500 shares of its Common Stock at a market price of $0.07 per share for a total debt discount of $12,189, subject to standard Rule 144 restrictions. The 224,128 shares of common stock are reported in common stock to be issued as of September 30, 2021, as they were not yet issued by the Company.

Each of the individual Promissory Notes have one-year terms, automatically renewable, unless an individual lender under the Loan Agreement notifies the agent within 60 days of the term that they would like payment of the principal and accrued interest upon the end of such promissory note term. No lenders requested payment for such individual promissory notes through the period ended September 2021.

NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

The Company issued a $166,667 convertible promissory note bearing interest at 4.50% per annum to a company, Tunstall Canyon Group, LLC, payable in two installments of $86,667 on December 20, 2018 and $80,000, plus accrued interest on December 20, 2019. Per the terms of the promissory note, 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 first $86,667 payment and 1,000,000 shares for the second $80,000 installment payment, respectively). As of December 20, 2018, a material event of default occurred for breach of payment of the interest then due, with such default continuing thought the date of this report. The holder of the note has the right to convert at any time and has indicated that it might convert under settlement discussions with the principal, Richard Halden, unrelated to this convertible note. See Note 5 – Convertible Notes Payable and Notes Payable Related Parties.

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. The discount related to the beneficial conversion feature on the note was valued at $27,083 based on the $0.013 difference between the market price of $0.093 and the conversion price of $0.08 times the 2,083,325 conversion shares. As a result of the event of default, the discount related to the beneficial conversion feature has been extinguished for the balance of 2018, and until the event of default is cured or the note is converted to common shares.

On September 26, 2019, the Company entered into a Settlement Agreement with Southwest Capital Funding Ltd. (“Southwest”) to resolve all conflicts related to a lawsuit in Hawaii, cause no. 16-1-0342, in the Circuit Court of the Third Circuit, State of Hawaii, styled Southwest Capital Funding, Ltd. v. Mamaki Tea, Inc., et. al., whereby the Company had provided loan guarantees for Mamaki of Hawaii, Inc., Hawaiian Beverages, Inc., Curtis Borman, and Lee Jenison. As part of the consideration for an agreed stipulated judgement, we agreed to provide Southwest a Promissory Note in the amount of $525,000, providing for a three-year term, at 7.7% simple interest only, payable semi-annually, with interest due calculated on a 365-day year, default interest at 18%, with the principal amount due at maturity. The principal balance of $525,000 and remaining accrued interest on the note is due August 15, 2022. In addition, we agreed to issue and deliver to Southwest 1,000,000 shares of Rule 144 restricted Common Stock valued at $0.05 per share. The shares were issued in the 3^rd quarter 2019 and were fully expensed in the period ended December 2019. The Company did not pay the third semi-annual interest payment when it was due in February 2021. In May 2021, the Company made the semi-annual interest payment (including late fees) and cured the default. See Note 5 – Convertible Notes Payable and Notes Payable Related Parties.

NOTE 7 – ACCRUED EXPENSES

Accrued expenses consisted entirely of accrued consulting fees. The consulting work involved fundraising and capital raising activities with potential investors for the Company, as well as consulting work related to chemical engineering and plant operations.

NOTE 8 – CAPITAL STRUCTURE

The Company is authorized to issue 500,000,000 shares of Common Stock with a par value of $.0001 per share, with each share having one voting right.

Common Stock

At September 30, 2021, there were 346,602,500 total shares of Common Stock outstanding.

During the three-months ended September 30, 2021, the Company: issued 3,911,628 shares of Rule 144 restricted Common Stock, including 3,687,500 shares issued in private placement to fifteen (15) accredited investors at an average price of $0.05 per share for $182,500, and 224,128 shares for costs related to the issuance of promissory notes at an average price of $0.03 per share. As of September 30, 2021, the Company has 198,500 shares of common stock to be issued to Kevin Jones, a related party, for costs related to issuance of promissory notes, and 625,000 shares of common stock to be issued in private placement to one (1) accredited investor, these shares will be issued in the fourth quarter of 2021.

During the three-months ended June 30, 2021, the Company: issued 6,222,797 shares of Rule 144 restricted Common Stock, including 4,766,667 shares issued in private placement to five (5) accredited investors at an average price of $0.04 per share for $173,000, and 482,500 shares issued for payment of consulting fees at a price of $0.03 per share, and 973,630 shares for costs related to the issuance of promissory notes at an average price of $0.05 per share.

During the three-months ended March 31, 2021, the Company: issued 1,200,000 shares of Rule 144 restricted Common Stock, issued in a private placement to an accredited investor, at $0.03 per share for $36,000.

During the three-months ended September 30, 2020, the Company issued 4,823,768 shares of Rule 144 restricted Common Stock as the result of a lender’s conversion of a portion of note principal at an average price of $0.02 per share.

During the three-months ended June 30, 2020, the Company: issued 904,711 shares of Rule 144 restricted Common Stock, including 375,000 shares issued in a private placement to an accredited investor, at $0.04 per share, and 529,711 shares at an average of $0.06 per share for the settlement of legal expenses which were previously accrued pursuant to agreements with two prior law firms.

During the three-months ended March 31, 2020, the Company: issued 13,824,607 shares of Rule 144 restricted Common Stock, including 600,000 shares issued in a private placement to an accredited investor, at $0.10 per share, 3,906,610 for the conversion of a prior loan at $0.047 per shares, 1,460,260 shares for costs related to the issuance of promissory notes at an average $0.085 per share and 857,737 shares at $0.01 per share from convertible warrants conversions. Shares to be issued are for the settlement of legal expenses which were accrued pursuant to agreements with two prior law firms.

At December 31, 2020, there were 335,268,075 shares of Common Stock issued and outstanding.

Stock options, warrants and other rights

As of September 30, 2021 and 2020 respectively, the Company has not adopted and does not have an employee stock option plan.

For the year ended December 2020, the Company had 7,000,000 warrants outstanding, of which 4,000,000 have expired in 2021. As of September 30, 2021, the Company had total warrants issued and outstanding of 3,000,000, which are in favor of Dean Goekel and expire in June 2022. The exercise price of these remaining warrants is $0.03. There is no unvested expense relating to the warrants. After meeting certain deliverables set forth in the agreement, Mr. Goekel will be issued additional stock warrants for 1,000,000 shares at a strike price that is an average of the stock price for the 90 days that the deliverables have been met.

NOTE 9 - RELATED PARTY TRANSACTIONS

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 late wife Christine Early, as an Agent for various private lenders including themselves, entered into a loan agreement (“Loan Agreement”) for the purpose of funding working capital and general corporate expenses for the Company of up to $1,500,000, which was subsequently amended to provide up to $5,000,000. 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 as an Interested Director did not vote on this transaction. Since the inception of the Loan Agreement through September 30, 2021, a total of $2,754,005 (excluding a debt discount of $16,439) has been loaned to the Company and $911,062 has been accrued in interest by eight shareholders, including Mr. Jones. See Note 5 – Convertible Notes Payable and Notes Payable Related Parties.

Through Mabert, as of September 30, 2021, Mr. Jones along with his late wife and his company have loaned $2,678,651, net of repayments, and six other shareholders have loaned the balance of the Mabert Loans. 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 work as an agent for the lenders.

For the period ended September 30, 2021, the Company accrued expenses for related parties of $2,006,902 to account for the total deferred compensation expenses among two current executives, two former executive and one current employee. Each of the current executives and employees have agreed to defer their compensation until such time as sufficient cash is available to make such payments, the Company’s Chief Financial Officer having the express authority to determine what constitutes cash sufficiency from time-to-time.

Through the period ended September 30, 2021, the Company received $142,936 in cash advances (net of conversions to notes payable) from one of our directors, Kevin Jones, a greater than 5% shareholder. Through the period ended September 30, 2020, the Company received $113,785 in cash and payment advances from four directors, Michael Wykrent, Ransom Jones, Kent Harer and Kevin Jones, a greater than 5% shareholder, in the amounts of $10,000, $3,433, $5,000 and $95,352 respectively. These amounts have been accrued as Advances - related parties for the periods.

Through the periods ended September 30, 2021 and December 31, 2020, the Company made advances to an affiliate, OPMGE, of $412,885. As reported previously, the Company owns a non-consolidating 42.86% interest in the OPMGE GTL plant located in Wharton, Texas. In the event of default, the Company holds a second lien against the assets of OPMGE. The amount advanced was booked as a related party receivable by the Company. Given the uncertainty of the collectability of this receivable, the Company has fully reserved the full amount of this equity method receivable with OPMGE as of December 31, 2020. The Company does not consider the results of the equity method investee to be material to the Company’s net loss. The cost basis for this equity method investee is zero and thus, losses have not been allocated to the Company.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Employment Agreements

In August 2012, the Company entered into an employment agreement with our chairman of the board, Ray Wright, as president of Greenway Innovative Energy, Inc., for a term of five years with compensation of $90,000 per year. In September 2014, Wright’s employment agreement was amended to increase such annual pay to $180,000. By its terms, the employment agreement automatically renews each year for successive one-year periods, unless otherwise earlier terminated. During the three-month period ended September 30, 2021, the Company paid and/or accrued a total of $45,000 for the period under the terms of the agreement.

Effective May 10, 2018, the Company entered into identical employment agreements with John Olynick, as President, and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements were identical. John Olynick elected not to renew his employment agreement and resigned as President on July 19, 2019. Ransom Jones, as Chief Financial Officer, earns a salary of $120,000 per year. Mr. Jones also serves as the Company’s Secretary and Treasurer. During each year that Mr. Jones’ agreement is in effect, he is entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year, such amount having been accrued for the period ended September 30, 2021. Both Mr. Olynick and Mr. Jones received a grant of common stock (the “Stock Grant”) at the start of their employment equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. Mr. Jones is also entitled to participate in the Company’s benefit plans when such plans exist.

Effective April 1, 2019, the Company entered into an employment agreement with Ryan Turner for a term of twelve (12) months with compensation of $80,000 per year, to manage the Company’s Business Development and Investor Relations functions. Turner reports to the President of Greenway Technologies and is entitled to a no-cost grant of common stock equal to 2,500,000 shares of the Company’s Rule 144 restricted common stock, par value $.0001 per share, valued at $.06 per share, or $150,000, which was expensed as of the effective date of the agreement. Such stock-based compensation shares were physically issued in February 2020. Mr. Turner is no longer with the Company.

Other

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. As a result, only 3,750,000 common shares are committed to be later issued under the original 2012 acquisition agreement.

The Company has accrued management fees of $1,301,964 related to separation agreements and settlement expenses for two prior executives of the Company, Richard Halden and Randy Moseley, who both resigned from their respective management positions in 2016, with Halden then further resigning as a director from our Board of Directors in Feb 2017. Although we have not maintained currency with respect to the contractual payment obligations therein, both former employees are greater than five percent shareholders and had agreed to defer payments until such time as we have sufficient available liquidity to begin making payments on a regular basis. In March 2020, Halden filed suit against the Company alleging claims arising from his 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; subsequently, the lawsuit was dismissed without prejudice on November 19, 2019. Other than an increase in our legal expenses related to defending against Halden’s lawsuit, and given the subsequent dismissal of the same, we expect no further material financial impacts from such accrued fees until any such regular payments are able to begin, or another form of settlement is reached.