UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:ended December 31, 2015
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR
For the transition period from ______ to ____
Commission file number:File Number: 000-55030
GREENWAY TECHNOLOGIES, INC.
(Exact name of Registrantregistrant as Specifiedspecified in Its Charter)
TEXAS | 90-0893594 | |
(State or incorporation or |
( | Identification Number) |
1521 North Cooper Street, Suite 205
Arlington, Texas 76011
(Address of principal executive offices) (Zip Code)
800-289-2515
(Registrant’s telephone number, including area code)
Securities registered underpursuant to Section 12(b) of the Exchange Act: None.
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value listed on the OTCQB.
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐[ ] No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐[ ] No ☑
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 requirements for the past 90 days. Yes þ[X] No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ[X] No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer", "accelerated filer"filer,” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | Smaller reporting company | ||
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 inby Rule 12b-2 of the Act). Yes ☐[ ] No ☑
The aggregate market value of the voting and non-voting common equitystock held by non-affiliates of the registrant computed by reference toon June 28, 2019, the price at whichlast business day of the common equity was last sold basedregistrant’s most recently completed second fiscal quarter, as reported on the closing priceOTCQB Market operated by the OTC Markets Group, Inc. on that dateday was approximately $6,974,090. On March 24, 2016, the registrant had outstanding 188,446,419 shares of Common Stock, $0.0001 par value per share.
Class | Outstanding as of April 14, 2020 | |
Common Stock, par value $0.0001 per share | 310,807,400 |
Documents Incorporated by Reference
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Form 10-K”) 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 our 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 Form 10-K 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 Securities and Exchange Commission (the “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 Form 10-K. 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.
In this Form 10-K, “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. (“GIE”), unless the context requires otherwise.
Item 1. | Business. |
Overview
We are engaged in the research and development of proprietary gas-to-liquids (“GTL”) synthesis gas (“Syngas”) conversion systems and micro-plants that can be scaled to meet specific gas field production requirements. Our patented and proprietary technologies have been realized in our first commercial G-ReformerTM unit (“G-Reformer”), a unique component used to convert natural gas into Syngas, which when combined with a Fischer-Tropsch (“FT”) reactor and catalyst, produces fuels including gasoline, diesel, jet fuel and methanol. G-Reformer units can be deployed to process a variety of natural gas streams including pipeline gas, associated gas, flared gas, vented gas, coal-bed methane and/or biomass gas. When derived from any of these natural gas sources, the liquid fuels created are incrementally cleaner than conventionally produced oil-based fuels. Our Company’s objective is to become a material direct and licensed producer of renewable GTL synthesized diesel and jet fuels, with a near -term focus on U.S. market opportunities. For more information about our Company, please visit our website located athttps://gwtechinc.com/.
Our GTL Technology
In August 2012, we acquired 100% of GIE, pursuant to that certain Purchase Agreement, by and between us and GIE, dated August 29, 2012, and filed as Exhibit 10.5 to this Form 10-K, and incorporated by reference herein (the “GIE Acquisition Agreement”). GIE owns patents and trade secrets for a proprietary technology to convert natural gas into Syngas. Based on a new, breakthrough process called Fractional Thermal Oxidation™ (“FTO”), we believe that the G-Reformer, combined with conventional FT processes, offers an economical and scalable method to converting natural gas to liquid fuel. On February 15, 2013, GIE filed for its first patent on this GTL technology, resulting in the issue of U.S. Patent 8,574,501 B1 on November 5, 2013. On November 4, 2013, GIE filed for a second patent covering other unique aspects of the design and was issued U.S. Patent 8,795,597 B2 on August 5, 2014. The Company has several other pending patent applications, both domestic and international, related to various components and processes relating to our proprietary GTL methods, complementing our existing portfolio of issued patents and pending patent applications.
On June 26, 2017, we and the University of Texas at Arlington (“UTA”) announced that we had successfully demonstrated our GTL technology at our sponsored Conrad Greer Laboratory at UTA, proving the viability of the science behind the technology.
On March 6, 2018, we announced the completion of our first commercial scale G-Reformer, a critical component in what we call the Greer-Wright GTL system. The G-Reformer is the critical component of the Company’s innovative GTL system. A team consisting of individuals from our Company, UTA and our Company’s contracted G-Reformer manufacturer worked together to test and calibrate the newly built G-Reformer unit. The testing substantiated the units’ Syngas generation capability and demonstrated additional proficiencies within certain proprietary prior prescribed testing metrics.
On July 23, 2019, we announced that Mabert LLC, a Texas limited liability company (“Mabert”), controlled by Kevin Jones, one of our directors, acquired INFRA Technology Group’s U.S. GTL plant and technology located in Wharton, Texas (the “Wharton Plant”). Mabert purchased the entire 5.2-acre site, plant and equipment, including INFRA’s proprietary FT reactor system and operating license agreement.
On August 29, 2019, to further facilitate the commercialization process, we announced that it entered into the joint venture, OPM Green Energy, LLC, a Texas limited liability company (“OPMGE”), for an ownership interest in the Wharton Plant. The other members of OPMGE are Mabert and Tom Phillips, Vice President of Operations for GIE. Our involvement in OPMGE is intended to facilitate third-party certification of our G-Reformer and related equipment and technology. In addition, we anticipate 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 our proprietary reforming technology and equipment, the Wharton Plant is initially expected to yield a minimum of 75 - 100 barrels per day of gasoline and diesel fuels from converted natural gas.
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Ultimately, we believe that our proprietary G-Reformer is a major innovation in gas reforming and GTL technology in general. Initial tests have demonstrated that our Company’s solution appears to be superior to legacy technologies, which are more costly, have a larger footprint, and cannot be easily deployed at field sites to process associated gas, stranded gas, coal-bed methane, vented gas, or flared gas. In addition, the Wharton Plant is anticipated to prove out the economics for the Company’s technology and GTL processes.
The technology for the G-Reformer is unique, because it permits for transportable (mobile) GTL plants with much smaller footprints, compared to legacy large-scale technologies. Thus, we believe that our technologies and processes will allow for multiple small-scale GTL plants to be built with substantially lower up-front and ongoing costs, resulting in more profitable results for oil and gas operators
GTL Industry –Market
GTL converts natural gas – the cleanest-burning fossil fuel – into high-quality liquid products that would otherwise be made from crude oil. These products include transport fuels, motor oils, and the ingredients for everyday necessities like plastics, detergents, and cosmetics. GTL products are colorless, odorless, and contain almost none of the impurities, (e.g., sulphur, aromatics, and nitrogen) that are found in crude oil.
According to publicly available industry research from Shell Oil, MarketResearcEngine.com, among others, the market for GTL products is said to have accounted for approximately $11.9 billion in 2019 and is expected to reach $20.1billion by 2023, growing at a compound annual growth rate of 11.03% over that period. Products created by the GTL process include GTL Diesel, GTL Naphtha, GTL Other (e.g., lubricants), with GTL Diesel accounting for more than 68% of the product market. Market share of these products has not changed significantly over the last four years. Increasing population across the globe have led to an increase in power consumption, creating a high demand for clean natural gas liquids products (“NGL”). In the commercial sector, there has been generally high demand for NGL products among petrochemical plants and refineries for blendstock, i.e., a blend of unfinished oils that creates a refined product, as well as in the automotive and packaging industries, among others. Due to their relatively clean burning nature, NGL products may be used as fuel in motor vehicles, in furnaces for heating and cooking and household energy source. Our planned focus is in technology licensing for our GTL plant technology, and in some cases, the direct production and sale of high cetane diesel and jet 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. For example, we believe that U.S. guidelines such as the Petroleum and Natural Gas Regulatory Board Act, 2006, Oilfields (Regulation and Development) Act of 1948, and Oil Industry (Development) Act, 1974 are likely to continue to encourage GTL applications in diverse end-use industries to conserve natural gas and other resources. Under the Clean Air Act (CAA), the EPA sets limits on certain air pollutants, including setting limits on how much can be in the air anywhere in the United States. The Clean Air Act also gives EPA the authority to limit emissions of air pollutants coming from sources like chemical plants, refineries, utilities, and steel mills. Individual states or tribes may have stronger air pollution laws, but they may not have weaker pollution limits than those set by EPA. Because our G-Reformer based GTL plants are not considered refineries, they do not fall under any related current EPA air quality guidelines. More information can be found under the EPA’s New Source Performance Standards which are published under 40 CFR 60.
Competition
Key industry players include: Chevron Corporation; KBR Inc, PetroSA, Qatar Petroleum, Royal Dutch Shell; and Sasol Limited. In terms of global production and consumption, Shell had the largest market share in 2019, with virtually all current production located overseas. Our technology is not designed to compete with the large refinery-size GTL plants operated by such large industry operators. Our plants are designed to be scaled to meet individual gas field production requirements on a distributed and mobile basis. According to a report released in July 2019 by the Global Gas Flaring Reduction Partnership (“GGFRP”), there are currently only 5 small-scale GTL plant technologies that have been proven and are now available for gas flares monetization available in the U.S., including: Greyrock (“Flare to Fuels”); Advantage Midstream (licensing Greyrock technology); EFT (“Flare Buster”); Primus GE and GasTechno (“Methanol in a Box”). We were not a direct part of this study, as we had not received 3rd party certification of our proprietary technology as of the date of this report.
However, the GGFRP report mentioned us as follows, “Greenway Technologies announced on July 23 that Mabert LLC, a major investor in Greenway, acquired the whole INFRA plant including an operating license agreement. The purpose of the acquisition is the incorporation and commercial demonstration of Greenway’s ‘G-Reformer’ technology. We will see whether the new team will be able to make the plant with the new reformer operational. (Globe Newswire, Fort Worth, Texas, Aug 31, 2019).”
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Mining Interests
In December 2010, UMED Holdings,acquired the rights to approximately 1,440 acres of placer mining claims located on Bureau of Land Management (“BLM”) land in Mohave County, Arizona (such property, the “Arizona Property”), in an Assignment Agreement dated December 27, 2010, and filed as Exhibit 10.31 to this Form 10-K, between Melek Mining, Inc. (the "Company") was, 4HM Partners, Inc. and the Company, in exchange for 5,066,000 shares of our common stock. Early indications from samples taken and processed by Melek Mining provided reason to believe that the potential recovery value of the metals located on the Arizona Property could be significant, but only actual mining and processing will determine the ultimate value that may be realized from this property holding. While we are not currently conducting mining operations, we are exploring strategic options to partner or sell our interest in the Arizona Property, while we focus on our emerging GTL technology sales and marketing efforts.
Company History
We were originally incorporated as Dynalyst Manufacturing Corporation (“Dynalyst”) under the laws of the State of Texas on March 13, 2002 and adopted a name change to2002. In connection with the merger with Universal Media Corporation upon completion of(“UMC”), a reverse acquisition of Dynalyst Manufacturing Corporation inNevada corporation, on August of 2009. In March 2011,17, 2009, we changed our name to UMC. The transaction was accounted for as a reverse merger, and UMC was the acquiring company on the basis that UMC’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 equity securities to the shareholders of UMC in exchange for 100% of UMC.
On March 23, 2011, Universal Media Corporation approved and filed with the Texas Secretary of State an amendment to our Certificate to change our name to UMED Holdings, Inc. ("UMED"
On June 22, 2017, in recognition of our primary operational activity, we approved an amendment to our Certificate to change our name to “Greenway Technologies Inc.” We filed a certificate of amendment with the Texas Secretary of State to affect that name change on June 23, 2017.
On June 26, 2019, we held our annual shareholders meeting in Arlington, Texas. There were seven proposals presented for vote by our shareholders (the “Shareholders”).
On December 11, 2019, we held a special meeting of the near future, (2)Shareholders to approve four proposals. In connection with these four proposals, we filed a Certificate of Amendment to the abilityCertificate with the Secretary of State of the State of Texas, which is attached as Exhibit 3.1 to growour Company’s Current Report on Form 8-K filed with steady growth to follow,the SEC on December 16, 2019, and (3) an emphasisincorporated herein by reference. All four proposals passed overwhelmingly. For more information regarding these proposals, please see our Definitive Proxy Statement on emerging core industry markets, such as energy, metalsSchedule 14A filed with the SEC on November 19, 2019 and agriculture.
Employees
As of the filing date of this Form 10-K, we refer to ourselves as "UMED," "We," Us," "the Company," and "Our."
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Going Concern
The accompanying condensed consolidated financial statements to this Form 10-K (our “Financial Statements”) have been prepared on a going concern qualificationbasis, which contemplates realization of assets and the satisfaction of liabilities in their report dated April 14, 2016, which raisesthe normal course of business. As of December 31, 2019, we have an accumulated deficit of $30,479,829. For the year ended December 31, 2019, we incurred a net loss of $3,661,245 and used $1,332,528 in 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 we are attempting to commence revenue generating operations and thereby generate sustainable revenues, our current cash position is not sufficient to support our ongoing daily operations and requires us to raise addition capital through debt and/or equity sources.
Accordingly, our ability to continue as a going concern.
While we are attempting to commence operations and generate revenues, our trading symbol is "UMED."
Item 1A | Risk Factors. |
Risks Related to our Business and Operations
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 doubtthe United States and elsewhere.
Our ability to successfully execute the production, sale, or licensing of our GTL technology may depend on our ability to raise additional debt or equity capital. Our ability to raise additional capital is uncertain and dependent upon on the abilitynumerous factors beyond our control including, but not limited to, general economic conditions, regulatory factors, reduced retail sales, increased taxation, reductions in consumer confidence, changes in levels of the Companyconsumer 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 necessaryadditional 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 financingresults 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 fund ongoingdevelop 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 achievingfinancial condition will be materially and adversely affected. The risks and difficulties we face include challenges in accurate financial planning as a profitable levelresult of operations. UMED does not have the financial resources and does not have any commitments for funding from unrelated parties or any other firm agreements that will provide working capital to its business segments. We cannot give any assurance that UMED will locate any funding or enter into any agreements that will provide the required operating capital. UMED has been depended on the sale of equity and advances from shareholders to provide it with working capital to date.
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 samples on its Arizona placer mining claims to determine the potential valueinherent risk of the various metals that maycommercializing new technology, there can be located on the claims.
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Establishing revenues and achieving profitability will depend on our ability to fully develop, certify and commercialize our GTL Technology, including successfully compete.
Much of our ability to establish revenues, achieve profitability and create positive cash flows from operations will depend on the completion of third-party engineering certification and subsequent successful introduction of our proprietary GTL technology. Our prospective customers will not use our GTL technology unless they determine that the economic 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 are well-established, prospective customers may elect not to use our GTL technology.
In addition, as this is a new technology and GTL processing method, we may be required to undertake time-consuming and costly additional development activities and seek regulatory clearance or approval for such new GTL technology. Such costs are not known by us as of the date of this report.
Lastly, the completion of the development and commercialization of our GTL technology remains subject to all the risks associated with the commercialization of any new GTL processing system with production 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 industry and a 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 efficiency 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:
● | current and future direct sales and marketing efforts by small and large competitors; | |
● | rapid and effective development of new, unique GTL techniques; and | |
● | new and aggressive pricing methodologies |
If substantial competitors enter our targeted markets, such as licensing of smaller independent oil and gas operators or the creation of blendstock for existing large refinery operations, we may be unable to compete successfully against such competition. Our potential competitors may have greater human and financial resources than we do at any given time, and there is significant competition for experienced personnel and financial capital to be deployed in the oil and gas extraction industries and mining and mineral extraction industries.industry. Therefore, it iscan be difficult for smaller companies such as UMEDours to attract the personnel and related investment for itsour various business activities.activities needed to succeed. We cannot give any assurances that we will be able to successfully compete for such personnel and capital funds, and withoutfunds. Without adequate financial resources, our management cannot assurebe certain that the companywe will be able to compete successfully 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 December 31, 2015, the Company's wholly-owned subsidiary Greenway Innovative Energy, Inc. (GIE) owns US2019, we own United States Patents Nos. 8,574,501 B1, originally issued November 5, 2013 and 8,795,597 B2, issued August 5, 2014, covering its mobile Gas-to-Liquids ("GTL")our GTL conversion unittechnology for the purpose of converting natural gas to clean synthetic fuels.
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We are currently employ twodependent on one equipment fabricator, the loss of which could adversely impact our operations.
We contract our manufacturing production with a heavy equipment fabricator in Texas that has worked with us for several years and specializes in the type of base refractory equipment we use in our proprietary G-Reformer based GTL processes. Accordingly, they have developed certain manufacturing expertise specifically related to our equipment which may be hard to replicate with a new manufacturer if they go out-of-business or end manufacturing for us for any reason. While there are similar manufacturers elsewhere in the United States and overseas, they will take an unknown additional amount of time to gain the expertise necessary to produce our proprietary refractory equipment, or may not be able to gain such expertise at all, limiting our production and related revenue capability.
We are dependent on a limited number of key executives, consultants, the loss of any of which could negatively impact our Interim Chief Executive Officer, Ransom Jones,business.
Our business is led by an interim President, Kent Harer, and our Chief Financial Officer, Randy Moseley. Mr. Moseley has a written employment agreement discussed in Note 15 to the financial statements.
If one or more of these senior executives, officers, or consultants 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, along with our financial condition, such that our results of operations may be materially and adversely affected. In addition, if the GTL Unit, at such time as capital fundscompetition for senior management and senior officers 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, key personnel, or consultants or attract and retain high-quality 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 key personnel could negatively impact our business and operations.
If our research and development agreements with UTA are available.
To support our engineering efforts, we entered into a confidential Sponsored Research Agreement (“SRA”) with UTA starting in October 2009 and other functions, we will hire persons under service agreementscontinuing in various forms through today, adding confidential Scope of Work addendums over this period to develop and enhance our patented GTL system with the goal of developing commercial GTL plants to convert natural gas into liquid fuels. We use UTA as consultants, part-timean external research and full time employees as necessary. We do not have any arrangementsdevelopment arm for the hiring of any persons at this time.
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 Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet siteimportant factors that contains reports, proxycould cause our revenue and information statements,operating results to fluctuate from quarter to quarter include:
● | our limited operating history; | |
● | the limited scope of our sales and marketing efforts; | |
● | our ability to attract new customers, satisfy our customers’ requirements, and retain customers; | |
● | general economic conditions; | |
● | changes in our pricing capabilities; | |
● | our ability to expand our business and operations by staying current with the evolving requirements of our target market; | |
● | the effectiveness of our key personnel; | |
● | our ability to protect our proprietary GTL Technology; | |
● | new and enhanced products by us and our competitors; | |
● | unanticipated delays or cost increases with respect to research and development; and | |
● | extraordinary expenses such as litigation or other dispute-related settlement payments. |
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We may have difficulty in attracting and other information regarding issuers that file electronically with the Commission at (http://www.sec.gov). Our Internet site is www.umedholdings.com.
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 that 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 timely pay the costs incurred in defending such claims. We currently carry directors’ and officers’ liability insurance, but 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 Company's statusboard 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 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 related to the GTL technology in question, which we rely on 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 events should occur at our joint venture plant location, or at any future customer sites (none exist today), 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. Such inability to defend ourselves or suffer catastrophic financial losses could cause us to cease operations and/or declare bankruptcy.
Our JV partner, OPMGE carries General Liability and Premises insurance. In the event we should have operations on future customer sites, 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 smallersmall 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, causing us to cease business operations. 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.
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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, navigate and respond to any changes that might occur. Due to our currently limited financial resources, we might not be able to respond to unanticipated changes, should they occur and impact our operations, and therefore have to cease operations.
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, and thus, our financial operations may be materially impacted by such events.
The massive and currently unknown short- and long-term economic impacts of COVID-19 may impact our business and ability to raise capital.
COVID-19 and its current extraordinary impact on the world economy has reduced oil consumption globally, decreasing crude oil prices, to levels not seen since the early 1980’s. The economics of GTL conversion rely in part on the arbitrage between oil and natural gas prices, with economic models for many producers, including our own models, using a range of $30-60/bbl (for WTI or Brent Crude as listed daily on the Nymex and ICE commodities exchanges) to determine relative profitability of their GTL operations. While COVID-19 may run its human course in the near term, we believe as many others in the U.S. government and media believe, that the economic impacts will be long lasting and for all practical matters, remain largely unknown at this time.
We may fail to establish and maintain strategic relationships.
We believe that establishing strategic industry partnerships and natural gas producer customer relationships will greatly benefit the growth of our business and the deployment of our GTL technology. To further such relationships, we have and will continue to seek out and enter into strategic alliances, joint ventures, and similar production relationships, including similar to those announced during the 2019 with INFRA Technologies, OPMGE and the ongoing relationship with UTA. We continue to seek out and have discussions with potential gas producer on both a customer and financing basis. However, we may not be able to maintain our current or enter into new strategic partnerships on commercially reasonable terms, or at all, and may not be able to create financial or customer relationships with natural gas producers. Even if we enter new natural gas producer relationships, such financial partners and/or customers may not have sufficient production of location based natural gas 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
There is very limited risk, financial or otherwise, related to our mining leases and interests at this time.
Risks Relating to Our Common 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 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.
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Selling additional shares of Common Stock, 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 price per share of Common Stock.
Issuance of additional Common Stock in exchange for services or to repay debt would dilute Shareholders’ proportionate ownership and voting rights and could have a negative impact on the market price of our Common Stock.
Our Board of Directors has previously and may continue to issue shares of our 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 its sole discretion. It is likely that that we will issue additional securities to pay for services and reduce debt in the future. Such issuances may lower the market price of our stock and decrease our ability to raise additional equity funding for working or investment capital as may be needed at a later time.
Even though our shares of Common Stock are publicly traded, an investor’s shares may not be “free-trading” and investors may be unable to sell their shares of Common Stock at or above their purchase price, which may result in substantial losses to the investor.
Investors should understand that their shares of our Common Stock are not “free-trading” merely because we are a publicly traded company. Shares bought from the Company or received for services rendered or in conjunction with the issuance of debt require different holding periods, thereby creating a potential lack of liquidity and inability to sell such shares timely for any investor. In order for our shares of Common Stock to become “free-trading,” the offer and sale of shares of our Common Stock must either be registered pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or be entitled to an exemption from registration under federal and state securities laws, after being held for statutory mandated periods.
In addition, an investor has no assurance that our stock price will rise after purchase or receipt in any manner, as our stock has shown significant volatility over the life of the Company. The following factors may add to the volatility in the price of our Common Stock in the future: (i) actual or anticipated variations in our quarterly or annual operating results; (ii) government regulations; (iii) announcements of significant acquisitions, strategic partnerships or joint ventures; (iv) our capital commitments; (v) additional dilutive stock issuances, and (vi) additions or departures of 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 of Common Stock or the availability of shares of Common Stock for sale at any time will have on the prevailing market price.
If we fail to remain current in our reporting company.requirements, we could be removed from the OTCQB marketplace, operated by the OTC Markets Group, Inc. (the “OTCMG”), which would limit the ability of broker-dealers to sell our securities and the ability of Shareholders to easily sell their securities in the secondary market.
Companies trading on the OTCQB must: (i) be reporting issuers under Section 12 of the Exchange Act of 1934, as amended (the “Exchange Act”); (ii) must be current in their reports under Section 13 of the Exchange Act; and must pay an annual fee to OTCQB, to maintain electronic price quotation privileges on the OTCQB. If we fail to remain current in our Exchange Act reporting requirements, we could be removed from the OTCQB and be forced to be traded on the Pink Sheets, which requires a more challenging stock purchase process. The OTCQB is recognized by the SEC as an established public market. This platform enables companies to provide current public information that investors use to analyze, value and trade a security. The OTC Pink Sheets is the lowest and most speculative tier of the three marketplaces for the trading of over-the-counter stocks. Companies traded on OTC Pink are not held to any particular disclosure requirements or financial standards, and due to the wide variety of companies listed on OTC Pink, including dark companies, delinquent companies and worse, they recommend only sophisticated investors with a high risk tolerance should consider it.
Pink Sheet shares generally trade thinly and infrequently making it hard to buy or sell when the investor wants to complete a transaction. In addition, trading in OTC Pink Sheet companies requires more paperwork because due the speculative nature of such stocks, the U.S. 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 promulgated thereunder.
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These SEC rules provide, among other things, that a broker-dealer must: (i) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (ii) furnish the customer a disclosure document describing the risks of investing in penny stocks; (iii) disclose to the customer the current market quotation, if any, for the penny stock; and (iv) 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. With the added inconvenience and cost for brokers, various large brokerage firms, including Merrill Lynch, Capital One, Fidelity, E-Trade and even the new Robinhood, among others, have simply stopped providing brokerage services for Pink Sheet stocks for new customers. Accordingly, the market for our common stock would be significantly diminished if we were forced to trade on the OTC Pink Sheets market exchange.
Volatility in the share price for our Common Stock may subject us to securities litigation.
There is a limited market for the sale of shares of our Common Stock. The market for our Common Stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our Common Stock 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. In the future, we may be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources away from our daily operations, negatively impacting our financial results.
We do not intend to pay dividends on shares of our Common Stock.
We have not paid any cash dividends on shares of our Common Stock since our inception and we do not anticipate that we will pay 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. Furthermore, our ability to pay dividends may be restricted under our debt agreements.
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 December 31, 2019, we had $4,653,532 of total accrued current liabilities and $2,139,843 of current debt (net of debt discounts totaling $107,880), bearing an average cash interest of 17.8% per year when current and 18% default interest when any such loans are not current. As of the date of this Form 10-K, we are in default of loans totaling $166,667 and have a total $2,139,843 of current debt bearing an average interest rate of 17.8% per year. We also have additional long-term liabilities of $525,000, in the form of a 3-year interest-only note payable, due in July 2022.For more details on our indebtedness, please see Notes 5 and 6 on pages F-11 and F-12 of our Financial Statements.
Our substantial level of indebtedness could have important consequences, including the following:
● | We must use a substantial portion of our cash flow from operations to pay interest, which reduces funds available to use for other purposes, such as working capital, capital expenditures, and other general corporate purposes; | |
● | Our ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes may be impacted; and | |
● | Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions. |
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. We are not able to control many of these factors. If industry and economic conditions deteriorate, our ability to raise debt or equity capital and/or cash flow may be insufficient to allow us to pay principal and interest on our debt and meet our other obligations, which could cause us to default on these obligations. In particular, the Mabert loans maintain a UCC-1 security interest in all of the collateral of the Company, including to our G-Reformer, technology and intellectual property (our patents, patents pending and licensed patents). If Mabert exercises its rights and remedies due to defaults under our secured loan agreements, our business, financial condition, and results of operations will be materially adversely affected.
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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:
● | Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; | |
● | Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; | |
● | Boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; | |
● | Excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and | |
● | The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequential investor losses. |
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 penny stock market, the Company’s management will strive to prevent the described patterns from being established with respect to our securities, as the occurrence of these patterns or practices could increase the volatility of the price per share of our Common Stock and/or diminish stockholders ability to trade our Common Stock.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 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 the price of our Common Stock.
Item 2. | Properties. |
Our principal office is at 8851 Camp Bowie Blvd. West,1521 North Cooper St., Suite 240, Fort Worth,205, Arlington, Texas 76116, where it leases approximately 1,800 square feet of office space,76011, leased at a rate of $2,417$957.00 per month, plus the cost of utilities, which is generally less than $100.00 per month.
We have unpatented mining claims for the Arizona Property. An unpatented mining claim is one that is still owned by the federal government, but which the claimant has a right to possession to extracted minerals, provided the land is open to mineral entry. A description of the Arizona Property is included in Mohave County,“Item 1. Business” and is incorporated herein by reference. We believe that we have satisfactory title to the Arizona on BLM land (BLM file no. AMC 403533) covering approximately 1,440 acresProperty, subject to liens for taxes not yet payable, liens incident to minor encumbrances, liens for credit arrangements and easements and restrictions that do not materially detract from the value of these properties, our interests in Mohave County southeastthese properties, or the use of Kingman, Arizona.these properties in a business. We believe that the Arizona Property is adequate and suitable for the conduct of a mining business, should we decide to proceed with such operations in the future.
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Item 3. | Legal Proceedings. |
The Company was named as a co-defendant in an action brought against the ordinary courseCompany and Mamaki Tea, Inc., alleging, among other things, that the Company was named as a co-guarantor on an $850,000 foreclosed note, including accrued and accruing interest, held by Southwest Capital Funding, Ltd. (“Southwest”). 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 business,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. On September 26, 2019, we may beentered into a Settlement Agreement with Southwest, providing 1,000,000 shares of Common Stock subject to legal proceedings involving contractual and employment relationships, liability claimsstandard Rule 144 restrictions, and a variety of other matters. Although the results of these other legal proceeding cannot be predicted with certainty, we do not believe that the final outcome of these matters should have a material adverse effect on our business, results of operations, cash flows or financial condition.
On April 9, 2018, the Company and Tonaquint, Inc. (“Tonaquint”)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. Such issuance of stock was completed in connection with a legal opinion pursuant to Rule 144. Copies of the Settlement Agreement was filed by the Company on Form 8-K on April 9, 2018, and a copy of which is incorporated herein as Exhibit 10.38.
On September 7, 2018, Wildcat Consulting Group, LLC (“Wildcat”), a company controlled by a shareholder, Marshall Gleason (“Gleason”), filed suit against the Company, alleging claims arising from a prior 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 agreed to abate both cases until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019. The Rule 11 Agreement was drafted to allow the Parties time to draft and sign a Compromise Settlement and Mutual Release Agreement (“Wildcat 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. The material terms of the Rule 11 Agreement were as follows:
● | The Company agreed to execute a new Promissory Note to replace the original Promissory Note, effective November 13, 2017, the effective date of the original note. The new Promissory Note has a maturity date of March 1, 2020 and provides for four equal payments of principal through such date, and accrued interest at 10% upon maturity. The Company made the three payments due through December 2019, and made the final payment in March 2020, thereby extinguishing such Promissory Note. | |
● | The Company agreed to pay $300,000 in settlement of the prior Consulting Agreement in 60 installments of $5,000 each month, until paid in full. The $300,000 payable was accrued as of December 31, 2018, of which $40,000 has been paid through the period ending December 31, 2019. |
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● | The Parties agreed to amend the existing Overriding Royalty Agreement (“ORRI”) between the Company’s wholly owned subsidiary, Greenway Innovative Energy, Inc. (“GIE”), increasing Wildcat’s royalties from .25% (1/4 of 1%) to .375% (3/8 of 1%). | |
● | The Company agreed to pay Wildcat’s legal fees related to these matters, capped at $60,000, in three installments of $20,000 on June 1, August 1, and October 1, 2019, all such payments having been made in the period ending December 31, 2019. | |
● | The Company agreed to issue 1,500,000 restricted shares of its Common Stock on or before October 15, 2019, in consideration of the Promissory Note, in exchange for extinguishment of all prior granted warrants and to complete the grant of 1,000,000 shares not received from a prior transaction. The Company issued such 1,500,000 restricted shares and the expense for such issuance was accrued on the Company’s Balance Sheet on the effective date of the Rule 11 Agreement and increased by $45,000 based upon the actual value of the shares on the date of issuance for the period ending December 31, 2019. |
The Rule 11 Agreement further provided that if the Company timely performed through October 15, 2019, the Parties would file a Joint Motion for Dismissal and present Agreed Orders of Dismissal with prejudice for both lawsuits. A copy of the Rule 11 Agreement is incorporated by reference as Exhibit 10.52.
The Company performed in all regards under the Rule 11 Agreement, however Gleason refused to sign the Wildcat Settlement Agreement at the point of the Company’s having performed its obligations. The parties’ respective counsels then mutually agreed to extend the original October 15, 2019 settlement date until at least the end of the year while the parties waited for Gleason’s signature. Gleason signed the Compromise Settlement and Release Agreement on February 4, 2020, and all litigation was dismissed by the Court on February 25, 2020. A copy of the Dismissal is incorporated by reference as Exhibit 10.59.See also See Note 12 – Subsequent Events on page F-21 to our Financial Statements.
On March 13, 2019, Chisos Equity Consultants, LLC (“Chisos”), a company controlled by a dissident shareholder, Richard Halden (“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; subsequently, the lawsuit was dismissed without prejudice on November 19, 2019. A copy of the Dismissal is incorporated by reference as Exhibit 10.60.
On March 13, 2019, Halden, 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; subsequently, the lawsuit was dismissed without prejudice on November 19, 2019. A copy of the Dismissal is incorporated by reference as Exhibit 10.61.
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 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 continued until the trial date of this report, weDecember 10, 2019; no trial was held and the lawsuit was dismissed with prejudice on November 26, 2019. A copy of the Dismissal is incorporated by reference as Exhibit 10.62.
On October 19, 2019 the Company was served with a lawsuit by Norman Reynolds (“Reynolds”), a previously engaged counsel by the Company. The suit was filed in Harris County District Court, Houston, Texas, asserting claims for unpaid fees of $90,377.50. While fully reserved, the Company vigorously disputed the total amount claimed and has asserted counterclaims based upon Reynolds’ alleged conflicts of interest, breaches of fiduciary duty and violations of the Texas Deceptive Trade Practices Act. We are not aware of any other asserted or unassertedconfident in the Company’s defenses and counterclaims and intend to continue to vigorously defend the Company’s interests and prosecute its claims. Management will seek to minimize further disputes but recognizes the inevitability of legal action in today's business environment as an unfortunate price of conducting business.
Item 4. | Mine Safety Disclosures. |
Not applicable.
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Market for Registrant'sInformation
Shares of our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
2015 | 2014 | |||||||||||||||
HIGH | LOW | HIGH | LOW | |||||||||||||
First Quarter | $ | 0.2300 | $ | 0.1201 | $ | 0.20 | $ | 0.09 | ||||||||
Second Quarter | 0.1875 | 0.1000 | 0.325 | 0.111 | ||||||||||||
Third Quarter | 0.2000 | 0.1001 | 0.35 | 0.16 | ||||||||||||
Fourth Quarter | 0.1400 | 0.0510 | 0.28 | 0.155 |
Fiscal 2018 Quarter Ended: | High | Low | ||||||
March 31, 2018 | $ | 0.16 | $ | 0.13 | ||||
June 30, 2018 | $ | 0.06 | $ | 0.06 | ||||
September 30, 2018 | $ | 0.07 | $ | 0.07 | ||||
December 31, 2018 | $ | 0.08 | $ | 0.08 | ||||
Fiscal 2019 Quarter Ended: | ||||||||
March 31, 2019 | $ | 0.08 | $ | 0.05 | ||||
June 30, 2019 | $ | 0.08 | $ | 0.05 | ||||
September 30, 2019 | $ | 0.17 | $ | 0.06 | ||||
December 31, 2019 | $ | 0.12 | $ | 0.08 |
3
Dividend Policy
We have not paid or declared any dividends on our Common Stock, nor do we anticipate paying any cash dividends and we do not expect to declare or pay any cash dividendsother distributions on our Common Stock in the foreseeable future. Payment of any cashAny future dividends will be declared at the discretion of our Board of Directors and will depend, uponamong other things, on (i) our future earnings, if any, (ii) our financial condition,requirements for future operations and growth, and (iii) other factorsfacts as deemed relevant by theour Board of Directors.
Unregistered Sales of UnregisteredEquity Securities
For the three monthsyear ended December 31, 2015,2019, we issued 23,227,653 shares of the Company’s common stock, including 3,371,043 shares of restricted common stock for costs related to Promissory Notes the Company didexecuted in 2019 in favor of Mabert LLC; 3,906,610 shares related to the conversion of a loan in favor of the Greer Family Trust, 2,500,000 shares related to legal settlements with Southwest Capital and Wildcat Consulting, 7,000,000 shares for employee stock compensation and 6,450,000 through private sales to accredited investors. In the first quarter of 2019, we made an adjustment for incorrectly reported prior shares of 581,905, resulting in a net book 22,645,748 shares issued for the year ending December 2019.
We relied upon the safe harbor found in Rule 506(b) of Regulation D promulgated under the Securities Act (“Regulation D”) and the exemption from registration under Section 4(a)(2) of the Securities Act. Each investor took such investor’s shares of Common Stock 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 offer and sale of our Common Stock. We sold our shares of Common Stock to only “accredited investors” as defined in Section 501(a) of Regulation D, with whom we had a direct personal, preexisting relationship, and after we had a thorough discussion with each accredited investor. Each certificate representing shares of our Common Stock contains a restrictive legend as required by the Securities Act. Finally, we have instructed our Transfer Agent not haveto transfer any salesrestricted shares of unregistered securities.our Common Stock, unless the offer and sale of such shares of Common Stock is registered pursuant to an effective registration statement under the Securities Act or is exempt from registration under federal and state securities laws.
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All of the above-described accredited investors who received shares of our Common Stock were provided with access to our filings with the SEC, including the following: information: (i) contained in our annual report on Form 10-K under the Exchange Act for Issuancethe fiscal year ended December 31, 2018; and (ii) contained in any reports or documents required to be filed by us under Equity Compensation Plans
Item 6. | Selected Financial Data. |
We are a smaller reporting company; as a result, we are not required to report selected financial data disclosures as required by Item 301 of our Company's status as a smaller reporting company.
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of the financial condition andour results of operations ofand financial condition for the Companyfiscal years ended December 31, 2019 and 2018 should be read in conjunction with the financial statementsour Financial Statements and the related notes to those Financial Statements that are included elsewhere in this Form 10-K and were prepared assuming that we will continue as a going concern. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the discussionstiming of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under "Applicationthe “Risk Factors,” “Cautionary Notice Regarding Forward-Looking Statements” and “Description of Critical Accounting Policies," which describes key estimatesBusiness” sections and elsewhere in this Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “predict,” and similar expressions to identify forward-looking statements. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions we makewithin the bounds of our knowledge of our business, our actual results could differ materially from those discussed in these statements. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the preparation offuture.
In the below discussion, “we,” “our,” “us,” the “Company” and similar terms in this report, as well as references to “UMED” and “Greenway” all refer to Greenway Technologies, Inc., and our financial statements.
Greenway Technologies, Inc. is engaged in the research and is conducting research on Gas-to-Liquid ("GTL") technology. The Technology is based upon the Fischer-Tropsch ("FT")development of proprietary gas-to-liquids syngas conversion systemsystems and micro-plants that has been operational in various locations throughout the world since the early 1930s. Thousands of FT systems have operated during the last 80 years, being most notably responsible for driving energy economies of wartime Nazi Germany and Imperial Japan. More recently, and for a more sustained period, FT has been responsible for providing much of the motive energy requiredcan be scaled to meet the needs of the Republic of South Africa,specific gas field production requirements. The company’s patented and proprietary technologies have been realized in its first commercial G-Reformer unit, a country recognized as having pushed FT technology much further than any other nation since the development of the process.
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.
Further, the Company believes its technologies and processes will allow for multiple small-scale GTL plants to be built with substantially lower up-front and ongoing costs resulting in more profitable results for O&G operators. In addition, the proprietary technology based around the G-Reformer is unique in that it also allows for transportable (mobile) GTL plants with a much smaller footprint as compared to legacy large-scale technologies. Greenway is in the process of building a GTL scale model unit at a local entity in conjunctiondiscussions with a sponsored research agreement with the Universitynumber of Texas at Arlington at an estimated costoil and gas operators and other interested parties to license and obtain joint venture or other forms of $1,500,000.capital funding to build its first third-party customer gas-to-liquid plant.
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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 commonCommon A stock. ActualEarly 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 of the holdings.which may be realized from this property holding. The Company's current expectations are thatCompany is currently exploring strategic options to partner or sell its interest in this acreage, while it will need approximately $2,000,000 to begin certified assaying ($500,000), develop a mining plan with the BLM ($500,000)focuses on its emerging GTL technology sales and acquire exploration equipment ($1,000,000). The total requirement will not be known until reports from a consulting geologist are received. Due the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.
5
We remain dependent on outside sources of funding for continuation of our operations. Our independent registered public accounting firm issued a going concern qualification in their report dated April 14, 2016,2020, which is included with our Financial Statements and raises substantial doubt about our ability to continue as a going concern.
�� | 2019 | 2018 | ||||||
Net loss | $ | (3,661,245 | ) | $ | (3,194,982 | ) | ||
Cash flow (negative) from operations | (1,332,528 | ) | (1,289,436 | ) | ||||
Negative working capital | (6,364,485 | ) | (4,704,396 | ) | ||||
Stockholders’ deficit | (6,889,485 | ) | (4,689,396 | ) |
As of December 31, 2019, we had total liabilities in excess of assets by $6,889,485. Also, during the yearsyear ended December 31, 2015 and 2014,2019, we have been unable to generateused net cash flows sufficient to support our operations and have been dependent on debt and equity raised from qualified individual investors and loans from a related party. We experienced negative financial results as follows:
2015 | 2014 Restated | |||||||
Net loss | $ | (4,028,702 | ) | $ | (4,384,475 | ) | ||
Cash flow (negative) from operations | (1,304,347 | ) | (1,455,517 | ) | ||||
Negative working capital | (2,271,303 | ) | (4,262,530 | ) | ||||
Stockholders' deficit | (2,270,559 | ) | (2,418,120 | ) |
The financial statements contained hereinFinancial Statements included in our Form 10-K do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence. Our ability to continue as a going concern is dependent upon our ability to generate sufficient new cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, andand/or ultimately to attain profitable operations. However, there is no assurance that profitable operations, financing, or sufficient new cash flows will occur in the future.
Our ability to achieve profitability will depend upon our ability to finance, manufacture, and market/operate GTL units. Our growth is dependent on attaining profit from our operations and our raising additional capital either through the sale of stockour Common Stock or borrowing. There is no assurance that we will be able to raise any equity financing or sell any of our products at a profit. We will be unable to pay our obligations in the normal course of business or service our debt in a timely manner throughout 2020 without raising additional debt or equity capital. There can be no assurance that we will raise additional debt or equity capital.
We are currently evaluating strategic alternatives that include (i) raising new equity capital and/or (ii) issuing additional debt instruments. The process is ongoing, lengthy and has inherent costs. There can be no assurance that the exploration of these strategic alternatives will result in any specific action to alleviate our 12-month working capital needs or result in any other transaction.
While we are attempting to commence operations and generate revenues, our cash position may not be significant enough to support our daily operations. Management intends to raise additional funds by way of an offering of our securities. Management believes that the actions presently being taken to further implement our business plan and generate revenues provide the opportunity for us to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in our ability to raise additional funds, we may not be successful. Our ability to continue as a going concern is dependent upon our capability to further implement our business plan and generate revenues.
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Results of Operations
For Year Ended December 31, 2019 as Compared to Year Ended December 31, 2018:
We had no revenues for consolidated operations for the years ended December 201531, 2019 and 2014 were $0 and $0, respectively.2018. We reported consolidated net losses during the years ended December 31, 20152019 and 20142018 of $4,028,702$3,661,245 and $4,384,475,$3,194,982, respectively.
The following table summarizes consolidated operating expenses and other income and expenses for the yearyears ended December 31, 20152019, and 2014:
2015 | 2014 Restated | |||||||
General and administrative | $ | 3,829,466 | $ | 2,241,076 | ||||
Research and development | 766,726 | 218,000 | ||||||
Depreciation and amortization | 396 | 396 | ||||||
Gain from debt forgiveness | 518,300 | 0 | ||||||
Write-off Logistix software | 73,500 | 0 | ||||||
Impairment on investment assets | 0 | 190,000 | ||||||
Gain (loss) on derivative | 139,397 | (91,395 | ) | |||||
Net interest expense | 218,105 | 928,774 | ||||||
Loss on discontinued operations | 561,412 | 714,834 |
2019 | 2018 | |||||||
General and administrative | $ | 1,988,111 | $ | 2,255,503 | ||||
Research and development | $ | 441,320 | $ | 630,518 | ||||
Loss on derivatives | $ | (64,899 | ) | $ | (34,500 | ) | ||
Accrued interest expense (including related parties) | $ | (443,760 | ) | $ | (126,461 | ) | ||
Net loss on debt settlement | $ | (45,000 | ) | $ | (28,000 | ) | ||
Settlement expense – loan agreement | $ | 39,220 | $ | (120,000 | ) | |||
Net loss on settlement related to legal matters | $ | (765,000 | ) | $ | - |
6
Salaries. During the year ended December 31, 2019, total salaries increased to $1,020,923 as compared to $233,334 for the year ended December 31, 2018. The increase primarily reflects certain consultants becoming employees during the period, including non-cash stock compensation expense of $420,000 in 2019, compared to $0 2018.
Consulting Fees. During the year ended December 31, 2019, consulting expense decreased to $251,377, as compared to $1,373,578 for the year ended December 31, 2018. The decrease was primarily due to certain consultants becoming employees of the Company, and a decreased reliance on the use of consultants for the development and production of the Company’s GTL technologies during the period.
Professional Fees. During the year ended December 31, 2019, professional fees decreased to $6,292, as compared to $24,358 for the year ended December 31, 2108. Professional fees decreased due to elimination of $663,750,certain prior vendors.
Travel Expenses. During the year ended December 31, 2019, travel expenses decreased to $11,120, as compared to $30,113 in the year ended December 31, 2018. The decrease in travel expenses was due to the termination of prior employees and a reduced need for employees to travel generally.
Settlement Expense. During the year ended December 31, 2019, we completed a final settlement of the Mamaki Tea litigation, resulting in a one-time charge of $765,000. There is no comparative expense for the year ended December 31, 2018.
Legal Expenses. During the year ended December 31, 2019, legal expenses increased to $477,417, as compared to $297,073 in the year ended December 31, 2018. The increase in legal fees was due primarily to additional work related to the dissident Shareholder actions and settlement of $77,100, rentvarious matters that were in, or soon to be in, litigation.
Research and Development Costs. During the year ended December 31, 2019, research and development costs decreased to $441,320, as compared to $630,518 in the year ended December 31, 2018. The decrease was due to us reaching the completion of our initial GTL research activities and the start of migration to a commercial production environment.
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Interest Expense. During the year ended December 31, 2019, interest expense increased to $443,760, including to related parties of $188,267, as compared to $126,461 for the year ended December 31, 2018. The increase was primarily due to the increase of debt financing versus the sale of securities to support operating expenses.
Derivative Adjustment. During the year ended December 31, 2019, loss on derivative adjustment was $64,899, as compared to $34,500 for year ended December 31, 2018. The increase was primarily due to changes in the derivative liability calculated using theBlack-Scholes Model pursuant to the outstanding convertible note payable and warrants that were extinguished during the period.
Net Loss from Operations. Our net loss from operations decreased to $2,429,431 in the year ended December 31, 2019, as compared to $2,886,021 for the year ended December 31, 2018. The decrease was due primarily to a decrease in consulting fees to $251,377 in 2019 compared to $1,363,578 to the same period in 2018, offset by an increase in legal expense of $76,800, auditing$180,344 and Salaries Expenses of $34,000, travel expenses of $11,654, transfer agent expenses of $10,823, and stock based compensation of $2,128,057.
Net Loss. Our consolidated net loss was $4,028,702increased to $3,661,245, or $0.02a negative $0.01 per basic and diluted earnings per share for the year ended December 31, 20152019, as compared to $4,384,475$3,194,982, or $0.03a negative $0.01 per basic and diluted earnings share for the yearsame period ended December 31, 2014.2018. The increase in net loss was due primarily to increased salaries, interest, legal, and settlement expenses of $1,585,232, offset by decreases in consulting fees and research and development expenses of $1,301,399 in the period. The weighted-average number of shares of Common Stock used in the earnings per share for the basic and dilutive computation was 165,860,150291,502,726 for the year ended December 31, 20152019, and 138,442,759285,638,699 for the year ended December 31, 2014.
Liquidity and Capital Resources
We do not currently have sufficient working capital to fund our expected future operations. We cannot assure investors that we will be able to continue our operations without securing additional adequate funding. We had $0$16,043 in cash, total assets of $744$428,890, and total liabilities of $2,271,303$7,318,375 as of December 31, 2015.2019. Total stockholder'sAccumulated deficit at December 31, 20152019, was $2,270,559.
Liquidity is the yearsability of a company to generate adequate amounts of cash to meet all of its financial obligations. The following table provides certain selected balance sheet comparisons between December 31, 2019, and December 31, 2018:
$ | % | |||||||||||||||
2019 | 2018 | Change | Change | |||||||||||||
Working Capital | ||||||||||||||||
Cash | $ | 16,043 | $ | 73,211 | ($ | 57,168 | ) | -78 | % | |||||||
Total current assets | $ | 428,890 | $ | 73,211 | $ | 355,679 | 486 | % | ||||||||
Total assets | $ | 428,890 | $ | 88,211 | $ | 340,679 | 386 | % | ||||||||
Accounts payable and accrued liabilities | $ | 4,396,570 | $ | 3,625,214 | $ | 771,356 | 21 | % | ||||||||
Notes payable and accrued interest | $ | 2,396,805 | $ | 1,048,917 | $ | 1,347,888 | 129 | % | ||||||||
Derivative liability | - | $ | 103,476 | ($ | 103,476 | ) | -100 | % | ||||||||
Total current liabilities | $ | 6,793,375 | $ | 4,777,607 | $ | 2,015,768 | 42 | % | ||||||||
Total long-term debt | $ | 525,000 | - | $ | 525,000 | n.a. | ||||||||||
Total liabilities | $ | 7,318,375 | $ | 4,777,607 | $ | 2,540,768 | 53 | % |
We are exploring various means to increase our working capital, including completing additional private stock sales and entering new debt instruments. In January 2020, we entered into a Securities Purchase Agreement (the “Purchase Agreement”), with PowerUp Lending Group, Ltd., a Virginia corporation (“PowerUp”), that specializes in making funding commitments to small-cap public companies. PowerUp has agreed to provide up to $1,000,000 to us over a twelve (12) month period, subject to period determined stock price and trading attributes, and we have borrowed $171,000 during the first quarter of 2020 under this from of Purchase Agreement. The Purchase Agreement contains customary representations and warranties, covenants, and conditions to closing.See Note 12 – Subsequent Events on page F-21 to our Financial Statements.
Operating Activities
Net cash used in continuing operating activities during the year ended December 31, 2015 and 2014, cash used by operating activities2019, was $1,304,347 and $1,455,517, respectively. Cash provided by investing activities were $225,000 and $0$1,332,528, as compared to $1,289,436 for the yearsyear ended December 31, 2015 and 2014, respectively.2018.
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Investing activities
Net cash used in investing activities for the year ending December 31, 2019 was $387,847, consisting of advances made to OPMGE for deposits on a piece of specialized commercial equipment required to convert the Wharton, TX manufacturing facility for use of our GTL technology, resulting in a Receivable – Related Party reported on our Balance Sheet. There were no cash flows from investing activities for the year ended December 31, 2018.
Financing Activities
Net cash provided by financing activities was $1,663,207 for the yearsyear ended December 31, 2015 and 2014 was $1,270,852 and $1,935,749, respectively, primarily from the sale2019, comprised of common stock and advances by shareholders.
Net cash provided by financing is available to the company at this time, partly because we do not have any earnings to support debt service or maintain typical debt covenants. We have no firm arrangements for any capital at this time. Additionally, equity capital for small companies generally and small companies in the oil and gas and mining segments in particular, have a difficult time competing for investors because of the high risk at this stage of development and the fact that the investment is long term. The marketactivities was $1,271,129 for the transportation fuelyear ended December 31, 2018, composed of $602,500 in sales of our Common Stock, $728,869 proceeds from notes, less $8,500 of payments on notes payable and metals that the company
Our accompanying consolidated financial statementsFinancial 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. TheOur general business strategy of the Company is to first develop the natural gas to liquidour GTL technology to maintain the Company'sour basic viability, while seeking significant development capital and then explore and research its existing mining leases properties.for full commercialization. As shown in the accompanying consolidated financial statement, the Company hasFinancial Statements, we have incurred a cumulativean accumulated deficit of $12,458,131$30,479,829 and $8,429,429$26,818,584 as of December 31, 20152019, and 2014,2018, respectively. TheOur ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on theour ability of the Company to obtain necessary financing to fund ongoing operations.
Commitments
Capital Expenditures
The prior funded Scope of Work (“SOW”) under our SRA with UTA was completed in the year ended December 2019, with payments made of $120,000 to complete the work described in the last SOW. As we move into commercialization of our GTL technology, we plan to update and enter into a new SOW with UTA for 2020 and 2021. This is anticipated to entail a financial commitment of approximately $257,000 for a twelve-month cycle, which we have been told can be payable in four equal installments of $64,250. However, we shall only execute such new SOW and notice UTA to start such work when we have funds available to make such payments. As described elsewhere herein this Report, we are working to raise sufficient capital to enter such new SOW, including from private stock sales, additional debt and payment from of our receivable with OPMGE. There is no assurance we that we will be able to raise such sufficient funds to enter into such new Scope of Work.
Operational Expenditures
Employment Contracts
In May 2011, the CompanyAugust 2012, we entered into an employment agreementsagreement with Kevin Bentley, its chief executive officer, Richard Halden, itsRay Wright, for the position of president and Randy Moseley, its chief financial officer. The Agreements areof GIE, for a term of 5 years with compensation of $180,000 the first year, $240,000 the second year, $300,000 the third year, $350,000 the four2th year and the fifth year at a salary commensurate with those in similar industries. The employment agreements also provide for the officers to receive 1,250,000 shares of restricted common stock annually for each year of the employment agreement. During the years ended December 31, 2015 and 2014, with consent of management, the Company accrued a total of $360,000 and $540,000, respectively, as management fees in accordance with the terms of these agreements. On April 8, 2015, the Company's chief executive officer resigned and relinquished his claim to receive $518,300 of deferred compensation.
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Effective May 10, 2018, we entered into employment agreements with John Olynick, as President, and 2014, respectively,Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements were virtually identical to each other. Both Mr. Olynick as President, and Mr. Jones, as Chief Financial Officer, are to earn a salary of $120,000 per year. Mr. Jones also serves as the Company’s Secretary and Treasurer. During each year that Mr. Olynick’s and Mr. Jones’ agreement are in effect, they are entitled to receive a bonus equal to at least $35,000 per year. Both Mr. Olynick and Mr. Jones each received a grant equal to 250,000 shares of Common Stock at the start of their employment, with such shares of Common Stock vesting immediately. Mr. Olynick and Mr. Jones are and were each also entitled to participate in the Company’s benefit plans, if and when any such plans exist. The foregoing summary of Mr. Olynick’s and Mr. Jones’s employment agreement is qualified in its entirety by reference to the actual true and correct Employment Agreements by and between Mr. Olynick, Mr. Jones and our Company, dated Mary 10, 2018, copies of which are filed as Exhibits 10.39 and 10.40 to this Form 10-K and incorporated by reference herein.
Mr. Olynick elected not to renew his employment agreement and resigned as President on July 19, 2019. Upon his resignation, we agreed to pay the balance of his Employment Agreement then due and owing over time. Accordingly, we accrued $110,084 for the balance of his Employment Agreement, against which we have paid $15,000, leaving a balance remaining of $95,084 for the year ending December 2019. In addition, Mr. Olynick had previously entered into a consulting agreement (the “Olynick Agreement”) to provide general advisory services with us on April 18, 2019, and which included terms for payment of billable time at $40.00 per hour, plus approved expenses. The Olynick Agreement was terminated when Mr. Olynick became President of the Company on May 10, 2018. We have accrued $191,250$24,740 in expenses related to such prior consulting agreement expenses. See Exhibit 10.42 incorporated by reference herein.
Effective April 1, 2019, we entered into an employment agreement with Thomas Phillips, Vice President of Operations, for a term of 12 months with compensation of $120,000 per year. Mr. Phillips reports to the President of GIE. Pursuant to his employment agreement, Mr. Phillips is entitled to a no-cost grant of common stock equal to 4,500,000 shares of the Company’s Rule 144 restricted common stock, par value $.0001 per share, with such shares having been issued in February 2020. In addition, Mr. Phillips is entitled to certain additional stock grants based on our performance during the term of his employment, and $168.700 towardsto participate in our benefit plans, if and when such plans become available. The foregoing summary of the Mr. Phillips’s employment agreements.agreement is qualified in its entirety by reference to the actual true and correct Employment Agreement by and between Thomas Phillips and our Company, dated April 1, 2019, a copy of which is filed as Exhibit 10.53 to this Form 10-K and incorporated by reference herein.
Effective April 1, 2019, we entered into an employment agreement with Ryan Turner for a term of 12 months with compensation of $80,000 per year, to manage our business development and investor relations. Mr. Turner reports to the President of our Company. Pursuant to his employment agreement, Mr. Turner 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, with such shares having been issued in February 2020. Mr. Turner is also entitled to certain additional stock grants based on our performance during the term of his employment and to participate in our benefit plans, when and if such plans become available. The foregoing summary of the Mr. Turner’s employment agreement is qualified in its entirety by its reference to the actual true and correct Employment Agreement by and between Ryan Turner and our Company, dated April 1, 2019, a copy of which is filed as Exhibit 10.58 to this Form 10-K and incorporated by reference herein.
Consulting Agreements
On November 28, 2017, we entered into the Chisos Agreement with Chisos for public relations, consulting and corporate communications services. The initial payment was 1,800,000 shares of our Common Stock. Additional payments were to be made upon our Common Stock reaching certain price points over an extended period. Due to a breach of the Chisos Agreement by Chisos, on June 22, 2018, our Board of Directors voted to terminate the Chisos Agreement. Based on the termination, all warrants to purchase our Common Stock were cancelled. Chisos sued us for breach of contract. The Company vigorously defended itself and the litigation was dismissed without prejudice on November 19, 2019. A copy of the court’s dismissal is incorporated by reference as Exhibit 10.61.For more information, see Note 11 – Legal Matters on page F-19 to our Financial Statements.
On September 7, 2018, Wildcat, a company controlled by Shareholder Gleason, filed suit against us alleging claims arising from the Gleason Agreement, seeking to recover monetary damages, interest, court costs, and attorney’s fees. In a separate lawsuit, Wildcat filed suit claiming that the Company breached that certain Promissory Note dated on or about November 13, 2017, entered into between Wildcat as lender and Greenway as borrower, and as a result Wildcat initiated an action in County Court at Law No. 2 of Tarrant County, Texas, Cause No. 2018-006416-2. On March 6, 2019, we entered into a Rule 11 Agreement with Gleason settling both disputes, a copy of which is filed as Exhibit 10.52 to this Form 10-K and incorporated by reference. Pursuant to the Rule 11 Agreement, the parties agreed to abate both cases until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019, whichever be sooner. The Rule 11 Agreement provided that if we timely performed through October 15, 2019, the parties would file a joint motion for dismissal and present agreed orders of dismissal with prejudice for both lawsuits. The Company performed in all regards under the Rule 11 Agreement, however Gleason refused to sign the Wildcat Settlement Agreement at the point of the Company’s having performed its obligations. The parties’ respective counsels then mutually agreed to extend the original October 15, 2019 settlement date until at least the end of the year while the parties waited for Gleason’s signature. Gleason signed the Compromise Settlement and Release Agreement on February 4, 2020, and all litigation was dismissed by the Court on February 25, 2020. A copy of the Dismissal is incorporated by reference as Exhibit 10.59.Note 11 – Legal Matters and Note 12 – Subsequent Events” to our Financial Statements on pages F-19 and F-21 respectively.
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Paul Alfano, a director and greater than five percent (5%) shareholder entered into a consulting agreement with us on April 19, 2018 via Alfano Consulting Services (the “Alfano Agreement”), to provide board and senior management advice, including but not limited to corporate strategy, SEC regulatory adherence, sales and marketing strategies, document and presentation preparation and fund-raising support. Terms included payment of billable time at $40.00 per hour, plus approved expenses, retroactive to January 1, 2017. A copy is available by Exhibit 10.44 incorporated by reference herein. The Company's minimum commitmentAlfano Agreement was terminated when Mr. Alfano became a director in June 2019. Prior to becoming a Director, Mr. Alfano had made a claim against us, providing written support using two different total payment amounts, which the Company disputed as incorrectly calculated at the time. Prior to becoming a Director, the Company and Mr. Alfano resolved such disputed amounts and we accrued Consulting Fees of $94,038 for 2016all prior periods through the year ending December 31, 2019. There is approximately $11,800no payment schedule agreed to by the parties, and such accrued expenses will be paid only when the Company has sufficient liquidity to make such payment, or unless or until the parties agree to some other form of payment provision, up to and including the conversion of the accrued expenses to stock or direct forgiveness by Alfano Consulting Services.
Other
Pursuant to the GIE Acquisition Agreement in annual maintenance fees,August 2012, we agreed to: (i) issue an additional 7,500,000 shares of Common Stock when the first portable GTL unit is built and becomes operational, and is capable of producing 2,000 barrels of diesel or jet fuel per day, and (ii) pay a 2% royalty on all gross production sales on each unit placed in production, or one percent (1%) each to the founders and previous owners of GIE. On February 6, 2018, and in connection with a settlement agreement dated April 5, 2018, by and between the Greer Family Trust and us, which are due September 1, 2016. Onceis the company enterssuccessor in interest one of the production phase,founders and prior owners of GIE, F. Conrad Greer (“Greer”), (the “Trust”, and such settlement agreement the “Trust Settlement Agreement”), we issued 3,000,000 shares of Common Stock and a convertible promissory note for $150,000 to the Trust in exchange for: (i) a termination of the Trust’s right to receive 3,750,000 shares of Common Stock in the future and 1% of the royalties owed to the Trust under the GIE Acquisition Agreement; (ii) the termination of Greer’s then current employment agreement with GIE; and (iii) the Trust’s waiver of any future claims against us for any reason. A copy of the Trust Settlement Agreement and related promissory note dated April 5, 2018, by us in favor of the Trust is filed as Exhibit 10.36 to this Form 10-K and incorporated by reference herein.
As a result of the transactions consummated by the Trust Settlement Agreement, we are committed to issue a reduced number of 3,750,000 shares of Common Stock and 1% of the royalties due on production of our GTL operational units to Ray Wright, the other founder and prior owner of GIE, pursuant to the GIE Acquisition Agreement.
Mining Leases
We have a minimum commitment during 2020 of approximately $11,160 for our annual lease maintenance fees due to Bureau of Land Management (“BLM”) for the Arizona Property, with such payment due by September 1, 2020. There is no actual lease agreement with the BLM, are equalbut we file an annual maintenance fee form and pay fees to 10% of production.
Financing
Financing to date has been provided by loans, advances from shareholdersShareholders and by issuing sharesDirectors and issuances of its common stockour Common Stock in various private placements to accredited investors, related parties and individuals. institutions.
For the year ended December 31, 2019, we received $1,302,188 in related party loans from Mabert, acting as agent for various lenders to the Company.See also Note 5 – Term Notes Payable and Notes Payable Related Parties on page F-11 to our Financial Statements.
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In the year ended December 31, 2019, we received $51,019 in advances from three of our directors, Ransom Jones, Kent Harer and Kevin Jones, in the amounts of $25,000, $25,000 and $1,019 respectively, which have been accrued as Advances - related parties for the period.
In June 2019, Michael Wykrent, a director purchased 1,200,000 shares of our Rule 144 restricted Common Stock, par value $.0001 per share for $60,000 in a private sale.
In September 2019, we sold 4,000,000 shares of our Rule 144 Common Stock, par value $.0001 per share for $200,000 to an accredited investor in a private sale.
In December 2019, we sold 1,250,000 shares of our Rule 144 Common Stock, par value $.0001 per share for $100,000 to an accredited investor in a private sale.
We have also received loans from external lenders. In January 2020, we entered into a Securities Purchase Agreement (the “Purchase Agreement”), with PowerUp Lending Group, Ltd., a Virginia corporation (“PowerUp”), that specializes in making funding commitments to small-cap public companies. PowerUp has agreed to provide up to $1,000,000 to us over a twelve (12) month period, subject to period determined stock price and trading attributes, and we have received $171,000 during the first quarter of 2020 under this from of Purchase Agreement. The Purchase Agreement contains customary representations and warranties, covenants, and conditions to closing. The foregoing description of the Purchase Agreement and the Notes do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement and the Notes, which are filed herewith as Exhibits 10.63 - 10.66, respectively, and incorporated herein by reference.See also Note 12 – Subsequent Events on page F-21 to our Financial Statements.
On July 25, 2019, a Trustee for the Greer Trust sent notice to the Company of their election to convert all unpaid principal and accrued interest of $183,220 due under the Greer Note. The conversion price as calculated according to the Note’s terms was $0.0469 per share, resulting in a conversion of the Note and accrued interest into 3,906,610 shares of the Company’s common stock. These shares were issued in the first quarter of 2020.See Note 6 – Other Notes Payable on page F-13 to our Financial Statements herein below.
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 – Other Notes Payable on page F-13 to our Financial Statements herein below.
Seasonality
We do not anticipate that our business will be affected by seasonal factors.
Impact of Inflation
While we are subject to general inflationary trends, including for basic manufacturing production materials, our management believes that inflation in and of itself does not have any off balance sheet arrangementsa material effect on our operating results. However, inflation may become a factor in the future. However, subsequent to year end 2019, the COVID-19 virus and its current extraordinary impact on the world economy has reduced oil consumption globally, decreasing crude oil prices, to levels not seen since the early 1980’s. The economics of GTL conversion rely in part on the arbitrage between oil and natural gas prices, with economic models for many producers, including our own models, using a range of $30-60/bbl (for WTI or Brent Crude as listed daily on the Nymex and ICE commodities exchanges) to determine relative profitability of their GTL operations. While the COVID-19 virus may run its human course in the near term, we believe (as many others in the U.S. government and media believe), that the economic impacts will be long lasting and for all practical matters, remain largely unknown at this time.
Off-Balance Sheet Arrangements
During the year ended December 2019, we entered into a revenue interest research and development venture with Mabert and an employee, Tom Phillips, OPMGE. We account for our participation under the Equity Method, as further defined herein below, whereby we may be subject to future gains and losses that are reasonably likely to have a current or futurean effect on our financial condition, revenues, andreported results of operations liquidityand liquidity. We are not required to invest, participate in any of the ongoing costs, financing or capital expenditures.expenditures made by OPMGE. We advanced $387,847 to OPMGE which we have accrued as a related party receivable and expect to be paid such advances as OPMGE receives expected financing and ramps up its operations in 2020.
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Critical Accounting Policies and Estimates
Our discussionFinancial Statements and analysis of our financial condition and results of operationsaccompanying notes are based upon financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statementsStates (“GAAP”). Preparing our Financial Statements requires usmanagement to make estimates and judgmentsassumptions that affectimpact the reported amounts of assets, liabilities, revenue, and expenses, and related
We recognize revenue in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” Sales will be recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will be 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 making judgments aboutthe Impairment or Disposal of Long-Lived Assets,” which evaluates the recoverability of long-lived assets not held for sale by measuring the carrying valuesamount of the assets and liabilitiesagainst 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 readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.
We believe that the following critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
The Financial Accounting Standards Board (“FASB”) issuedAccounting Standard 606– Revenue from Contracts with Customers, as guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We adopted the guidance on January 1, 2018 and applied the cumulative catch-up transition method. The transition adjustment to be recorded to stockholders’ deficit upon adoption of the new standard did not have a material effect upon the consolidated financial statements.
The Company will recognize revenuehas not, to date, generated any revenues.
Equity Method Investment
On August 29, 2019, we entered into a research and development venture, OPMGE, with Mabert and an employee, Tom Phillips. We contributed a limited license to use our proprietary and patented GTL technology and a working G-Reformer refractory unit, for no actual cost basis, in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition ("ASC 605-10") which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidenceexchange for 300 membership units in OPMGE, equating to an approximately a 42.8% current interest in OPMGE, pending the expected issuance of an arrangement exists; (2) delivery has occurred; (3)additional 300 membership units, equating to a net 30% ownership interest in OPMGE at that time. There is no book or asset value attributed to the selling price is fixedcontributed technology. We evaluated our interest in OPMGE and determinable; and (4) collectability is reasonably
Multiple-Element Arrangements ("ASC 605-25"). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Accounting Standard 718, "Accounting“Accounting for Stock-Based Compensation" ("Compensation” (“ASC 718"718”) established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value basedvalue-based method of accounting for an employee stock option or similar equity instrument. In January 2006, UMEDwe implemented ASC 718, and accordingly, UMED accountswe account for compensation cost for stock option plans in accordance with ASC 718.
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Use of Estimates
The preparation of the consolidated financial statementsour Financial Statements in conformity with accounting principles generally accepted in the United StatesGAAP 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 statementsour Financial Statements and the reported amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.
Cash and Development Costs
We consider all highly liquid investments purchased with an original maturity of 3-months or less to be cash equivalents. There were no cash equivalents at December 31, 2019, or December 31, 2018. Unless otherwise indicated, all references to “dollars” in this Form 10-K are to U.S. dollars.
Income Taxes
We account for mine exploration costsincome taxes in accordance with Accounting Standards Codification 932, Extractive Activities. All exploration expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. At December 31, 2015, the Company had not incurred any mine development costs.
We have adopted the provisions of timing differences such as deferred officers' compensationFASB ASC 740-10-05, Accounting for Uncertainty in Income Taxes(“ASC 750-10-05”). ASC 750-10-05 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and stock compensationprescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, ASC 750-10-05 provides guidance on de-recognition, classification, interest and penalties, accounting versusin interim periods, disclosure and transition. Open tax differences.
Net Loss Perper Share, basicBasic and diluted
We have adoptedAccounting Standards Codification Subtopic 260-10, Earnings Perper Share ("ASC 260-10), specifying the computation, presentation and disclosure requirements of earning per share information. Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares issued and outstanding for the period. Shares of Common Stock issuable upon conversion of the notes payable and exercise of warrants has(10,857,737), shares of Common Stock convertible for debt (2,083,333) and shares of Common Stock outstanding but not yet issued (6,000,986) have been excluded as a common stockCommon Stock equivalent in the diluted loss per share because their effect would be anti-dilutive.
Derivative Financial Instruments
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815,Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. ASC 815 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is anti-dilutiveto match the timing of gain or loss recognition on the computation.
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See Note 6 – Other Notes Payable on page F-13 to our Financial Statements for a more detailed description regarding our current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Concentration and Credit Risk
Financial instruments and related items, which potentially subject the Companyus to concentrations of credit risk, consist primarily of cash, cash equivalents, and trade receivables. The Company places itsWe place our cash and temporary cash investments with high credit-credit quality institutions. At times, such investments may be in excess of the FDICFederal Deposit Insurance Corporation insurance limit.
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.” ASU No. 2014-10 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, ASU 2014-10 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 our 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 we 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 we enter into where this standard would otherwise apply. We do not have any lease agreements where such lease accounting standards would apply.
Impact of New Accounting Standards
We have been updated for the Codification.
Subsequent Events
In March 2020, 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. While to date the Company has not been required to stop operating, management is evaluating its consolidateduse of its office space, virtual meetings and the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The extent to which the COVID-19 (coronavirus) outbreak will impact our operations, ability to obtain financing or future financial statements.results is uncertain.
On September 7, 2018, Wildcat, a company controlled by a shareholder Gleason, filed suit against the Company, alleging claims arising from a prior consulting agreement entered into by the parties dated August 24, 2017, 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. The parties negotiated a settlement, as described in the related Rule 11 Agreement, incorporated by reference as Exhibit 10.52. Gleason signed the Compromise Settlement and Release Agreement on February 4, 2020, and the Parties filed a Joint Motion for Dismissal and Agreed Orders of Dismissal with prejudice for both lawsuits, such Motion and Order accepted by the Court on February 25, 2020. A copy of the Dismissal is incorporated by reference as Exhibit 10.59.
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10On January 24, 2020, the Company entered into its a Securities Purchase Agreements (the “Purchase Agreement”), by and between the Company and PowerUp Lending Group, Ltd., a Virginia corporation (“PowerUp”), whereby PowerUp purchased, and the Company sold, a Convertible Promissory Note, dated January 24, 2020, by and between the Company and PowerUp (the “Note”), in exchange for a cash purchase price of $118,000.00. PowerUp has agreed to provide up to $1,000,000 to the Company under the same and substantially similar terms (term dates change with each agreement) over a twelve-month period, subject to period determined stock price and trading attributes. The Purchase Agreement contains customary representations and warranties, covenants, and conditions to closing. The foregoing descriptions of the Purchase Agreement and the Notes do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement and the Notes, which are filed herewith as Exhibits 10.63 - 10.66, respectively, and incorporated herein by reference.See also Note 12 – Subsequent Events on page F-21 to our Financial Statements.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company, as defined by Rule12b-2 of the Securities Exchange Act of 1934 and Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
At no time have there been any disagreements with Accountants on Accounting and Financial Disclosure.
The term disclosure controls and procedures (as definedmeans controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the Securitiesreports that it files or submits under the Exchange Act of 1934 Rules 13a-15(e)is recorded, processed, summarized and 15d-15(e)) as ofreported, within the
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internalreporting. 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 our 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 U.S. generally accepted accounting principles.
● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; | |
● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and | |
● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. |
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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 transactionsfact that there are resource constraints, and dispositionsthe benefits of our assets, (ii) provide reasonable assurance that
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 the year ending December 2019, we conducted an evaluation of the effectiveness of our internal controlcontrols over financial reporting as of December 31, 2015. In making this assessment, management usedbased on the criteria set forthframework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inCommission. 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, our principal executive officer and principal financial officer, have concluded that as of December 31, 2019, our internal control over financial reporting was ineffective.
Management’s Annual Report on Internal Control over Financial ReportingReporting.
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.
As of December 31, 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 our internal controls over financial reporting based on the framework in Internal Control - Guidance for Smaller Public Companies.
We have identified at least the following deficiencies, which together constitute a material weakness in our assessment of the effectiveness of internal control over financial reporting as of December 31, 2015;
1. |
2. | During the year ended December 31, |
3. |
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We are continuing the process of remediating itsour control deficiencies. However, the material weakness in internal control over financial reporting that hashave been identified will not be remediated until numerous new internal controls are implemented and operate for a period of time, are tested, and the Company iswe are able to conclude that such internal controls are operating effectively. The CompanyWe cannot provide assurance that these procedures will be successful in identifying material errors that may exist in the financial statements. The Companyour Financial Statements. We cannot make assurances that itwe will not identify additional material weaknesses in itsour internal control over financial reporting in the future. ManagementOur management plans, as capital becomes available to the Company,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.
Our management believes that the material weaknesses set forth above did not includehave 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 results in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures and could potentially have an attestation report of the Company's registered public accounting firm regarding internal control overimpact our financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
Changes in Internal Controls over Financial Reporting
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our system of internal control over financial reporting to ensure we continue to work towards an effective internal control environment. There were no changes that occurred during the fourth quarter of the fiscal year covered by the Annual Report on Form 10-Kended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, the Company'sour internal control over financial reporting.
Item 9B. | Other Information. |
None.
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Item 10. | Directors, Executive Officers and Corporate Governance. |
The following table sets forth the names, ages, and Corporate Governance.
Name | Age | Position | Director | |||
Raymond Wright | 83 | Chairman of the Board, President of GIE, and Director | 2016 | |||
Ransom Jones | 71 | Director, Chief Financial Officer, Secretary and Treasurer | 2016 | |||
Kevin Jones | 55 | Director | 2016 | |||
Kent Harer | 63 | Director and President (Interim) | 2017 | |||
Paul Alfano | 64 | Director (Independent) | 2019 | |||
Michael Wykrent | 76 | Director (Independent) | 2019 | |||
Thomas Phillips | 52 | Vice President of Operations for GIE | — |
The members of our Board of Directors are subject to serve untilchange from time to time by the vote of our Shareholders at special or annual meetings to elect directors. Our current Board of Directors consists of six directors, who have expertise in our business. No date for the next annual meeting of stockholdersShareholders is specified in our bylaws or has been fixed by the Board of Directors. Officers are elected annually by the directors. The term of office of each officer ends at the next annual meeting of our Board of Directors, expected to take place immediately after the next annual meeting of Shareholders, or until such time when such officer’s successor is elected and qualified.
The foregoing notwithstanding, except as otherwise provided in any resolution or resolutions of the board, directors who are elected at an annual meeting of Shareholders, and directors elected and/or appointed in the interim to fill vacancies and newly created directorships, will hold office for the term for which elected and/or appointed until their successors have beenare elected and have qualified. Officers serve atqualified or until their earlier death, resignation or removal.
Whenever the discretionholders of any class or classes of stock or any series thereof are entitled to elect one or more directors pursuant to any resolution or resolutions of the Board of Directors.
Ransom Jones and Kevin Jones are brothers. Otherwise, there are no other family relationships among our directors and officers.
We may employ additional management personnel, as our Board of Directors deems necessary. We have not identified or reached an agreement or understanding with any other individuals to serve in management positions.
Directors and Officers Biographies
Raymond Wright - Chairman of our Board of Directors, Co-Founder and President of our wholly owned subsidiary, GIE
Mr. Wright has been a Director since March 6, 2016 and was elected by the Board as Chairman in 2017, while also serving as the President of GIE since August 2012. Mr. Wright was the co-founder of DFW Genesis with F. Conrad Greer, in 2009, where he began working on current natural gas GTL processes until 2012, when he and the late Mr. Greer formed GIE to continue working on a new GTL solution, which has gone on to become the basis of our proprietary G-Reformer technology. Previously, Mr. Wright worked with Dallas-based Texas Instruments (TI) managing operations and opening up new markets for TI in England. He developed and built a materials manufacturing facility for TI’s European operation and introduced TI’s Light Sensor technology in Europe. Mr. Wright was asked to join the Board of Directors due to his specific experience in the GTL industry, his early contributions and leadership to our GTL technology, and his general business, management and analytical skills. He received an undergraduate degree in Accounting from Southern Methodist University.
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13
Kenton Harer – Director and President (Interim)
Kenton J. Harer joined our Board of Directors on February 3, 2017 and was appointed by our Board of Directors serve as our interim President on July 19, 2019, as reported on our Current Report on Form 8-K, filed with the SEC on July 23, 2019, which is incorporated by reference herein. Mr. Harer has over 35 years of industrial gas experience, starting his career working for the oilfield division of LTV Corporation in 1981, and in 1984, began working with industrial gas, where he developed an extensive knowledge of the industrial gas business experience duringand the past five years of each director and executive officervarious technologies of the Company.
Ransom Jones – Director, Chief Financial Officer, Secretary and Treasurer
Ransom B. Jones has served as a director since March 6, 2016, was our Interim Chief Executive Officer and President from January 2016 to April 2017, and became our Chief Financial Officer, Secretary and Treasurer on January 14, 2016 and director on March 7, 2016.
Kevin Jones are brothers.
RICHARD HALDEN was appointed president and director of UMED Holdings, Inc. on August 18, 2009. On January 14, 2016, Mr. Halden resigned as President of the Company but continues to serve as a director. Mr. Halden also currently serves as president of Capital Equity Partners, LLC, (2007 to present) a management services firm providing corporate financial and marketing services to public companies. Mr. Halden was co-founder of Channel 28, in 2004, a Dallas, Texas independent television station airing programming provided by Urban Television Network Corporation, which contracted with Mr. Halden from 2001 to 2006. Prior to the founding of Channel 28, Mr. Halden provided consulting services to American Independent Network Corporation, Hispanic Television Network, Inc. and American Tire from 1996 to 2001.
Paul Alfano – Director (Independent)
Paul Alfano joined our Board of Directors June 26, 2019. Mr. Alfano is a greater than 5% Shareholder and has served as a consultant to us since 2016, until he became a director in 2019. He has extensive leadership experience in Silicon Valley and currently runs his own consulting firm based in Rochester, NY. Mr. Alfano has led worldwide sales and business development teams, alliances and joint ventures while at Hewlett-Packard (“HP”), Network Appliance and Portal Software (acquired by Oracle). He has worked with “C-Level” Fortune 50 Executives throughout his career. Most notably Mr. Alfano had a successful 25-year career at HP Headquarters (Palo Alto, CA), with his last assignment as Director of Worldwide Sales & Business Development for the HP-Cisco Alliance, ending in 2007. He reported to the senior management teams at both HP & Cisco. Mr. Alfano also led HP’s SBC-PacBell account team for many years, which was one of HP’s largest and most profitable. Mr. Alfano was asked to join the Board of Directors due to his specific sales skills, and for his general business, management and analytical skills. He is a graduate of St. John Fisher College (Rochester, NY) having earned a BS in Marketing, as well as an MBA in Finance from Rochester Institute of Technology.
Michael Wykrent - Director (Independent)
Michael Wykrent was elected to serve as a member of our Board of Directors June 26, 2019. Mr. Wykrent is a major Shareholder and has been an advisor to the Board since 2012. Mr. Wykrent retired from United Parcel Service (“UPS”) after a 27-year career working in Human Resources as a Region Communications Manager. When he began his career at UPS, the company was comprised of only a few thousand managers. By the end of his career, UPS had become a world-wide service provider, with over 481,000 employees. Mr. Wykrent helped open new operating areas as UPS was expanding and also headed up region employee opinion surveys and coordinated the charitable contributions throughout the southwest. His duties brought him into contact with management and employees working in package sorting and delivery operations, labor relations, engineering, accounting, air operations, fleet rentals, vehicle maintenance, legal, customer service, delivery information and loss prevention. Mr. Wykrent was asked to join the Board of Directors due to his sales, business, management and analytical skills. He served in the Navy for four years in communications and later graduated from Henry Ford College.
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Other Key Personnel
Thomas Phillips, age 52, was named Vice President of Operations for GEI in 2018. Mr. Phillips is a highly experienced and accomplished deal-making executive with a successful acquisition and divestiture track record. After starting his career with Lone Star Gas, building and operating pipelines and natural gas processing plants, Mr. Phillips joined JP Morgan FCS/Financial Computer Software (a spinoff of Highland Capital Management). After that group was purchased, Mr. Phillips was asked to join the senior management team at BCR Environmental/NuTerra Management LLC, a municipal wastewater treatment technology company and related solutions provider. Early in 2017, Mr. Phillips was brought aboard to guide our GTL engineering operations. Mr. Phillips holds a Bachelor of Science in Industrial Engineering from and is designated as a Distinguished Alumnus of Texas A&M University.
Committees of the Board
On June 22, 2018, pursuant to the authority granted to our Board of Directors in Section 2.10 of Article Two of our bylaws, the Board of Directors created an executive committee (the “Executive Committee”). As of the date of this report, the designated directors comprising the Executive Committee include Ray Wright, Kent Harer, Paul Alfano and Ransom Jones. The Executive Committee may consider and review any and all such matters or issues it deems necessary coming before us and take such further lawful actions as it determines to be consistent with its responsibilities. Given our small size, with the exception of the Executive Committee, our entire Board of Directors participates in all of the considerations with respect to our audit, compensation and nomination deliberations.
The responsibilities of other committees now or to be adopted in the future are currently are fulfilled by our Board of Directors and all of our directors participate in such responsibilities, two of whom are “independent” as defined in the listing standards of the Nasdaq Stock Market, Inc., which states in part, that, “that an independent director must not be an officer or employee of the company or its subsidiaries or any other individual having a relationship that, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.”
Audit Committee
Our entire Board of Directors currently performs the functions of an audit committee, but no written charter governs the actions of our Board of Directors when performing the functions of what would generally be performed by an audit committee. Our Board of Directors approves the selection of our independent accountants and officers ismeets and interacts with the independent accountants to discuss issues related to any other director or officerfinancial reporting. In addition, our Board of Directors reviews the scope and results of the Company.audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. At the present time, Ransom Jones, our Chief Financial Officer and one of our directors, is considered to be our expert in financial and accounting matters.
Nomination Committee
Due to our size and the size of our Board of Directors, we do not require a separate nominating committee at this time. When evaluating director nominees, our directors consider the following factors:
● | The appropriate size of our Board of Directors; | |
● | The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of our Board of Directors; | |
● | Experience in political affairs; | |
● | Experience with accounting rules and practices; and | |
● | The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new members of our Board of Directors. |
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Our goal is to assemble a Board of Directors that brings together a variety of perspectives and skills derived from high-quality business and professional experience. In doing so, our Board of Directors will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no employeesstated minimum criteria for director nominees, although our Board of Directors may also consider such other factors as it may deem are in our best interests as well as the interests of our Shareholders. In addition, our Board of Directors identifies nominees by first evaluating the current members of our Board of Directors willing to continue in service. Current members of our Board of Directors with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of our Board of Directors does not executive officers, but whowish to continue in service or if our Board of Directors decides not to re-nominate a member for re-election, our Board of Directors then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of our Board of Directors are expectedpolled for suggestions as to make a significant contributionindividuals meeting the criteria described above. Our Board of Directors may also engage in research to our business. We intendidentify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to hire independent geologists, engineersretain a third-party search firm, if necessary. Our Board of Directors does not typically consider Shareholder nominees, because it believes that our current nomination process is sufficient to identify directors who serve our Shareholders’ best interests.
As approved by our Shareholders at a Special Shareholders meeting (“Special Shareholders Meeting”) held on December 11, 2019, we amended our Certificate of Formation (fka Articles of Incorporation) to change the voting requirements specifying that the vote required to approve certain actions before our Stockholders, including “fundamental actions,” as defined by Texas Business Organizations Code (the “TBOC”) Section 21.364, and excavation subcontractors on an“fundamental business transactions,” as needed basis.
www.UMED.comDelinquent Section 16(a) Reports
. Our address is: UMED Holdings, Inc., 8851 Camp Bowie West Blvd., Suite 240, Fort Worth, Texas 76116.
Based solely on the Section 16(a) reports received by us, the transaction report of Company transactions in our Common Stock supplied by our transfer agentTransfer Agent, and our shareholdersShareholders list as of MarchDecember 31, 2016, to the best of our knowledge all required directors, officers2019, there were four delinquent Section 16(a) reports (a Form 3 and greater than 9.99% percent shareholders complied with applicable filing requirements duringForm 5 for Paul Alfano, a director, and a Form 4 and Form 5 for Kevin Jones, a director) for the fiscal year ended December 31, 2015.
Communication with Directors
Shareholders and other interested parties may contact any of our directors by writing to them at Greenway Technologies, Inc. at 1521 N. Cooper Street, Suite 205, Arlington, TX 76011. Attention: Secretary.
Our Board of Directors has approved a process for handling letters received by us and addressed to any of our directors. Under that process, one of our officers reviews all such correspondence and regularly forwards to the directors a summary of all such correspondence, together with copies of all such correspondence that, in the opinion of such officer, deal with functions of our Board of Directors or committees thereof or that he otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by us that are addressed to members of the board and request copies of such correspondence.
Conflicts of Interest
With respect to transactions involving real or apparent conflicts of interest, we have adopted written policies and procedures, which require that the: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who were electedauthorize or approve the transaction prior to such authorization or approval; and hold office until their successors are elected(ii) the transaction be fair and qualified.reasonable to us at the time it is authorized or approved by our directors.
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Code of Ethics for Senior Executive officers are appointed by the BoardOfficers and Senior Financial Officers
We have adopted a written code of Directorsbusiness conduct and serve until their successors have been duly electedethics (our “Code of Ethics”), which applies to our principal executive officer, principal financial officer, principal accounting officer and qualified. Ransom Jonesall persons providing similar functions. Our Code of Ethics is designed to deter wrongdoing and Kevin Jones are brothers. Otherwise, there is no family relationship between anyto promote:
● | honest and ethical conduct; | |
● | full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements; | |
● | compliance with applicable laws, rules and regulations; | |
● | the prompt reporting violation of the code; and | |
● | Ongoing accountability for adherence to our Code of Ethics. |
A copy of our directors and executive officers.
Item 11. | Executive Compensation. |
Summary of Cash and Certain Other Compensation
At present, we have four executive officers, Messrs. Wright, Harer, R. Jones, and Phillips.
Summary Compensation Table
The following table sets forth the aggregate compensation paid for services rendered toour named executive officers for each of the Company during the last three fiscal years by the Named Executive Officers:
Officers Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equiy Incentive Plan Compensation ($) | Nonqualified deferred compensation earnings($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
Ray Wright (1) | 2018 | 180,000 | - | - | - | - | - | - | 180,000 | |||||||||||||||||||||||||||
2019 | 180,000 | - | - | - | - | - | - | 180,000 | ||||||||||||||||||||||||||||
Kent Harer (2) | 2019 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Ransom Jones (3) | 2018 | 120,000 | 35,000 | 25,000 | - | - | - | - | 180.000 | |||||||||||||||||||||||||||
2019 | 120,000 | 35,000 | - | - | - | - | - | 155.000 | ||||||||||||||||||||||||||||
Tom Phillips (4) | 2019 | 120,000 | - | 270,000 | - | - | - | - | 390,000 | |||||||||||||||||||||||||||
Patrick Six (5) | 2018 | 5,000 | - | - | - | - | - | - | 5,000 | |||||||||||||||||||||||||||
2019 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
John Olynick (6) | 2018 | 120,000 | 35,000 | 25,000 | - | - | - | - | 180,000 | |||||||||||||||||||||||||||
2019 | 75,084 | 35,000 | - | - | - | - | - | 110,084 |
Name and Position | Year | Salary ($) | Bonus($) | Compensation ($) | Total ($) | |||||||
Ransom Jones, Interim Chief Executive Officer, effective January 14, 2016, Chief Operating Officer, April 1, 2015 – January 14, 2016 | 2015 | 20,400 | - | 37,500 | (1) | 57,900 | ||||||
Kevin Bentley, Chief Executive Officer, resigned April 6, 2105 | 2015 | 0 | - | 743,750 | (2) | 743,750 | ||||||
2014 | 165,000 | (3) | - | 165,000 | ||||||||
2013 | 0 | (4) | - | 0 | ||||||||
Richard Halden, President | 2015 | 180,000 | (5) | - | 603,750 | (6) | 783,750 | |||||
resigned on January 14, 2016 | 2014 | 165,000 | (7) | - | 165,000 | |||||||
2013 | 0 | (8) | 0 | |||||||||
Randy Moseley, Chief Financial Officer | 2015 | 180,000 | (9) | - | 603,750 | (10) | 783,750 | |||||
and Principal Financial Officer | 2014 | 165,000 | (11) | - | 165,000 | |||||||
2013 | 0 | (12) | 0 |
(1) | ||
(2) | Mr. Harer was appointed interim President upon the resignation and departure of John Olynick in July 2019. Mr. Harer has not taken a salary or any other form of compensation since his appointment. Mr. Harer does not have an employment agreement and serves at the pleasure of our Board of Directors. | |
(3) | Mr. Jones was interim chief executive officer, effective January 14, 2016, and president from August 4, 2016, through April 24, 2017. On January 4, 2017, Mr. Jones received 3,500,000 shares of our Common Stock valued at $0.14 per share. On October 2, 2016, Mr. Jones received 375,000 shares of | |
agreement. | ||
(4) |
(5) | Mr. Six was elected as chief executive officer on April 24, 2017. Mr. Six resigned as President and CEO on May 10, 2018, and as a director on February 19, 2019, and was due no further compensation. | |
(6) | Mr. Olynick was hired as president on May 10, 2018 and received 250,000 shares of our Common Stock valued at $0.10 per share as a component of his | |
Stock awards during the year ended December 31, 2019 were made according to the aggregate date fair value computed in accordance with FASB ASC Topic 718, with such grants being valued as of the closing price of the Company’s stock on effective date of the agreements underlying such grants.
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding equity awards for three of our four named executive officers as of the end of our last completed fiscal year, December 31, 2019. Mr. Phillips was entitled to a no-cost grant of common stock options orequal to 4,500,000 shares of the Company’s Rule 144 restricted common stock, appreciation rights have been made since our inception.
Director Compensation
Currently, our directors receive no compensation for their services asparticipation on our board, board committees or other activities related to the Company. There are no plans by the directors since our inception. We have no standard arrangement pursuantpay retirement benefits to which our directors are to be compensated for their services in their capacity as directors except for the granting from time to time of incentive stock options. The board of directors may award special remuneration to any director undertaking any special services on behalfor executive officers.
Executive Compensation
Three of our company other than services ordinarily required ofnamed executives, Ray Wright, Ransom Jones and Tom Phillips have Employment Agreements. Kent Harer, who is a director. Other than indicated below,director and is currently serving as our interim President, does not have an employment agreement and receives no director received and/or accrued any compensation for his servicesmanagement roles and responsibilities. Mr. Harer has agreed to this arrangement until a new chief executive is hired by us. Each of the three current employment agreements automatically renew each calendar year, unless a party provides notice of non-renewal before sixty (6) days before each annual period’s end. In addition, each employment agreement provides for payment of the respective executive’s contracted remaining compensation for termination without cause. Mr. Jones was provided with 250,000 shares at the inception of his agreement, and he is due a bonus of $35,000 each year he is employed by us. Mr. Phillips received a no-cost grant of common stock equal to 4,500,000 shares of the Company’s Rule 144 restricted common stock, par value $.0001 per share, with such shares issued in February 2020. There were no changes to any of the named executives’ duties as a director, including committee participation and/or special assignments.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Securities Authorized for Issuance under Equity Compensation Plans
None.
Securities Beneficial Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forthpresents information regarding the beneficial ownership of all shares of our Common Stock as of information concerning the number of shares of common stock owned beneficially as of March 24, 2016 which was 98,811,192 shares, by: (i) each person (including any group) known by us to own more than five (5%) of any class of our voting securities, (ii) each of our directors and executive officers, and (iii) our officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
Name and Address | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | ||||||
Randy Moseley (3) | 35,567,574 | 17.50 | % | |||||
Richard Halden (4) | 32,677,721 | 16.07 | % | |||||
Ransom Jones | 375,000 | .18 | % | |||||
Craig Takacs | 3,157,563 | 1.55 | % | |||||
Kevin Jones (5) | 15,333,334 | 7.54 | % | |||||
Raymond Wright | 7,000,000 | 3.44 | % | |||||
D. Patrick Six (6) | 4,700,000 | 2.31 | % | |||||
as a group (7 persons) | 98,811,192 | 48.59 | % |
Beneficial Ownership Table | ||||||||
Directors and Named Executive Officers (14) | Shares of Common Stock Beneficially Owned (1) | |||||||
Number | Percent | |||||||
Paul Alfano(2) | 21,250,000 | 6.8 | % | |||||
Kent Harer (8) | 4,000,000 | 1.3 | % | |||||
Kevin Jones (4) | 22,265,142 | 7.2 | % | |||||
Ransom Jones (9) | 4,125,000 | 1.3 | % | |||||
Raymond Wright (7) | 17,500,000 | 5.6 | % | |||||
Michael Wykrent (10) | 10,000,000 | 3.2 | % | |||||
Thomas Phillips (11) | 5,350,000 | 1.7 | % | |||||
All current Directors and Named Executive Officers as a group (7 persons) (12) | 84,490,142 | 27.2 | % | |||||
John Olynick (13) | 250,000 | 0.1 | % | |||||
0.0 | % | |||||||
5% or Greater Stockholders | ||||||||
Paul Alfano (2) | 21,250,000 | 6.8 | % | |||||
Richard Halden (3) | 17,205,911 | 5.5 | % | |||||
Kevin Jones (4) | 22,265,142 | 7.2 | % | |||||
Randy Moseley (5) | 22,178,302 | 7.1 | % | |||||
D. Patrick Six (6) | 15,333,272 | 4.9 | % | |||||
Raymond Wright (7) | 17,500,000 | 5.6 | % |
1) | Applicable percentages are based on 310,807,400 shares of Common Stock outstanding as of the date of this report on Form 10-K. Beneficial ownership is determined by rules promulgated by the SEC and generally includes voting or investment power with respect to securities. Common Stock underlying options, warrants, and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days of year end are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, we believe that each of the individuals named in the table has sole voting and investment power with respect to the Common Stock indicated as beneficially owned by such individual. The table includes Common Stock and options, warrants, and convertible notes exercisable or convertible into Common Stock that are either vested or may vest within 60 days of year end. | |
2) | Paul Alfano. Mr. Alfano is an independent director and greater than 5% Shareholder. | |
3) | Richard Halden. Mr. Halden is a greater than 5% Shareholder. The total number of shares shown includes Common Stock Halden beneficially owns through various entities and through a spousal interest, as reported by Halden on his most recent Form 4 filed on July 27, 2015. At year-end 2019, Halden was also the beneficial owner of certain securities convertible into Common Stock, including: (a) 2,000,000, 3-year term warrants pursuant to a Severance and Release Agreement by and between the Company and Halden, dated February 1, 2017, since expired without conversion (see Exhibit 10.30 incorporated herein by reference), and (b) 2,083,333 shares pursuant to a Subordinated Convertible Promissory Note, dated December 20, 2017, by and between the Company and Tunstall Canyon Group, LLC, an entity controlled by Halden, filed as Exhibit 10.34 and incorporated herein by reference. | |
4) | Kevin Jones. Mr. Kevin Jones is a greater than 5% Shareholder and a director. Kevin Jones and Ransom Jones are brothers. Mr. K. Jones has sole voting and dispositive power with respect to 5,250,000 Shares. In addition, the amount of Common Stock beneficially owned by Mr. K. Jones includes: (a) 7,527,113 Shares held by Mabert, in which Mr. K. Jones has an ownership interest and for which he serves as a manager; (b) 8,500,000 Shares owned by Mr. K. Jones’s spouse, Ms. Christine Earley, in which Mr. K. Jones has a spousal interest; and (c) 1,867,843 Shares issuable to Mr. K. Jones pursuant to that certain Loan Agreement by and between Mabert and the Company, dated September 14, 2018, filed as Exhibit 10.49 to the Company’s Form 10-K/A, filed with the SEC on May 13, 2019. | |
5) | Randy Mosley. Mr. Mosely is a greater than 5% Shareholder, and former officer of the Company, having served as our chief financial officer from May 7, 2011 until November 11, 2016. | |
6) | D. Patrick Six. Mr. Six is a 5% Shareholder. Mr. Six also served as our president and a director, but resigned from those positions effective as of May 10, 2018, and February 19, 2019, respectively. | |
7) | Raymond Wright. Mr. Wright is a greater than 5% Shareholder, the chairman of our Board of Directors, and president of GIE our wholly owned subsidiary. | |
8) | Kent Harer. Mr. Harer is a director and our acting president, making him a named executive officer. The Common Stock beneficially owned by Mr. Harer are those shares immediately issuable upon Mr. Harer’s exercise of a Stock Purchase Warrant, dated January 8, 2018, by and between our Company and Mr. Harer, filed as Exhibit 10.37, and incorporated by reference herein. | |
9) | Ransom Jones. Mr. Ransom Jones is a director and our chief financial officer, secretary and treasurer, making him a named executive officer. Mr. Jones has sole voting and dispositive power with respect to 250,000 shares of Common Stock. In addition, the amount of Common Stock beneficially owned by Mr. Jones includes 3,875,000 shares owned by Mr. Jones’s spouse, Ms. Jan Jones, in which Mr. Jones has a spousal interest. Ransom Jones and Kevin Jones are brothers. | |
10) | Michael Wykrent. Mr. Wykrent is an independent director. | |
11) | Thomas Phillips. Mr. Phillips is Vice President of Operations, and receives more than $100,000 in annual compensation, making him a named executive officer. Mr. Phillips was also contractually entitled to an additional grant of 4,500,000 shares of our Common Stock, such stock being issued after 2019 year end. | |
12) | All current directors and named executive officers as a group. This ownership includes only the ownership of our current named executive officers and directors. | |
13) | John Olynick. Mr. Olynick served as our president from May 10, 2018, to July 19, 2019. | |
14) | Unless otherwise indicated, the address for each of these |
-34- | |
Other than as stated herein, there are no present arrangements or understandings, known to the Company,us, including any pledge by any person of the Company's securities, the operation of which may at a subsequent date result in a change in control of the Company.
● | The operation of which may at a subsequent date result in a change in control of the registrant; or | |
● | With respect to the election of directors or other matters. |
Item 13. | Certain Relationships and Related Transactions and Director Independence. |
Other than as stated herein, there are no other agreements with any of our officers and Related Transactions,directors.
After approval given during a properly called special meeting of the Board of Directors, on September 14, 2018, Mabert, which is owned and Director Independence.
Mr. Jones, his wife and Mabert have made advancesloaned a total $1,426,056 to the Company and four other Shareholders have loaned the balance of $605,000, pursuant to the Loan Agreement, through the year ending December 31, 2019. These loans are secured by the assets of our 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 Mabert on behalf of the lenders party to the Loan Agreement. 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 cash compensation for its efforts.
Mr. Jones, as the owner and managing member of Mabert, is also the managing and control member of OPMGE, a research and development venture in and to which the Company has a significant revenue member interest and has licensed its proprietary GTL technology and equipment. Due to Mr. Kevin Jones’ family relationship as the brother of Mr. Ransom Jones, our CFO, and his control position over Mabert and OPMGE, Mr. Jones is not considered an independent director.
Mr. Michael Wykrent, a director, made loans totaling $425,000 under the Mabert Loan Agreement to us prior to his being elected as a director of the Company. Mabert operates as an agent for various lenders, including Mr. Wykrent, and manages such loans on behalf of the various lenders under the Loan Agreement. Mr. Wykrent was elected as a non-executive director and we believe that Mr. Wykrent remains an independent director, despite having this lending relationship through Mabert, which, in the opinion of the Company’s Board of Directors, would not interfere with the exercise of his independent judgment in carrying out the responsibilities of a director.
Mr. Paul Alfano, a director, was contracted as a consultant by the Company in April 2018 prior to his being elected as a director of the Company, thereupon such consulting contract was terminated. In his consulting role, Mr. Alfano’s total fees never exceeded $120,000 for any prior period. We have accrued a total $94,038 for the fees and expenses that were remaining under his consulting agreement at the time Mr. Alfano was elected as a non-executive director. At the current time, there is no specific timetable for repayment of such accrued expenses and we believe that Mr. Alfano remains an independent director, despite having these accrued prior consulting expenses, which, in the opinion of the Company’s Board of Directors, would not interfere with the exercise of his independent judgment in carrying out the responsibilities of a director.
-35- |
Three directors, Kevin Harer, Ransom Jones and Kevin Jones made advances of $51,019 to us in the fourth quarter of 2019, in cash amounts of $383,878$25,000 and $715,070$25,000 respectively, and $1,019 in the form of a non-reimbursed payment for services. Although we expect to repay such advances during fiscal year 2020, actual repayment of such advances is subject to an indefinite timeframe due to our financial condition and circumstances, and each director recognizes that we may not be able to make such repayments on a timely basis.
Director Kevin Jones, through Mabert, acquired a non-operational GTL plant in Wharton, TX in July 2019, and contributed it form a joint venture with us in August 2019, which included a separate interest for one of our key employees, Tom Phillips, who owns a 10% revenue interest, in OPMGE. We agreed to contribute a limited license to our proprietary technology and equipment, and also agreed to share Phillips and other Company personnel with OPMGE, in order for it to complete third party engineering certification. While there are no salaried positions currently being provided by OPMGE, we have no assurance that a salaried position could be offered to Phillips, and that he could find such position better than his role as VP of Operation with us. Further, the years ended December 31, 2015substantial 10% revenue interest held by Phillips, allowing him to participate in any future profitability of OPMGE may also provide incentive for him to leave us. The loss of this key employee could cause unforeseen interruptions to our business until such time as a replacement engineer is found and 2014, respectively. The shareholders have electedhired by us.
Director Independence
Mr. Alfano and Mr. Wykrent serve as our two independent directors. We use the definition of “independent director” as defined in the listing standards of the Nasdaq Stock Market, Inc. Under this standard, an “independent director” is a person other than an executive officer or employee of a company or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In addition, the following persons shall not be considered independent:
● | A director who is, or at any time during the past three years was, employed by the Company; | |
● | A director who accepted or who has a family member who accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence, other than the following: (i) compensation for board or board committee service; (ii) compensation paid to a family member who is an employee (other than as an executive officer) of the issuer; or (iii) benefits under a tax-qualified retirement plan, or non-discretionary compensation; | |
● | A director who is a family member of an individual who is, or at any time during the past three years was, employed by the company as an executive officer; | |
● | A director who is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received, payments for property or services in the current or any of the past three fiscal years that exceed five percent of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in the company’s securities; or (ii) payments under non-discretionary charitable contribution matching programs; | |
● | A director of the issuer who is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the issuer serve on the compensation committee of such other entity; or | |
● | A director who is, or has a family member who is, a current partner of the company’s outside auditor, or was a partner or employee of the registrant’s outside auditor who worked on the company’s audit at any time during any of the past three years. |
Under these standards required to convert advancesan independent director, none of $314,517Mr. Harer, Mr. K. Jones, Mr. R. Jones, nor Mr. Wright qualify as independent directors.
We hope to add additional qualified independent members to our Board of Directors at a later date, depending upon our ability to reach and $1,527,180 to shares of class A common stock at market value ($.173 and $.228 per share) and received repayments of $122,976 and $0 during the years ended December 31, 2015 and 2014, respectively.
Item 14. | Principal Accounting Fees and Services. |
The following table presents fees for professional services rendered by itsSoles, Heyn & Company LLP (“Soles”) and Assurance Dimensions (“Assurance”), our independent auditors for the audit of the Company'sour financial statements for the years ended December 31, 20152019, and 2014:
2015 | 2014 | |||||||
Audit Fees | $ | 28,500 | $ | 34,000 | ||||
Audit Related Fees | $ | 0 | $ | 0 | ||||
Tax Fees | $ | 0 | $ | 0 | ||||
All Other Fees | $ | 0 | $ | 0 | ||||
Total | $ | 28,500 | $ | 34,000 |
2019 | 2018 | |||||||
Audit Fees | $ | 31,690 | $ | 38,021 | ||||
Audit Related Fees | -0- | -0- | ||||||
Tax Fees | -0- | -0- | ||||||
All Other Fees | -0- | -0- | ||||||
Total | $ | 31,690 | $ | 38,021 |
Audit Fees billed by Soles were for professional services rendered for auditing and reviewing the Company'saudit of our annual financial statements and review of our interim financial statements for the year ended December 31, 2018 and through March 31, 2019, as well as for consents andtheir assistance with and review of documents filed with the SecuritiesSEC. Due to the death of a name partner (and our engagement partner), Patrick Heyn, Soles could no longer perform our Company’s audit services, and Exchange Commission.
Pre-Approval Policy for Services of UMED HoldingsOur Independent Auditors
Our Board of Directors reviews theour Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K filings before their filing.we file them with the SEC. In addition, theour Board of Directors reviews the audit plans and anticipated fees for audit and tax work prior to the commencement of that work. All fees paid to the independent auditors are pre-approved by theour Board of Directors. These services may include audit services, audit-related services, tax services and other services.
-36- |
Item 15. | Exhibits, Financial Statement Schedules. |
(a) | All financial statements are included in Item 8 of this report. |
(b) | All financial statement schedules required to be filed by Item 8 of this report and the exhibits contained in this report are described in Item 8 of this report and are included as indexed in the appendix on page F-1, et seq. |
-37- |
-38- |
* Filed in Form 10 filed on August 28, 2013.
** Filed in Form 10 filed on November 12, 2013Previously filed.
-39- |
*** SIGNATURESFiled herewith
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in Houston, Texas.
GREENWAY TECHNOLOGIES, INC. | ||
Date: April 14, 2020. | ||
By | /s/ Kent Harer | |
Kent Harer, President | ||
By | ||
/s/ Ransom Jones | ||
Ransom Jones, Chief Financial Officer and | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
��
Signature | Title | Date | ||
/s/ | ||||
Director, |
April 14, | |||
KENT HARER | |||
/s/ Michael Wykrent | Director | April 14, 2020 | ||
MICHAEL WYKRENT | ||||
/s/ Ransom Jones | Director | April 14, 2020 | ||
RANSOM JONES | ||||
/s/ Kevin Jones | Director | April 14, 2020 | ||
KEVIN JONES | ||||
/s/ Paul Alfano | Director | April 14, 2020 | ||
PAUL ALFANO | ||||
/s/ Raymond Wright | Chairman, President of Greenway Innovative | April 14, 2020 | ||
RAYMOND WRIGHT | Energy, Inc. |
-40- |
INDEX TO FINANCIAL STATEMENTS
Greenway Technologies, Inc. and Subsidiaries
December 31, 2019 and 2018
Contents
Report of Independent Registered Public Accounting | ||
Consolidated Balance Sheets, December 31, 2019 and 2018 | F-2 | |
Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018 | F-3 | |
F-4 | ||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018 | F-5 | |
Notes to Consolidated Financial Statements | F-6 : F-21 |
F-1 |
To Thethe Board of Directors and shareholders
Stockholders of
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetssheet of UMED Holdings,Greenway Technologies, Inc. and its subsidiaries (the "Company")Company) as of December 31, 2015 and 20142019 and the related consolidated statements of operations, stockholders'stockholders’ deficit and cash flows for the yearsyear ended December 31, 20152019 and 2014. the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses for the year ended December 31, 2019. The Company had a net loss of $3,661,245, accumulated deficit of $30,479,829, net cash used in operating activities of $1,332,528, and had negative working capital of $6,364,485. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/ Assurance Dimensions |
We have served as the Company’s auditor since 2019.
Margate, Florida
April 14, 2020
F-1A |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Greenway Technologies, Inc. and Subsidiary
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheet of Greenway Technologies, Inc. and subsidiary (the Company) as of December 31, 2018 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2018 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financials have been prepared assuming the Company will continue as a going concern. As of December 31, 2018, the Company had accumulated losses of $26,818,584, has generated no profit, and may experiences losses in the near term. These factors and the need for additional financing in order for the Company to meet its business plan, raise substantial doubt about its ability to continue as a going concern. Management’s plan to continue as a going concern is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits included considerationaudit, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provide a reasonable basis for myour opinion.
/s/ Soles, Heyn, & Company, LLP |
We have served as the Company’s auditors since 2015.
Soles, Heyn & Company, LLP
West Palm Beach, Florida
April 18, 2019
F-1B |
Consolidated Balance Sheet
As of December 31, 20152019 and 2014 and the consolidated results of its operations and its cash flows for the years ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America.
December 31, | December 31, | |||||||
2015 | 2014 Restated | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash | $ | 0 | $ | 77,504 | ||||
Total Current Assets | 0 | 77,504 | ||||||
Fixed assets | ||||||||
Property & equipment | 4,015 | 88,703 | ||||||
Less depreciation | 3,271 | 14,061 | ||||||
744 | 74,642 | |||||||
Other Assets | ||||||||
Mine properties, less impairment allowance of $100,000 in 2015 | 0 | 0 | ||||||
Investments, less impairment allowance of $90,000 in 2015 | 0 | 0 | ||||||
Assets related to discontinued operations | 0 | 1,757,643 | ||||||
Total Other Assets | 0 | 1,757.643 | ||||||
Total Assets | $ | 744 | $ | 1,909,789 | ||||
Liabilities & Stockholders' Deficit | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 85,545 | $ | 34,986 | ||||
Advances from stockholders | 102,214 | 181,272 | ||||||
Accrued management fees | 1,793,617 | 1,822,677 | ||||||
Accrued expenses | 229,763 | 153,592 | ||||||
Convertible note payable, net of discounts of $0 and $110,800) | 0 | 47,200 | ||||||
Derivative liability-warrants | 60,164 | 239,789 | ||||||
Liabilities related to discontinued operations | 0 | 1,860,518 | ||||||
Total Current Liabilities | 2,271,303 | 4,340,034 | ||||||
Total Liabilities | 2,271,303 | 4,340,034 | ||||||
Commitments and Contingencies | ||||||||
Stockholders' Deficit | ||||||||
Class B stock, 20,000,000 shares authorized, par value $0.0001, | ||||||||
15,126,938 issued and outstanding at December 31, 2015 and | ||||||||
15,738,894 at December 31, 2014 | 1,513 | 1,574 | ||||||
Class A stock 300,000,000 shares authorized, par value $0.0001, | ||||||||
183,882,132 and 145,559,835 issued and outstanding at | ||||||||
December 31, 2015 and December 31, 2014, respectively | 18,389 | 14,557 | ||||||
Additional paid-in capital | 10,167,670 | 5,983,053 | ||||||
Accumulated deficit | (12,458,131 | ) | (8,429,429 | ) | ||||
Total Stockholders' Deficit | (2,270,559 | ) | (2,430,245 | ) | ||||
Total Liabilities & Stockholders' Deficit | $ | 744 | $ | 1,909,789 |
2015 | 2014 Restated | |||||||
Loss from continuing operations | ||||||||
General and administrative | $ | 3,829,466 | $ | 2,241,076 | ||||
Research and development | 766,726 | 218,000 | ||||||
Depreciation | 396 | 396 | ||||||
Total Expense | 4,596,588 | 2,459,472 | ||||||
Operating loss | (4,596,588 | ) | (2,459,472 | ) | ||||
Other income (expenses) | ||||||||
Debt forgiveness | 518,300 | 0 | ||||||
Write off Logistix software | (73,500 | ) | 0 | |||||
Impairment on investment assets | 0 | (190,000 | ) | |||||
Gain (Loss) on change in fair value of derivatives | 139,397 | (91,395 | ) | |||||
Interest expense | (218,105 | ) | (928,774 | ) | ||||
Total other expenses | 366,092 | (1,210,169 | ) | |||||
Operating loss from continuing operations | (4,230,496 | ) | (3,669,641 | ) | ||||
Discontinued operations, net of tax (loss) from discontinued operations | (561,412 | ) | (714,834 | ) | ||||
Gain on disposal of discontinued operations | 763,206 | 0 | ||||||
Total gain (loss) discontinued operations | 201,794 | (714,834 | ) | |||||
Loss before income taxes | (4,028,702 | ) | (4,384,475 | ) | ||||
Provision for income taxes | 0 | 0 | ||||||
Net loss | $ | (4,028,702 | ) | $ | (4,384,475 | ) | ||
Basic loss per share; | ||||||||
Operating loss | $ | (0.02 | ) | $ | (0.03 | ) | ||
Loss from discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) | ||
Net loss per share | $ | (0.02 | ) | $ | (0.03 | ) | ||
Weighted average shares | ||||||||
Outstanding; | ||||||||
Basic and diluted | 165,860,150 | 138,442,759 | ||||||
Stock | ||||||||||||||||||||||||||||
Class B Number of Shares | Par Value $0.0001 Amount | Class A Number of Shares | Par Value $0.0001 Amount | Additional Paid-In- Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
Balance December 31, 2013 | 15,798,894 | $ | 1,580 | 128,911,568 | $ | 12,892 | $ | 2,818,782 | $ | (4,044,954 | ) | $ | (1,211,700 | ) | ||||||||||||||
Sale of common stock | 2,310,118 | 231 | 336,269 | 336,500 | ||||||||||||||||||||||||
Conv of class B | ||||||||||||||||||||||||||||
Stock to class A common | (60,000 | ) | (6 | ) | 600,000 | 60 | (54 | ) | - | |||||||||||||||||||
Conv shareholders' advances to common stock | 6,703,915 | 670 | 1,526,509 | 1,527,179 | ||||||||||||||||||||||||
Shares issued for services | 7,034,234 | 704 | 1,301,547 | 1,302,251 | ||||||||||||||||||||||||
Net loss | (4,384,475 | ) | (4,384,475 | ) | ||||||||||||||||||||||||
Balance December 31, 2014, Restated | 15,738,894 | $ | 1,574 | 145,559,835 | $ | 14,557 | $ | 5,983,053 | $ | (8,429,429 | ) | $ | (2,430,245 | ) | ||||||||||||||
Sale of common stock | 10,915,101 | 1,091 | 1,081,502 | 1,082,593 | ||||||||||||||||||||||||
Class B common converted To class A common | (611,956 | ) | (61 | ) | 9,179,340 | 918 | (857 | ) | - | |||||||||||||||||||
Conv shareholders' advances to common stock | 1,817,746 | 182 | 314,335 | 314,517 | ||||||||||||||||||||||||
Shares issued for services | 16,410,110 | 1,641 | 2,403,087 | 2,404,728 | ||||||||||||||||||||||||
Warrants issued for services | 386,549 | 386,549 | ||||||||||||||||||||||||||
Net loss | (4,028,702 | ) | (4,028,702 | ) | ||||||||||||||||||||||||
Balance | ||||||||||||||||||||||||||||
December 31, 2015 | 15,126,938 | $ | 1,513 | 183,882,132 | $ | 18,389 | $ | 10,167,670 | $ | (12,458,131 | ) | $ | (2,270,559 | ) |
2015 | 2014 Restated | |||||||
Cash Flows from Operating Activities | ||||||||
Net Loss from Operations | $ | (4,230,496 | ) | $ | (3,669,641 | ) | ||
Adjustments to reconcile net loss to net cash used in | ||||||||
operating activities: | ||||||||
Depreciation | 398 | 395 | ||||||
Stock issued for services | 2,404,729 | 1,302,251 | ||||||
Interest and amortization of debt discounts | 102,700 | 64,836 | ||||||
Debt forgiveness | (518,300 | ) | 0 | |||||
Impairment provision on assets | 0 | 190,000 | ||||||
Warrants | 386,549 | 0 | ||||||
Debt issue costs amortized | 0 | 12,125 | ||||||
Write off of Logistix software | 73,500 | 0 | ||||||
Gain (loss) change in fair value of derivatives | (139,397 | ) | 91,395 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts payable | 50,559 | (19,819 | ) | |||||
Accrued management fees | 489,241 | 493,850 | ||||||
Derivative liability | 0 | 239,789 | ||||||
Accrued expenses | 76,171 | 22,092 | ||||||
Net Cash Used in Operating Activities | (1,304,347 | ) | (1,272,727 | ) | ||||
Cash Flows from Investing Activities | 0 | 0 | ||||||
Cash Flows from Financing Activities | ||||||||
Advances from shareholders converted to common stock | 314,517 | 1,527,180 | ||||||
Advances from shareholders | (79,058 | ) | 54,869 | |||||
Decrease in notes payable | 0 | (30,000 | ) | |||||
Decrease in convertible note payable | (47,200 | ) | 47,200 | |||||
Proceeds from sale of common stock | 1,082,593 | 336,500 | ||||||
Net Cash Provided by Financing Activities | 1,270,852 | 1,935,749 | ||||||
Cash Used in Discontinued Operations | (44,009 | ) | (585,613 | ) | ||||
Net (Decrease) Increase in Cash | (77,504 | ) | 77,409 | |||||
Cash Beginning of Period | 77,504 | 95 | ||||||
Cash End of Period | $ | 0 | $ | 77,504 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash Paid during the period for interest | $ | 69,297 | $ | 49,009 | ||||
Cash Paid during the period for taxes | $ | 0 | $ | 0 | ||||
Conversion of class B common stock to class A common stock | $ | 918 | $ | 0 |
December 31, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash | $ | 16,043 | $ | 73,211 | ||||
Prepaid expenses | 25,000 | - | ||||||
Receivable - related party | 387,847 | - | ||||||
Total Current Assets | 428,890 | 73,211 | ||||||
Property & equipment, net | - | - | ||||||
Total other assets, net of reserve | - | 15,000 | ||||||
Total Assets | $ | 428,890 | $ | 88,211 | ||||
Liabilities & Stockholders’ Deficit | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 1,032,680 | $ | 738,845 | ||||
Advances - related parties | 51,019 | 1,100 | ||||||
Accrued severance expense | 1,301,964 | 2,032,102 | ||||||
Accrued expenses | 641,518 | 734,833 | ||||||
Accrued expenses - related parties | 1,369,389 | 118,334 | ||||||
Accrued interest payable (includes related parties interest of $188,267) | 256,962 | - | ||||||
Notes payable and convertible notes payable | 216,667 | 410,667 | ||||||
Notes payable - related parties (Net of debt discount of $107,880 and $90,619 respectively) | 1,923,176 | 638,250 | ||||||
Derivative liability – convertible notes | - | 103,476 | ||||||
Total Current Liabilities | 6,793,375 | 4,777,607 | ||||||
Long Term Liabilities | ||||||||
Notes Payable - Southwest Capital | 525,000 | - | ||||||
Total Long Term Liabilities | 525,000 | - | ||||||
Total Liabilities | $ | 7,318,375 | $ | 4,777,607 | ||||
Commitments and contingencies (Note 11) | ||||||||
Stockholders’ Deficit | ||||||||
Common stock 500,000,000 shares authorized, par value $0.0001, 296,648,677 and 286,703,915 outstanding at December 31, 2019 and 2018, respectively. Class B shares eliminated by vote at shareholders meeting on December 11, 2019. | $ | 30,153 | $ | 29,101 | ||||
Additional paid-in capital | 22,710,632 | 22,100,087 | ||||||
Common stock to be issued | 857,227 | - | ||||||
Subscription Receivable - Warrants | (7,668 | ) | - | |||||
Accumulated deficit | (30,479,829 | ) | (26,818,584 | ) | ||||
Total Stockholders’ Deficit | (6,889,485 | ) | (4,689,396 | ) | ||||
Total Liabilities & Stockholders’ Deficit | $ | 428,890 | $ | 88,211 |
The accompanying notes are an integral part of these consolidated financial statements
F-2 |
Consolidated Statements of Operations
For the years ended December 31, 2019 and 2018
For the Years Ended December 31, | ||||||||
2019 | 2018 | |||||||
Revenues | $ | - | $ | - | ||||
Expenses | ||||||||
General and administrative | 1,988,111 | 2,255,503 | ||||||
Research and development | 441,320 | 630,518 | ||||||
Total Expense | 2,429,431 | 2,886,021 | ||||||
Operating loss | (2,429,431 | ) | (2,886,021 | ) | ||||
Other income / (expense) | ||||||||
Loss on change in fair value of derivative | (64,899 | ) | (34,500 | ) | ||||
Interest expense | (443,760 | ) | (126,461 | ) | ||||
Settlement gain / (expense) - loan agreement | 39,220 | (120,000 | ) | |||||
Net loss on settlement related to legal matters | (765,000 | ) | (28,000 | ) | ||||
Other Miscellaneous Income | 2,625 | - | ||||||
Total other income / (expense) | (1,231,814 | ) | (308,961 | ) | ||||
Loss before income taxes | (3,661,245 | ) | (3,194,982 | ) | ||||
Provision for income taxes | - | - | ||||||
Net loss | $ | (3,661,245 | ) | $ | (3,194,982 | ) | ||
Net loss per share | ||||||||
Basic and diluted net loss per shares | $ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average shares | ||||||||
Outstanding | ||||||||
Basic and diluted | 291,502,726 | 285,638,699 |
The accompanying notes are an integral part of these consolidated financial statements.
F-3 |
Consolidated Statements of Stockholders’ Deficit
For the years ended December 31, 2019 and 2018
Year ended December 31, 2019 | ||||||||||||||||||||||||||||
Common Stock, par value $0.0001 | Additional | Common | ||||||||||||||||||||||||||
Number of shares | Amount | paid-in capital | Stock to be Issued | Subscription Receivable | Accumulated deficit | Total | ||||||||||||||||||||||
Balance, December 31, 2018 | 286,703,915 | $ | 29,101 | $ | 22,100,087 | $ | - | $ | - | $ | (26,818,584 | ) | $ | (4,689,396 | ) | |||||||||||||
Shares issued for Warrant conversions | 766,667 | 76 | 7,592 | - | (7,668 | ) | - | - | ||||||||||||||||||||
Adjustment for incorrectly reported shares | (581,905 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Shares issued for Promissory Note Fees | 810,000 | 81 | 43,848 | - | - | - | 43,929 | |||||||||||||||||||||
Shares to be issued for Promissory Note Fees | - | - | - | 124,852 | - | - | 124,852 | |||||||||||||||||||||
Shares to be issued for Loan Conversion | - | - | - | 312,375 | - | - | 312,375 | |||||||||||||||||||||
Shares to be issued for stock-based compensation | - | - | - | 420,000 | - | 420,000 | ||||||||||||||||||||||
Shares issued in Legal Settlements | 2,500,000 | 250 | 199,750 | - | - | - | 200,000 | |||||||||||||||||||||
Shares issued for Private Placement | 6,450,000 | 645 | 359,355 | - | - | - | 360,000 | |||||||||||||||||||||
Net loss for the year ended December 31, 2019 | (3,661,245 | ) | (3,661,245 | ) | ||||||||||||||||||||||||
Balance, December 31, 2019 | 296,648,677 | $ | 30,153 | $ | 22,710,632 | $ | 857,227 | $ | (7,668 | ) | $ | (30,479,829 | ) | $ | (6,889,485 | ) |
Year ended December 31, 2018 | ||||||||||||||||||||||||||||
Common Stock, par value $0.0001 | Additional | Common | ||||||||||||||||||||||||||
Number of shares | Amount | paid-in capital | Stock to be Issued | Subscription Receivable | Accumulated deficit | Total | ||||||||||||||||||||||
Balance, December 31, 2017 | 287,681,826 | $ | 28,771 | $ | 20,782,630 | $ | - | $ | - | $ | (23,623,602 | ) | $ | (2,812,201 | ) | |||||||||||||
Shares issued from stock sales to accredited investors | 5,655,253 | 983 | 601,517 | - | - | - | 602,500 | |||||||||||||||||||||
Shares issued to settle shareholder obligations | 3,000,000 | 300 | 329,700 | - | - | - | 330,000 | |||||||||||||||||||||
Shares returned and cancelled for settlement | (11,733,164 | ) | (1,163 | ) | 1,163 | - | - | - | - | |||||||||||||||||||
Shares issued for services | 500,000 | 50 | 49,950 | - | - | 50,000 | ||||||||||||||||||||||
Shares issued to settle shareholder disputes | 1,600,000 | 160 | 207,840 | - | - | - | 208,000 | |||||||||||||||||||||
Equity features embedded in debt issued | - | - | 127,287 | - | - | - | 127,287 | |||||||||||||||||||||
Net loss for the year ended December 31, 2018 | (3,194,982 | ) | (3,194,982 | ) | ||||||||||||||||||||||||
Balance, December 31, 2018 | 286,703,915 | $ | 29,101 | $ | 22,100,087 | $ | - | $ | - | $ | (26,818,584 | ) | $ | (4,689,396 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F-4 |
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018
Year Ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (3,661,245 | ) | $ | (3,194,982 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Change in fair value of derivatives | 64,899 | 34,500 | ||||||
Amortization of debt discount | 151,521 | 81,833 | ||||||
Net loss on legal settlements, net of cash payments | 725,000 | 28,000 | ||||||
Accrued management fees | - | 365,500 | ||||||
Stock based compensation | 420,000 | 50,000 | ||||||
Gain in settlement of convertible note | (39,220 | ) | ||||||
Bad debt expense | 15,000 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Other Assets | - | 5,000 | ||||||
Prepaid expense | (25,000 | ) | 157,500 | |||||
Accrued expenses | 722,684 | 404,407 | ||||||
Accounts payable | 293,833 | 778,806 | ||||||
Net Cash Used in Operating Activities | (1,332,528 | ) | (1,289,436 | ) | ||||
Cash flows from investing activities: | ||||||||
Receivable - related parties | (387,847 | ) | - | |||||
Net Cash Used in Investing Activities | (387,847 | ) | - | |||||
Cash Flows from Financing Activities | ||||||||
Repayment of shareholder advances | - | (51,740 | ) | |||||
Proceeds from Notes Payable - related parties | 1,302,188 | 728,869 | ||||||
Payments on other notes payable | (50,000 | ) | (8,500 | ) | ||||
Proceeds from sale of common stock | 360,000 | 602,500 | ||||||
Stockholder advances | 51,019 | - | ||||||
Net Cash Provided by Financing Activities | 1,663,207 | 1,271,129 | ||||||
Net (Decrease) Increase in Cash | (57,168 | ) | (18,307 | ) | ||||
Cash Beginning of Year | 73,211 | 91,518 | ||||||
Cash End of Year | $ | 16,043 | $ | 73,211 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash Paid during the period for interest | $ | 46,452 | $ | 789 | ||||
Cash Paid during the period for taxes | $ | - | $ | - | ||||
Non-Cash investing and financing activities | ||||||||
Shares issued to settle shareholder obligations | $ | - | $ | 330,000 | ||||
Subscription receivables - warrants | $ | (7,668 | ) | $ | - | |||
Shares issued for promissory note fees | $ | 168,781 | $ | - | ||||
Shares issued for loan conversion (fair value $312,375) | $ | 183,220 | $ | - | ||||
Equity features (warrants) embedded in debt issued | $ | - | $ | 90,620 | ||||
Shares issued for settlement of accrued legal settlements | $ | 200,000 | $ | 208,000 |
The accompanying notes are an integral part of these consolidated financial statements.
F-5 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
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-ReformerTM refractory 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 gasoline, 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 a proprietary technology to convert natural gas into synthesis gas (“syngas”). Based on its breakthrough process called Fractional Thermal Oxidation™ (“FTO”), the Company believes that the G-Reformer, combined with conventional Fischer-Tropsch (“FT”) processes, offers an economical and scalable method to converting 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.
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
Principles of Consolidation
The accompanying consolidated financial statements include the financial statements of UMEDGreenway and its wholly-ownedwholly owned subsidiaries. The Company's investmentThere are no assets, liabilities or operations in Jet Regulators is accounted for at cost due to its lack of significant influence.the Universal Media Corporation and Logistix Technology Systems subsidiaries identified below. All significant inter-company accountsintercompany transactions and transactions werebalances have been eliminated in consolidation.
The accompanying consolidated financial statements include the accounts of the following entities:
Name of Entity | % | Entity | Incorporation | Relationship | ||||||||||||
Corporation | Texas | Parent | ||||||||||||||
| ||||||||||||||||
Universal Media Corporation | 100 | % | Corporation | Wyoming | Subsidiary | |||||||||||
Greenway Innovative Energy, Inc. | 100 | % | Corporation | Nevada | Subsidiary | |||||||||||
Logistix Technology Systems, Inc. | 100 | % | Corporation | Texas | Subsidiary |
F-6 |
F - 6
The accompanying consolidated financial statements to this Annual Report on Form 10-K 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, the Company sustained a loss of $4 million forDecember 31, 2019, we have an accumulated deficit of $30,479,829. For the year ended December 31, 20152019, we incurred a net loss of $3,661,245 and hasused $1,332,528 in net cash for operating activities. In addition, we had a deficitworking capital deficiency of $12.5 million at$6,364,485 as of December 31, 2015.2019. 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.
The accompanying consolidated financial statements do not include any adjustmentadjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.
Reclassification
Certain amounts for the current year endedending December 31, 2014,2019 have been reclassified and are now shown in their own line descriptions on the Company (through procedures performed by its independent auditors) determined that it had failedbalance sheet as compared to the prior year, to properly value shares issuedreflect the balances in each category. This includes the reclassification of certain Accrued management fees in 2018 reclassified to Accrued expenses-related parties, Accounts payable and Accrued interest payable for services and shareholder conversions and properly identify and value derivatives related to a convertible note with associated warrants. As the result of this error, we are restating our financial statements ("The Restatement") and associated disclosures to include the cost associated with the shares issued and the derivatives associated with the convertible note and warrants. The error resulted in the understatement of non-cash expenses and a corresponding understatement of net loss by $1,699,129, for the year ended December 31, 2014.
Balance Sheet Accounts | As Previously Stated | Reclassify Mamaki | Correction of Derivative and Stock Valuations | As Restated | ||||||||||||
Cash | $ | 82.400 | $ | (4,896 | ) | $ | 77,504 | |||||||||
Accounts receivable | 780 | (780 | ) | 0 | ||||||||||||
Prepaid expenses | 32,700 | (32,700 | ) | 0 | ||||||||||||
Land | 150,000 | (150,000 | ) | 0 | ||||||||||||
Buildings | 871,842 | (871,842 | ) | 0 | ||||||||||||
Equipment | 1,084,755 | (996,052 | ) | 88,703 | ||||||||||||
Accumulated depreciation | (312,946 | ) | 298,885 | (14,061 | ) | |||||||||||
Mine Properties | 100,000 | (100,000 | ) | 0 | ||||||||||||
Investments | 90,000 | (90,000 | ) | 0 | ||||||||||||
Debt issue costs | 55,427 | (55,427 | ) | 0 | ||||||||||||
Assets related to discontinued operations | 0 | 1,757,643 | 1,757,643 | |||||||||||||
Total | $ | 2,155,214 | $ | 0 | $ | (233,302 | ) | $ | 1,909,789 | |||||||
Accounts payable | $ | 70,568 | $ | (35,582 | ) | $ | 34,986 | |||||||||
Advances from shareholders | 181,272 | 181,272 | ||||||||||||||
Accrued expenses | 733,316 | (579,725 | ) | 153,591 | ||||||||||||
Convertible note payable, net | 136,801 | (89,601 | ) | 47,200 | ||||||||||||
Derivative liability | 0 | 239,789 | 239,789 | |||||||||||||
Term notes | 1,245,211 | (1,245,211 | ) | 0 | ||||||||||||
Liabilities related to discontinued operations | 0 | 1,860,518 | 1,860,518 | |||||||||||||
Total | $ | 4,189,845 | $ | 0 | $ | 150,189 | $ | 4,340,034 | ||||||||
Class B common | $ | 1,574 | $ | 0 | $ | 0 | $ | 1,574 | ||||||||
Class A common | 14,557 | 0 | 0 | 14,557 | ||||||||||||
Additional paid-in-capital | 4,679,538 | 0 | 1,303,515 | 5,983,53 | ||||||||||||
Accumulated deficit | (6,730,300 | ) | 0 | (1,699,129 | ) | (8,429,429 | ) | |||||||||
Total | $ | 2,034,631 | ) | $ | 0 | $ | (383,489 | ) | (2,418,120 | ) |
Statement of Operations | As Previously Stated | Mamaki Reclassification | Correction of Derivative and Stock Valuations | As Restated | ||||||||||||
Sales | $ | 24,581 | $ | (24,581 | ) | 0 | $ | 0 | ||||||||
Cost of sales | 54,696 | (54,696 | ) | 0 | 0 | |||||||||||
Gross profit | (30,115 | ) | (30,115 | ) | 0 | 0 | ||||||||||
Expenses | ||||||||||||||||
General and administrative | 2,092,746 | (415,009 | ) | 563,339 | 2,241,076 | |||||||||||
Research and development | 218,000 | 0 | 0 | 218,000 | ||||||||||||
Depreciation | 119,350 | (118,954 | ) | 0 | 396 | |||||||||||
2,430,096 | (533,963 | ) | 563,339 | 2,459,472 | ||||||||||||
Operating loss Other expenses | (2,460,211 | ) | (564,078 | ) | (563,339 | ) | (2,459,472 | ) | ||||||||
Impairment on investments | 0 | 0 | (190,000 | ) | (190,000 | ) | ||||||||||
Loss on derivative | 0 | 0 | (91,395 | ) | (91,395 | ) | ||||||||||
Interest expense | (225,135 | ) | (150,756 | ) | (842,270 | ) | (928,774 | ) | ||||||||
Operating loss from continuing operations | (2,685,346 | ) | (714,834 | ) | (1,687,004 | ) | (3,669,641 | ) | ||||||||
Loss from discontinued operations | 0 | (714,834 | ) | 0 | (714,834 | ) | ||||||||||
Loss before income taxes | (2,685,346 | ) | 0 | (1,687,004 | ) | (4,384,475 | ) | |||||||||
Provision for income taxes | 0 | 0 | 0 | 0 | ||||||||||||
Net loss | $ | (2,685,346 | ) | $ | (714,834 | ) | (1,687,004 | ) | $ | (4,384,475 | ) | |||||
Basic loss per share | ||||||||||||||||
Operating loss | $ | (0.03 | ) | |||||||||||||
Loss from discontinued operations | $ | (0.00 | ) | |||||||||||||
Statement of Cash Flows Accounts | As Previously Stated | Mamaki Reclassification | Correction of Derivative and Stock Valuations | As Restated | ||||||||||||
Net loss from operations | $ | (2,685,346 | ) | $ | (714,834 | ) | $ | (269,461 | ) | $ | (3,669,641 | ) | ||||
Depreciation | 119,350 | (118,955 | ) | 0 | 395 | |||||||||||
Interest and amortization of debt discounts | 0 | 64,836 | 64,836 | |||||||||||||
Stock issued for services | 738,842 | 0 | 563,409 | 1,302,251 | ||||||||||||
Impairment provisions | 0 | 0 | 190,000 | 19,000 | ||||||||||||
Warrants | 89,568 | 0 | (89,568 | ) | 0 | |||||||||||
Debt issue costs amortized | 0 | 0 | 12,125 | 12,125 | ||||||||||||
Accounts receivable | 900 | (900 | ) | 0 | 0 | |||||||||||
Prepaid expenses | 21,149 | (21,149 | ) | 0 | 0 | |||||||||||
Accounts payable | (9,287 | ) | (10,532 | ) | 0 | (19,819 | ) | |||||||||
Accrued management fees | 493,851 | 0 | 0 | 493,851 | ||||||||||||
Derivative liability | 0 | 0 | 239,789 | 239,789 | ||||||||||||
Accrued expenses | 262,332 | (240,240 | ) | 22,092 | ||||||||||||
Net Cash Provided by Operations | (968,641 | ) | 323,056 | 1,081,812 | (1,455,517 | ) | ||||||||||
Advances and conversions from shareholders | 729,029 | 0 | 798,151 | 1,582,049 | ||||||||||||
Proceeds from convertible note | 136,801 | 0 | (89,601 | ) | 47,200 | |||||||||||
Decrease in notes payable | (120,393 | ) | 90,393 | 0 | (30,000 | ) | ||||||||||
Proceeds from sale of common stock | 336,500 | 0 | 0 | 336,500 | ||||||||||||
Net Cash Provided by Financing | 1,049,855 | 90,393 | 157,859 | 1,935,749 | ||||||||||||
Cash used in discontinued operations | (402,823 | ) | (402,823 | ) | ||||||||||||
Net Increase in Cash | $ | 81,214 | $ | (3,805 | ) | $ | 77,409 |
NOTE 43 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied in the presentation of the 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 as follows.
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,Property, Plant and Equipment."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. Due the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resourcesThere were no long-lived assets or impairment charges for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014. 2019.
Revenue Recognition
The CompanyFASB 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 continuedepict the transfer of promised goods or services to paycustomers in an amount that reflects the annual renewal fees of $11,160 based on obtaining encouraging results from samples on surface material. Dueconsideration to reduced growth expectations andwhich the Company not receiving any revenues from its ownership in Jet Tech described in Note 7, we recognized an impairment charge of $90,000 during the year ended December 31, 2014.
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 planscontributed a limited license to recognizeuse 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 accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition ("ASC 605-10") which requiresOPMGE, 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 four basic criteria must be met before revenue can be recognized: (1) persuasive evidencethe Company does not control OPMGE. The Company accounts for its interest in OPMGE via the equity method of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided foraccounting. At December 31, 2019, there was no change in the same periodinvestment cost of $0. At December 31, 2019, OPMGE had no material activity as of such date. As described in Note 9, the Company maintains a Related Party receivable with OPMGE for $387,847 related sales are recorded.to our advancing capital for certain of its capital expenditures. The Company expects to fully recover the receivable once OPMGE operations ramp up in 2020.
F-7 |
Multiple-Element Arraignments ("ASC 605-25"). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
The preparation of theconsolidated financial statements in conformity with accounting principles generally accepted in the United StatesU.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 consolidated financial statements and the reported amountamounts of revenuerevenues and expenses during the reportedreporting period. Such estimates include allowance for collectible receivables, derivative liability valuations and deferred tax valuation allowances. Actual results could differ materially from thesuch estimates.
Cash and Cash Equivalent
The Company considers all highly liquid investments purchased with an original maturity of three monthsthree-months or less to be cash equivalents. Unless otherwise indicated, all references to “dollars” in this Form 10-K are to U.S. dollars. There were no cash equivalents at December 31, 2015 and 2014, respectively.
Extractive Activities-Mining. Costs of acquiring mine properties are capitalized by project area upon purchase of the associated claims. Mine properties are periodically assessed for impairment of value and any diminution in value. The Company had 1,440 acres of placer mining claims at December 31, 2015, which were acquired in December 2010 in exchange for 5,066,000 shares of common stock valued at $100,000. Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.
The Company accounts for income taxes in accordance with FASB ASC 740, "Income“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.Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise'senterprise’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-yearstax years, subject to IRS examination include 20092014 – 2014.
F - 10
For the year ended December 2019, the basic loss per share was computed by dividing net loss available to common shareholders by the weighted average number of common shares issued and outstanding. Shares issuable upon the exercise of warrants (10,857,737), shares convertible for debt (2,083,333) and shares outstanding but not yet issued (13,000,986) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive.
For the year ended December 2018, 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 (5,112,953)(17,265,893) have been excluded as a common stock equivalent in the diluted loss per share because their effect iswould be anti-dilutive.
Derivative Instruments
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815,Derivatives and Hedging ("(“ASC 815"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.
F-8 |
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 December 31, 2015 and 2014.
Level 1: Observable1 – 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 active markets;
Level 3: Unobservable3 – Valuation based on unobservable inputs in which there isthat are supported by little or no market data, which requiresactivity, therefore requiring management’s best estimate of what market participants would use as fair value.
The following table represents the reporting entity to develop its ownCompany’s assets and liabilities by level measured at fair value on a recurring basis at December 31, 2019 and 2018:
Description | Level 1 | Level 2 | Level 3 | |||||||||
2019 Derivative Liabilities | $ | 0 | $ | 0 | $ | 0 | ||||||
2018 Derivative Liabilities | $ | 0 | $ | 0 | $ | 103,476 |
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
All gains and losses on assets and liabilities measured at level 3.
The change in the notes payable at fair value for the year ended December 31, 2019, is as follows:
Fair Value | Change in | Gain | Fair Value | |||||||||||||||||
January 1, 2019 | Fair Value | on Settlement | Conversions | December 31, 2019 | ||||||||||||||||
Derivative Liabilities | $ | (103,476 | ) | $ | (64,899 | ) | $ | 39,220 | $ | 129,155 | $ | - |
The change in the notes payable at fair value for the year ended December 31, 2018, is as follows:
Fair Value | Change in | New | Fair Value | |||||||||||||||||
January 1, 2018 | Fair Value | Convertible Notes | Conversions | December 31, 2018 | ||||||||||||||||
Derivative Liabilities | $ | (105,643 | ) | $ | (2,167 | ) | $ | 0 | $ | 0 | $ | 103,476 |
Stock Based Compensation
The Company follows Accounting Standards Codification subtopic 718-10,Compensation (" (“ASC 718-10"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.
F-9 |
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.
F - 11
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10,Research and Development (" (“ASC 730-10"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 $766,726$441,320 and $218,000$630,518 during the years ended December 31, 20152019 and 2014,2018, respectively.
Issuance of Common Stock
The issuance of common stock for other than cash is recorded by the Company at market values.
Impact of New Accounting Standards
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
NOTE 64 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, their estimated useful lives, and related accumulated depreciation at December 31, 20152019 and 2014,2018, respectively, are summarized as follows:
Range of | ||||||||||||
Lives in Years | 2019 | 2018 | ||||||||||
Equipment | 5 | 2,032 | 2,032 | |||||||||
Furniture and fixtures | 5 | 1,983 | 1,983 | |||||||||
4,015 | 4,015 | |||||||||||
Less accumulated depreciation | (4,015 | ) | (4,015 | ) | ||||||||
$ | 0 | 0 | ||||||||||
Depreciation expense for the year ended December 31, 2019 and 2018. | $ | 0 | $ | 0 |
F-10 |
Range of | ||||||||||||
Lives in | ||||||||||||
Years | 2015 | 2014 | ||||||||||
Equipment | 5 | 2,032 | 13,220 | |||||||||
Logistix software | 5 | 0 | 73,500 | |||||||||
Furniture and fixtures | 5 | 1,983 | 1,983 | |||||||||
4,015 | 88,703 | |||||||||||
Less accumulate depreciation | (3,271 | ) | (14,061 | ) | ||||||||
$ | 744 | 74,642 | ||||||||||
Depreciation expense for the year ended | $ | 396 | $ | 297 |
F - 12
Term notes payable consisted of the following at December 31, 20152019 and 2014;
2015 | 2014 Restated | |||||||
Jet Tech LLC In October 2011, the Company acquired a 49% interest in JetTech LLC which is an aerospace maintenance operation located at Meacham Airport in Fort Worth, Texas -The Company has impaired the investment at December 31, 2015 and 2014, respectively, | $ | 0 | $ | 0 | ||||
TOTAL INVESTMENTS | $ | 0 | $ | 0 |
2019 | 2018 | |||||||
Secured notes payable at 18% per annum related to the Mabert LLC as Agent Loan Agreement dated September 14, 2018 for up to $5,000,000, shown net of debt discount of $107,880 and $90,619 (1) | $ | 1,923,176 | $ | 638,250 | ||||
Unsecured note payable at 10% per annum dated November 13, 2017 to a corporation, with an amended due date of March 1, 2020 (2) | 50,000 | 100,000 | ||||||
Unsecured note payable at 4.5% per annum dated December 28, 2017 to a corporation, payable in two parts on January 8, 2018 and 2019 (3) | 166,667 | 166,667 | ||||||
Unsecured convertible note payable at 4.0% per annum dated January 16, 2018 to a trust, payable January 16, 2020 (4) | 0 | 144,000 | ||||||
Total term notes (net of discounts) | $ | 1,940,627 | $ | 1,048,917 |
(1) On September 18, 2014,14, 2018, the Company entered into a loan agreement with a private company, Mabert LLC, acting as Agent for various private lenders (the “Loan Agreement”) for the purpose of funding working capital and general corporate expenses up to $1,500,000, subsequently amended to a maximum of $5,000,000. Mabert LLC is a Texas limited liability company, owned by Director and stockholder, Kevin Jones, and his wife Christine Early (for each and all references herein forward, “Mabert”). Under the Loan Agreement, Mabert has loaned gross loan proceeds of $2,031,056 (excluding debt discount of $107,880, for a net $1,923,176 debt) through December 31, 2019. Mr. Jones, and his wife have loaned $1,426,056 from inception through December 31, 2019, including $897,188 in the current year ended December 2019. The loan is fully secured, Mabert having filed a UCC-1 with the State of Texas. For each Promissory Note loan made under the Loan Agreement, as a cost to each note, the Company agreed to issue warrants and/or stock for 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 year ended December 31, 2019, the Company issued an additional 1,784,376 shares of Common Stock, as compared to the Company having issued 1,624,404 warrants as of December 31, 2018. Pursuant to ACS 470, the fair value attributable to a discount on the debt is $107,880 for the period ended December 31, 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 under the Loan Agreement with a shareholder for $25,000, at 18% interest per annum. 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 under the Loan Agreement with a financial institution for $225,000, at 18% interest per annum, advanced and guaranteed by Kevin Jones, a Director and shareholder. 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 under the Loan Agreement with a shareholder for $300,000, at 18% interest per annum. 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.
On June 10, 2019, the Company executed a Promissory Note under the Loan Agreement with a shareholder for $50,000, at 12.5% interest per annum. As a cost of the note, the Company issued 100,000 shares of its Class A common stock at a market price of $0.055 per share for a total debt discount of $5,666, subject to standard Rule 144 restrictions.
On August 4, 2019, the Company executed a Promissory Note under the Loan Agreement with a shareholder for $30,000, at 10% interest per annum. As a cost of the note, the Company issued 60,000 shares of its Class A common stock at a market price of $0.093 per share for a total debt discount of $5,578, subject to standard Rule 144 restrictions.
On September 30, 2019, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $505,130, at 18% interest per annum. As a cost of the note, the Company issued 1,010,260 shares of its Class A common stock at a market price of $0.076 per share for a total debt discount of $77,054, subject to standard Rule 144 restrictions.
F-11 |
On December 31, 2019, the Company executed a Promissory Note under the Loan Agreement with Kevin Jones, a Director and shareholder for $167,058, at 18% interest per annum. As a cost of the note, the Company issued 334,116 shares of its Common Stock at a market price of $0.076 per share for a total debt discount of $25,483, subject to standard Rule 144 restrictions.
Each of the individual Promissory Notes have one-year terms, automatically renewable, unless an individual lender notifies Mabert 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 during the year ended December 2019.
(2) On November 13, 2017, the Company executed a Promissory Note with Wildcat for a lump sum payment of $100,000, plus an additional $10,000 interest, due on February 2018. The Company defaulted on the note and Wildcat subsequently sued for breach of contract. The parties subsequently settled the dispute and the parties executed a new Promissory Note replacing the original Promissory Note, effective November 13, 2017, the effective date of the original note. The new Promissory Note has a maturity date of March 1, 2020 and provides for four equal payments of principal through such date, and accrued interest at 10% upon maturity. The Company made the two payments due through December 2019, and made the final payments in March 2020, thereby extinguishing such Promissory Note. The balance reflected in this Note 5 is the balance remaining as of year ending December 2019.See Note 11 – Legal.
(3) On December 20, 2017, the Company issued a $158,000convertible 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.
(4) On January 16, 2018, the Company issued a convertible promissory note for $150,000, prior shown net a $6,000 principal payment at $144,000. This loan was in default for breach of payment through 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 and the note was converted to 3,906,610 shares of Class A common stock.
NOTE 6 – OTHER NOTES PAYABLE
The Company issued a $166,667 convertible promissory note bearing interest at 10.0%4.50% per annum to an accredited investor, payable July 23, 2015, in monthlyequal installments of $31,600$6,000 commencing February 1, 2018 plus interest at rate of 4% per annum on December 20, 2018 and $80,000 plus accrued interest beginning 6 months after the date of this promissory note. The note was paid in full on July 22, 2015.December 20, 2019. The holder hadhas the right under certain circumstances to convert the note into common stock of the Company at a conversion price equalof $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 to 70% of the average of the 3 lowest volume weighted average trading prices during the 20-day period ending on the latest complete trading day priorconvert and has indicated that it might convert under settlement discussions unrelated to the conversion date.
The Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity'sEntity’s Own Equity, and concluded that the Convertible Note did resultnot 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 $158,000$27,083 based on its then intrinsicthe $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.
The Company issued a $150,000 convertible promissory note January 16, 2018 bearing interest at 4.50% per annum to an accredited investor, the Greer Family Trust (“Trust”), payable in equal installments of $6,000 plus accrued interest until the principal and accrued interest are paid in full. The note provided the Trust a right to convert the note into common stock of the Company at a conversion price of equal to seventy percent (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. At which time, the default interest rate became 18%. The Company accrued such default interest since the default.
On July 25, 2019, a Trustee for the Trust sent notice to the Company of their election to convert all unpaid principal and accrued interest of $183,220 due under the note. The conversion price as calculated according to the note’s terms is $0.0469 per share, resulting in a conversion of the Note and accrued interest into 3,906,610 shares of the Company’s common stock. These shares were issued in the first quarter of 2020.
The Company evaluated the terms of the original 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 discount related to the beneficial conversion feature on the note was valued at $58,495 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 ($78,463) and the warrants ($79,537) iswas being amortized over the term of the debt (10 months)debt. The discount related to the beneficial conversion feature on the note was valued using theBlack-Scholes Model. ForDuring the year ended December 30, 2015,31, 2018, the Company recognized $51,001of interest expense related toremaining discount was fully amortized. The derivative liability for this note at July 25, 2019 and December 31, 2018 was $168,375 and $103,476 respectively, calculated as described in Note 3 under the amortization of the discount as the note was paid in full on July 22,2015.
July 25, 2019 | Commitment Date | |||||||
Expected dividends | 0 | % | 0 | % | ||||
Expected volatility | 253.27 | % | 261.71 | % | ||||
Expected term: conversion feature | 1 year | 1 year | ||||||
Risk free interest rate | 2.08 | % | 1.76 | % |
Due to the conversion of the convertible note on July 22, 2015, when25, 2019, the note was repaid.
On September 26, 2019, we 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, styledSouthwest 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. A first semi-annual interest payment of $15,727 is due February 15, 2020. We accrued $10,549 through the end of December 2019 and made such semi-annual interest payment in February 2020.
In addition, we agreed to issue costsand deliver to Southwest 1,000,000 shares of Rule 144 restricted Class A common stock valued at December 31, 2015 was $0, as the note had been repaid.
NOTE 97 – ACCRUED EXPENSES
Accrued expenses, after certain reclassifications in 2019, consisted of the following at December 31, 20152019 and 2014;2018:
2019 | 2018 | |||||||
Accrued consulting fees | $ | 392,018 | $ | 479,194 | ||||
Accrued consulting expense | 249,500 | 249,500 | ||||||
Miscellaneous accruals | - | 6,139 | ||||||
Total accrued expenses | $ | 641,518 | $ | 734,833 |
F-13 |
2015 | 2014 Restated | |||||||
Accrued consulting fees | $ | 229,000 | $ | 144,500 | ||||
Bank overdraft | 763 | 0 | ||||||
Accrued interest expense | 0 | 9,091 | ||||||
Total accrued expenses | $ | 229,763 | $ | 153,591 |
NOTE 10–8 – CAPITAL STRUCTURE
At the Company’s Special Shareholders Meeting, all four proposals presented to the Company’s shareholders were passed with overwhelming support. The approvals for Proposals 1 – 3 are relevant to the Company’s current capital structure. Specifically, Proposal 1 received shareholder approval to increase the number of authorized shares of Class A Shares of the Company, par value $0.0001 per share (“Class A Shares”), from 300,000,000 to 500,000,000, (such amendment, “Amendment No. 1”); Proposal 2 received shareholder approval to change the name of the Company’s Class A Shares from “Class A” to “common stock” (“Common Stock”), which now has the same par value $0.0001 per share, designations, powers, privileges, rights, qualifications, limitations, and restrictions as the former Class A Shares, and Proposal 3 received shareholder approval to eliminate Class B Shares as a class of capital stock of the Company. All references to Common Stock described herein below include by definition any former Class A common stock.
Accordingly, the Company is authorized to issue 300,000,000500,000,000 shares of class A common stockCommon 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 stockeach share hashaving one voting right and the right to dividends, if and when declared by the Board of Directors.
Common Stock
At December 31, 2015,2019, there were 183,882,132296,648,677 shares of class A common stockCommon Stock issued and outstanding.
During the period from July 1, throughthree-months ended December 31, 2019, the Company: issued 5,534,116 shares of Rule 144 restricted Common Stock, including 4,000,000 and 1,200,000 shares issued in a private placement to two (2) accredited investors, each at $0.05 per share, and, 334,116 shares for $25,483 in loan origination fees.
During the three-months ended September 30, 2105,2019, the CompanyCompany: issued 5,921,992a net new 8,826,870 shares of restricted class ACommon Stock, including 3,906,610 shares for a loan conversion at $0.047 per share (see Note 5 herein above), and to: three (3) individuals at a total 1,170,260 shares for $88,298 in loan origination fees; one (1) individual in a private placement of 1,250,000 shares at $0.08 per share and 2,500,000 shares valued at $200,000 to two (2) business entities related to legal settlements.
During the three-months ended June 30, 2019, the Company: issued 1,100,000 shares of restricted Common Stock to two (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 Common Stock to eighteenthree (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 Common Stock outstanding.
During the year ended December 31, 2018, the Company: issued 5,655,253 shares of Common Stock to twenty-two (22) individuals through private placements for cash of $450,910 at average of $0.076 per share.
● | issued 500,000 shares of restricted common stock for related to fulfilling the obligations of the Employment Agreements for our then president, John Olynick, and our CFO, Ransom Jones, for stock grants totaling $50,000 at $.010 per share. | |
● | issued 3,000,000 of restricted common stock to one shareholder in settlement of a shareholder obligation for a total value of $330,000 at an average of $0.11 per share. | |
● | Issued 1,600,000 of restricted common stock to one shareholder in settlement of a debt that had warrants attached. The total was a value of $208,000 at an average of $0.13 per share. | |
● | canceled 11,733,164 of treasury shares. |
F-14 |
F - 14
At December 31, 2015,2019, there are no longer any Class B shares. For the period ending December 31, 2018, there were 15,126,938no shares of classClass B stock issued and outstanding. Each class B share is convertible, at the option of the shareholder, into common stock on a one for one basis.
F - 15
At December 31, 2015,2019 and 2018 respectively, the Company has not adopted any employee stock option plans.
At December 31, 2019 and 2018 respectively, the Company had 10,857,737 and 17,265,893 warrants outstanding.
Name of Warrant Holder | Warrants Issue Date | Total Warrants Issued | Term (Yrs) | Expiration Date | Activity in 2018 | Balance 2018 | Activity in 2019 | Balance 2019 | ||||||||||||||||||||
Norman Reynolds | Oct-15 | 4,000,000 | 5 | Oct-00 | - | 4,000,000 | - | 4,000,000 | ||||||||||||||||||||
Various Shareholders | Jan-16 | 1,169,136 | 2 | Jan-18 | (1,169,136 | ) | - | |||||||||||||||||||||
Various Shareholders | Jan-17 | 641,489 | 3 | Dec-19 | - | 641,489 | (641,489 | ) | - | |||||||||||||||||||
Richard Halden | Feb-17 | 4,000,000 | 2 | Feb-19 | - | 4,000,000 | (4,000,000 | ) | - | |||||||||||||||||||
Richard Halden | Feb-17 | 2,000,000 | 3 | Feb-20 | - | 2,000,000 | - | 2,000,000 | ||||||||||||||||||||
MTG Holdings LTD | Nov-17 | 1,000,000 | 3 | Nov-20 | - | 1,000,000 | (1,000,000 | ) | - | |||||||||||||||||||
Kent Harer | Jan-18 | 4,000,000 | 3 | Jan-21 | 4,000,000 | 4,000,000 | 4,000,000 | |||||||||||||||||||||
Mabert LLC | Dec-18 | 1,624,404 | 15 | Dec-33 | 1,624,404 | 1,624,404 | (766,667 | ) | 857,737 | |||||||||||||||||||
Total: | 18,435,029 | 4,455,268 | 17,265,893 | (6,408,156 | ) | 10,857,737 |
For the year ended December 2019, the Company had 10,857,737 warrants outstanding, of which 2,000,000 have expired and 857,737 have been converted as of the date of this report on Form 10-K. Of the remaining 8,000,000 warrants, the 4,000,000 warrants in the favor of Reynolds expire in October 2020, and the 4,000,000 warrants in favor of Harer expire in January 2021. The weighted average exercise price of these remaining warrants is $.175, with remaining terms of less than a year.
On October 1, 2015, the Company issued 4,000,000 warrants for legal work. The warrants are exercisable for $.20at $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 freerisk-free interest rate of 1.75%. These warrants were not exercised before December 31, 2019 and will expire by their terms on October 1, 2020.
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%. The initial 4,000,000 warrants were not exercised within the period provided and expired by their terms on February 3, 2019.
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 11 – Legal Matters on page F-19 to our Financial Statements.
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 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 Central Time on January 8, 2021.
F-15 |
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 two quarters 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’ 857,737 warrants, were converted to common stock in January 2019.
There were 641,489 warrants issued to various individual shareholders prior to 2017 that had an average range of two to three-year expiration terms, all expiring at various times in 2019. The Company has adjusted its outstanding warrants accordingly for the year ending December 31, 2019.
There were 1,169,136 warrants issued to various individual shareholders prior to 2015 that had an average range of two to three-year expiration terms, all expiring at various times in 2018. The Company has adjusted its outstanding warrants accordingly for the year ending December 31, 2018.
NOTE 119 - 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 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 December 31, 2019, a total of $2,031,056 (excluding debt discount of $107,880) has been loaned to the Company by six shareholders, including Mr. Jones.See alsoNote 5 - Term Notes Payable and Notes Payable Related Parties herein on page F-11.
Through Mabert, Mr. Jones along with his wife and his company have loaned $1,426,056, and four 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 year ended December 31, 2019, the Company accrued expenses for related parties of $1,369,389 to account for the total deferred compensation expenses among three current executives, one 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.
In the year ended December 31, 2019, we received $51,019 in advances from three of our directors, Ransom Jones, Kent Harer and Kevin Jones, in the amounts of $383,878$25,000, $25,000 and $715,070 during$1,019 respectively, which have been accrued as Advances - related parties for the yearsperiod.
During the year ended December 31, 2015 and 2014, respectively. The shareholders have elected to convert advances of $314,517 and $1,527,179 to shares of class A, common stock at an average value of $0.173 and $0.228 per share and received repayments of $79,058 and $0 during the years ended December 31, 2015 and 2014, respectively.
NOTE 1210 – INCOME TAXES
The Company has not filed its corporate tax returns since fiscal 2016.
Due to recurring losses, the Company had approximately $4.9 million and $3.5 million, respectively, of net operating losses ("NOL") carry forwards for federal and state incomeCompany’s tax purposes. These losses are available for future years and expire through 2033. Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.
2015 | 2014 | |||||||
Current | $ | - | $ | - | ||||
Deferred | - | - | ||||||
Total tax provision for (benefit from) income taxes | $ | - | $ | - |
The difference between the provision foreffective income tax expense atrate and the applicable statutory federal statutoryincome tax rate of 34% for the years endedis summarized as follows:
2019 | 2018 | |||||||
Federal statutory rate | (21.0 | )% | (21.0 | )% | ||||
State tax, net of federal benefit | (0.0 | ) | (0.0 | ) | ||||
Permanent differences and other including surtax exemption | 0.0 | 0.0 | ||||||
Valuation allowance | (21.0 | ) | (21.0 | ) | ||||
Effective tax rate | 0.0 | % | 0.0 | % |
At December 31, 20152019 and 20142018 the Company's effective rate is as follows:
2015 | 2014 | |||||||
Federal statutory rate | (34.0 | ) % | (34.0 | ) % | ||||
State tax, net of federal benefit | (0.0 | ) | (0.0 | ) | ||||
Permanent differences and other including surtax exemption | 0.0 | 0.0 | ||||||
Valuation allowance | 34.0 | 34.0 | ||||||
Effective tax rate | 0.0 | % | 0.0 | % |
2019 | 2018 | |||||||
Deferred tax assets | ||||||||
Net operating loss carry forwards | $ | 22,840,100 | $ | 19,598,855 | ||||
Deferred compensation / management fees | 3,569,833 | 1,342,000 | ||||||
Total deferred tax assets | 26,409,933 | 20,940,855 | ||||||
Less valuation allowance | (26,409,933 | ) | (20,940,855 | ) | ||||
Net deferred tax asset | $ | - | $ | - |
F-16 |
As of December 31, 2019, the Company had unused net operating loss carry forwards of approximately $30.1 million available to reduce future federal taxable income. Net operating loss carryforwards of $23.6 million expire through fiscal years ending 2037, and liabilities included6.5 million may be carried forward indefinitely. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally a greater than 50% change in ownership).
The Company’s ability to offset future taxable income, if any, with tax net operating loss carryforwards may be limited due to the financial statements consistnon-filing of tax returns and the impact of the following amounts at December 31, 2015statute of limitations on the Company’s ability to claim such benefits. Furthermore, changes in ownership may result in limitations under Internal Revenue Code Section 382. Due to these limitations, and December 31, 2014:
2015 | 2014 Restated | |||||||
Deferred tax assets | ||||||||
Net operating loss carry forwards | $ | 4,028,702 | $ | 4,384,475 | ||||
Deferred compensation | 2,409,213 | 1,966,523 | ||||||
Stock based compensation | 4,898,968 | 1,887,431 | ||||||
Other | 1,121,248 | 191,000 | ||||||
Total | 12,458,131 | 8,429,429 | ||||||
Less valuation allowance | (12,458,131 | ) | (8,429,429 | ) | ||||
Deferred tax asset | - | - | ||||||
Deferred tax liabilities | ||||||||
Depreciation and amortization | $ | - | $ | - | ||||
Net long-term deferred tax asset | $ | - | $ | - |
NOTE 13 – DISCONTINUED OPERATIONS
Mamaki of Hawaii historical operations | $ | 2,008,794 | ||
Contract receivable from Hawaiian Beverages | 700,000 | |||
UMED note payable assumed by Hawaiian Beverages | 64,697 | |||
Write off Mamaki of Hawaii Intercompany receivable | (777,255 | ) | ||
Write off UMED investment in Mamaki of Hawaii stock | (778,430 | ) | ||
Write off contract receivable | (454,600 | ) | ||
Gain from discontinued operations for 2015 | $ | 763,206 |
2015 | 2014 | |||||||
Sales | $ | 47,275 | $ | 24,581 | ||||
Cost of sales | 8,407 | 54,696 | ||||||
Gross profit | 38,868 | (30,115 | ) | |||||
Operating Expenses: | ||||||||
General and administrative expenses | 395,824 | 415,009 | ||||||
Depreciation | 89,218 | 118,954 | ||||||
Total Operating Expenses | 485,042 | 533,963 | ||||||
Operating Loss | (446,174 | ) | (564,078 | ) | ||||
Other Income (Expense) | ||||||||
Interest expense | (115,238 | ) | (150,756 | ) | ||||
Loss from discontinued operations | $ | (561,412 | ) | $ | (714,834 | ) | ||
Loss per share – discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) | ||
12/31/2014 | ||||
Current assets relating to discontinued operations: | ||||
Cash | $ | 5,153 | ||
Accounts receivable | 780 | |||
Prepaid expenses and deposits | 32,700 | |||
Property, plant and equipment, net | 1,719,009 | |||
Total assets related to discontinued operations | $ | 1,757,643 | ||
Current liabilities relating to discontinued operations: | ||||
Bank overdrafts | $ | 4,896 | ||
Notes payable | 1,245,211 | |||
Accounts payable | 35,582 | |||
Accrued interest payable | 36,450 | |||
Accrued expenses | 538,380 | |||
Total liabilities related to discontinued operations | $ | 1,860,518 |
Employment Agreements
In August 2012, the Company entered into an employment agreementsagreement with theRay Wright, as president of Greenway Innovative Energy, Inc., and who is now chairman of the board of Greenway Innovative Energy,Technologies, Inc., for a term of 5five years with compensation of $90,000 per year. In June ofSeptember 2014, the president'spresident’s employment agreement was amended to increase hissuch annual pay to $180,000. On March 31, 2015, accrualBy its terms, the employment agreement automatically renewed on the Greenway chairman of the board agreement was ceased due to his absence from the companyAugust 12, 2018 for more than a year.successive one-year period. During the yearstwelve-months ended December 31, 2015 and 2014, respectively,2019, the Company paid and/or accrued $191,250 and $168,700 towardsa total of $180,000 for this fiscal year under the employment agreements.
Effective May 10, 2018, the Company reduced its office lease spaceentered 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 year ended December 2019. 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 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 equal to 4,500,000 shares of the Company’s Rule 144 restricted common stock, par value $.0001 per share, valued at $.06 per share, or $270,000, which we expensed at time of grant. Such shares were physically issued in February 2020. Phillips is also entitled to certain additional stock grants based on the performance of the Company during the term of his employment and is entitled to participate in the Company’s benefit plans, if and when such become available.
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 we expensed at time of grant. Such shares were physically issued in February 2020. Turner is also entitled to certain additional stock grants based on the performance of the Company during the term of his employment. Turner is also entitled to participate in the Company’s benefit plans, if and when such become available.
F-17 |
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 3,500their 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 1,800 square feetthe 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 month-to-month basis at $3,200 per month. regular basis. In March of this year, 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.
Consulting Agreements
On November 28, 2017, the Company entered into a three-year consulting agreement with Chisos 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 were to be made upon the Company’s common stock reaching certain price points over an extended period. 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. Chisos sued the Company for breach of contract. The Company vigorously defended itself and the litigation was dismissed without prejudice on November 19, 2019.See Note 11 – Legal Matters on page F-19 to our Financial Statements.
On September 7, 2018, Wildcat Consulting, a company controlled by a shareholder, Marshall Gleason (“Gleason”), filed suit against the Company alleging claims arising from a prior Consulting Agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. On March 6, 2019, the parties entered into a Rule 11 Agreement settling both disputes. The Company performed in all regards under the Rule 11 Agreement and the parties executed the Settlement Agreement. Gleason signed the Compromise Settlement and Release Agreement on February 4, 2020, and both cases were dismissed by the Court on February 25, 2020. See alsoNote 11 – Legal Matters and Note 12 – Subsequent Events on page F-19 and F-21 to our Financial Statements.
F-18 |
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company adopted this guidance effective January 1, 2019 and noted that the leases discussed below did meet the requirements for recording a right of use asset or liability under ASC-842 given that they were short term leases.
In October 2015, the Company signedentered into a new two-year lease for new office space of approximately 1,800 square feet at thea 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 for successive one-year terms in the first twelve months and $2,495 for the second twelve months. During the years ended December 31, 2015 and 2014,Company’s sole discretion.
Each September, the Company expensed $55,836 and $76,800, respectively, in rent expense.
Legal Matters
The Company was named as a co-defendant in an action brought against the Company may become involved in various lawsuits and legal proceedings which ariseMamaki Tea, Inc., alleging, among other things, that the Company was named as a co-guarantor on an $850,000 foreclosed note, including accrued and accruing interest held by Southwest Capital Funding, Ltd. (“Southwest”). On April 22, 2016, Greenway Technologies filed suit under Cause No. DC-16-004718, in the ordinary course193rd District Court, Dallas County, Texas against Mamaki of business. However, litigation is subjectHawaii, 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 inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.HBI for $700,000 (along with the assumption of certain debt). The Company currently is not awaremaintained its guaranty on the original loan as a component of any such legal proceedings that we believe will have, individually orthe 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 aggregate, a material adverse effect on its business, financial condition or operating results.
F-19 |
On April 9, 2018, the Company issued 664,285and 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 restricted class Aour common stock subject to a weekly leak out restriction equal to the greater of $10,000 and 8% of the weekly trading volume. Such issuance of stock was completed in connection with a legal opinion pursuant to Rule 144.
On September 7, 2018, Wildcat, a company controlled by a shareholder Gleason, filed suit against the Company, alleging claims arising from a prior 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 agreed to abate both cases until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019. The Rule 11 Agreement was drafted to allow the Parties time to draft and sign the Wildcat 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. The material terms of the Rule 11 Agreement were as follows:
● | The Company agreed to execute a new Promissory Note to replace the original Promissory Note, effective November 13, 2017, the effective date of the original note. The new Promissory Note has a maturity date of March 1, 2020 and provides for four equal payments of principal through such date, and accrued interest at 10% upon maturity. The Company made the three payments due through December 2019, and made the final payment in March 2020, thereby extinguishing such Promissory Note. | |
● | The Company agreed to pay $300,000 in settlement of the prior Consulting Agreement in 60 installments of $5,000 each month, until paid in full. The $300,000 payable was accrued as of December 31, 2018, of which $40,000 has been paid through the period ending December 31, 2019. | |
● | The Parties agreed to amend the existing Overriding Royalty Agreement (“ORRI”) between the Company’s wholly owned subsidiary, Greenway Innovative Energy, Inc. (“GIE”), increasing Wildcat’s royalties from .25% (1/4 of 1%) to .375% (3/8 of 1%). | |
● | The Company agreed to pay Wildcat’s legal fees related to these matters, capped at $60,000, in three installments of $20,000 on June 1, August 1, and October 1, 2019, all such payments having been made in the period ending December 31, 2019. | |
● | The Company agreed to issue 1,500,000 restricted shares of its Common Stock on or before October 15, 2019, in consideration of the Promissory Note, in exchange for extinguishment of all prior granted warrants and to complete the grant of 1,000,000 shares not received from a prior transaction. The Company issued such 1,500,000 restricted shares and the expense for such issuance was accrued on the Company’s Balance Sheet on the effective date of the Rule 11 Agreement and increased by $45,000 based upon the actual value of the shares on the date of issuance for the period ending December 31, 2019. |
The Rule 11 Agreement further provided that if the Company timely performed through October 15, 2019, the Parties would file a Joint Motion for Dismissal and present Agreed Orders of Dismissal with prejudice for both lawsuits.
The Company performed in all regards under the Rule 11 Agreement, however Gleason refused to sign the Wildcat Settlement Agreement at the point of the Company’s having performed its obligations. The parties’ respective counsels then mutually agreed to extend the original October 15, 2019 settlement date until at least the end of the year while the parties waited for Gleason’s signature. Gleason signed the Compromise Settlement and Release Agreement on February 4, 2020, and all litigation was dismissed by the Court on February 25, 2020.
On March 13, 2019, Chisos, a company controlled by dissident shareholder 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; subsequently, the lawsuit was dismissed without prejudice on November 19, 2019.
On March 13, 2019, dissident shareholder Halden 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; subsequently, the lawsuit was dismissed without prejudice on November 19, 2019.
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 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 continued until the trial date of December 10, 2019; no trial was held and the lawsuit was dismissed with prejudice on November 26, 2019.
On October 19, 2019 the Company was served with a lawsuit by Norman Reynolds, a previously engaged counsel by the Company. The suit was filed in Harris County District Court, Houston, Texas, asserting claims for unpaid fees of $90,378. While fully reserved, Greenway vigorously disputes the total amount claimed. Greenway has asserted counterclaims based upon alleged conflicts of interest, breaches of fiduciary duty and violations of the Texas Deceptive Trade Practices Act (“DTPA”). Greenway is confident in its defenses and counterclaims and intends to vigorously defend its interests and prosecute its claims.
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NOTE 12 - SUBSEQUENT EVENTS
In March 2020, 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 regulations, 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 the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The extent to which the COVID-19 (coronavirus) outbreak will impact our operations, ability to obtain financing or future financial results is uncertain.
On September 7, 2018, pursuant to the Rule 11 Agreement executed by the parties on March 6, 2019 and the Company having performed in all regards under such agreement through its term of October 30, 2019, Wildcat and the Company signed the final Wildcat Settlement Agreement on February 4, 2020, and the Parties filed a Joint Motion for Dismissal and Agreed Orders of Dismissal with prejudice for both lawsuits, such Motion and Order accepted by the Court on February 25, 2020.See Note 11 – Legal Matters herein above.
On February 11, 2020,we sold 600,000 shares of our Rule 144 Common Stock, par value $.0001 per share for $60,000 to an accredited investor in a private sale.
On February 16, 2020, we issued 7,000,000 shares of our Rule 144 Common Stock, par value $.0001 per share, to two employees, Ryan Turner and Thomas Phillips for 2,500,000 and 4,500,000 shares respectively, pursuant to identical voluntary stock issue deferment provisions in each of their employment agreements, valued on the date of grant at $.10 per share, such share issuance expense to be accounted for in our first quarter 2020.
On February 19, 2020, Kevin Jones, a Director converted 857,737 warrants issued in conjunction with the Mabert LLC Loan Agreement described herein above, for 857,737 shares of the Company’s Common Stock.
On February 19, 2020, Kevin Jones, a Director was issued 1,460,260 shares of our Rule 144 restricted Common Stock as consideration for loan origination fees, for two promissory notes issued during the year ended December 2019.See Note 5 – Term Notes Payable and Notes Payable Related Parties on page F-11 to our Financial Statements.
On March 3, 2020, we issued 3,906,610 shares of our Rule 144 restricted Common Stock related to the conversion of $53,145a loan in favor of advances from shareholder.
the Greer Family Trust.See Note 11 – Legal Matters on page F-19 to our Financial Statements.
On January 24, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and between the Company and PowerUp Lending Group, Ltd., a Virginia corporation (“PowerUp”), whereby PowerUp purchased, and the Company sold, a Convertible Promissory Note, dated January 24, 2020, by and between the Company and PowerUp (the “Note”), in exchange for a cash purchase price of $118,000.
PowerUp has agreed to provide up to $1,000,000 to the Company under the same and substantially similar terms (term dates change with each agreement) over a twelve-month period, subject to period determined stock price and trading attributes. The Purchase Agreement contains customary representations and warranties, covenants, and conditions to closing.
Material terms of the Note include the following provisions:
● | The unpaid principal balance of the Note shall bear interest at the rate of 10% per year; |
● | Any amount of principal or interest due under the Note that is not paid when due shall bear interest at the rate of 22% per year from the date it was due until such outstanding amount is paid; |
● | The Note matures on January 24, 2021; |
● | PowerUp may elect to convert all or any part of the outstanding and unpaid amount of the Note into shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) from time to time, during the period that is 180 days following the issue date of the Note; |
● | The Company must reserve up to five times the number of shares of Common Stock that would be issuable upon full conversion of the Note, and instruct the Company’s transfer agent, Transfer Online, Inc., to that effect; |
● | The Company may prepay the Note, but must pay a prepayment percentage to PowerUp depending on the time that the Note is prepaid; |
● | So long as the Note remains outstanding, the Company may not sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business without PowerUp’s written consent; and |
● | Certain events qualify as events of default under the Note including, but not limited to: (a) the Company’s breach of a material term of the Note or the Purchase Agreement; (b) the Company’s failure to pay the amount of principal or interest due to PowerUp under the Note by the Company, (c) the Company’s failure to comply with its reporting obligations under the Securities Exchange Act of 1934, as amended, and (d) the Company’s assignment for the benefit of creditors. |
On February 22, 2020, the Company executed a second sequential Securities Purchase Agreement and Convertible Promissory Note for an additional $53,000, under the same and substantially similar terms, i.e., incorporating the new issue date for a one-year term maturing on February 12, 2021.
The foregoing descriptions of the Purchase Agreement and the Notes do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement and the Notes.
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