UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2019

 

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

 

Commission File No. 000-55030

 

 

 

GREENWAY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Texas   90-0893594

(State or other jurisdiction of
incorporation or organization)

  (I.R.S. Employer
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)

 

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

 

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

 

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

 

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

 

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

 

As of November 19, 2019, Greenway Technologies, Inc. had outstanding 296,815,547 shares of our Class A common stock and no outstanding shares of its Class B common stock.

 

 

 

 
 

 

Table of Contents

 

Part I – Financial Information.  
   
Item 1. Consolidated Financial Statements & Notes (Unaudited) 3
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 36
   
Item 4. Controls and Procedures 36
   
Part II - Other Information  
   
Item 1. Legal Proceedings 39
   
Item 1A. Risk Factors 39
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 49
   
Item 3. Defaults Upon Senior Securities 49
   
Item 4. Mine Safety Disclosures 49
   
Item 5. Other Information 50
   
Item 6. Exhibits 50

 

2
 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

 

    September 30,
2019
    December 31,
2018
 
    (Unaudited)        
Assets                
Current Assets                
Cash   $ 19,576     $ 73,211  
Prepaid expenses     14,612       -  
Receivable - related party     131,120       -  
Total Current Assets     165,308       73,211  
Fixed assets                
Property & equipment     4,015       4,015  
Less depreciation     4,015       4,015  
Total fixed assets     -       -  
Other assets                
Advance to Dynalyst, net of reserve $15,000     -       15,000  
Total Other Assets                
Total Assets   $ 165,308     $ 88,211  
                 
Liabilities & Stockholders’ Deficit                
Current Liabilities                
Accounts payable   $ 881,356     $ 738,845  
Advances - related parties     -       1,100  
Accrued management fees     1,301,964       2,032,102  
Accrued expenses     682,657       734,833  
Accrued expenses - related parties     1,204,389       118,334  
Legal settlement expenses     20,000       -  
Accrued interest payable     160,014       -  
Notes payable and convertible notes payable     216,667       410,667  
Notes payable - related parties (Net of debt discount of $140,038 and $90,619 respectively)     1,723,960       638,250  
Derivative liability – convertible notes     -       103,476  
Total Current Liabilities     6,191,007       4,777,607  
Long Term Liabilities                
Notes Payable - Southwest Capital     525,000       -  
Total Long Term Liabilities     525,000       -  
Total Liabilities   $ 6,716,007     $ 4,777,607  
                 
Commitments and contingencies (Note 10)                
                 
Stockholders’ Deficit                
Common Class A stock 300,000,000 shares authorized, par value $0.0001, 296,815,547 and 286,703,915 outstanding at September 30, 2019 and December 31, 2018, respectively     30,170       29,101  
Additional paid-in capital     22,862,359       22,100,087  
Subscription Receivable - Warrants     (7,668 )     -  
Accumulated deficit     (29,435,460 )     (26,818,584 )
Total Stockholders’ Deficit     (6,550,699 )     (4,689,396 )
Total Liabilities & Stockholders’ Deficit   $ 165,308     $ 88,211  

 

See accompanying notes to the condensed unaudited consolidated financial statements.

 

3
 

 

GREENWAY TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations

For the three months and nine months ended September 30, 2019

(Unaudited)

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
Revenues   $ -     $ -     $ -     $ -  
Expenses                                
General and administrative     339,507       219,574       1,100,433       1,031,381  
Research and development     (87,357 )     75,000       441,320       616,283  
Total Expense     252,150       294,574       1,541,753       1,647,664  
                                 
Operating loss     (252,150 )     (294,574 )     (1,541,753 )     (1,647,664 )
                                 
Other income (expenses)                                
Gain / (loss) on change in fair value of derivative     (81,975 )     (56,168 )     (64,899 )     (18,581 )
Interest income / (expense)     (121,449 )     5,476       (284,669 )     (28,760 )
Settlement expense - loan agreement     39,220       -       39,220       (208,000 )
Net gain on settlement of debt     -       -       -       180,000  
Settlement income / (expense)     (95,000 )     210,000       (765,000 )     210,000  
Other Miscellaneous Income     -       -       125       -  
Total other income / (expense)     (259,204 )     159,308       (1,075,223 )     134,659  
                                 
Loss before income taxes     (511,354 )     (135,266 )     (2,616,976 )     (1,513,005 )
Provision for income taxes     -       -       -       -  
Net loss   $ (511,354 )   $ (135,266 )   $ (2,616,976 )   $ (1,513,005 )
                                 
Net loss per share                                
Basic and diluted net loss per shares   $ (0.00 )   $ (0.00 )   $ (0.01 )   $ (0.01 )
Weighted average shares Outstanding                                
Basic and diluted     288,855,344       286,703,915       288,607,408       286,478,655  

 

See accompanying notes to the condensed unaudited consolidated financial statements.

 

4
 

 

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

 

Nine months ended September 30, 2019 (Unaudited)
    Common Stock,
par value $0.0001
    Additional                    
    Number of shares     Amount     paid-in capital     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 )     -       -  
Net loss for the three months ended March 31, 2019                             -       (598,948 )     (598,948 )
Balance, March 31, 2019 (Unaudited)     287,470,582     $ 29,177     $ 22,107,679     $ (7,668 )   $ (27,417,532 )   $ (5,288,344 )
                                                 
Adjustment for incorrectly reported shares     (581,905 )     -       -       -       -       -  
Shares issued for Promissory Note Fees     1,100,000       110       54,890       -       -       55,000  
Net loss for the three months ended June 30, 2019                                     (1,506,674 )     (1,506,674 )
Balance, June 30, 2019 (Unaudited)     287,988,677     $ 29,287     $ 22,162,569     $ (7,668 )   $ (28,924,206 )     (6,740,018 )
                                                 
Shares issued for Promissory Note Fees (1,070,260 shares not issued in the period reported)     1,170,260       117       88,181       -       -       88,298  
Shares issued for Loan Conversion (3,906,610 shares not issued in the period reported)     3,906,610       391       311,984       -       -       312,375  
Shares issued in Legal Settlements (2,500,000 shares not issued in the period reported)     2,500,000       250       199,750       -       -       200,000  
Shares issued for Private Placement (1,250,000 shares not issued in the period reported)     1,250,000       125       99,875       -       -       100,000  
Net loss for the three months ended September 30, 2019                                     (511,354 )     (511,354 )
Balance, September 30, 2019 (Unaudited)     296,815,547     $ 30,170     $ 22,862,359     $ (7,668 )   $ (29,435,460 )   $ 6,550,699  

 

Nine months ended September 30, 2018 (Unaudited)
    Common Stock,
par value $0.0001
    Additional                    
    Number of shares     Amount     paid-in
capital
    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     4,810,253       478       536,022       -       -       536,500  
Shares issued to settle shareholder obligations     3,000,000       300       329,700       -       -       330,000  
Shares returned and cancelled for settlement     (11,763,164 )     (1,163 )     1,163       -       -       -  
Net loss for the three months ended March 31, 2018                                     (574,623 )     (574,623 )
Balance, March 31, 2018 (Unaudited)     283,728,915     $ 28,386     $ 21,649,515     $ -     $ (24,198,225 )   $ (2,520,324 )
                                                 
Shares issued from stock sales to accredited investors     875,000     $ 56     $ 65,944     $ -     $ -     $ 66,000  
Shares issued for settlement     1,600,000       160       207,840       -       -       208,000  
Shares issued for Compensation     500,000       50       29,950       -       -       30,000  
Net loss for the three months ended June 30, 2018                                     (803,116 )     (803,116 )
Balance, June 30, 2018 (Unaudited)     286,703,915     $ 28,652     $ 21,953,249     $ -     $ (25,001,341 )   $ (3,019,440 )
                                                 
Equity features imbedded in debt issues     -       -     $ 36,667.00     $ -     $ -     $ 36,667  
Net loss for the three months ended September 30, 2018                                     (135,265 )     (135,265 )
Balance, September 30, 2018 (Unaudited)     286,703,915     $ 28,652     $ 21,989,916     $ -     $ (25,136,606 )     (3,118,038 )

 

See accompanying notes to the condensed unaudited consolidated financial statements.

 

5
 

 

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2019 and 2018
(Unaudited)

 

    Nine Months Ended  
    September 30,  
    2019     2018  
             
Cash Flows from Operating Activities:                
Net loss   $ (2,616,976 )   $ (1,513,005 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Change in fair value of derivatives     64,899       (58,797 )
Amortization of debt discount     93,879       69,585  
Legal settlements     745,000       -  
Accrued management fees     -       (40,000 )
Bad debt expense (Dynalyst)     15,000       -  
Changes in operating assets and liabilities:                
Prepaid expense     (14,612 )     157,500  
Accrued expenses     462,655       -  
Accounts payable     142,511       (44,918 )
Net Cash Used in Operating Activities     (1,107,644 )     (1,429,635 )
                 
Cash flows from investing activities:                
Receivable - related parties     (131,120 )     -  
Net Cash Used in Investing Activities     (131,120 )     -  
                 
Cash Flows from Financing Activities                
Repayment of shareholder advances     -       (50,741 )
Proceeds from Notes Payable - related parties     1,135,130       100,000  
Payments on other notes payable     (50,000 )     (8,500 )
Proceeds from sale of common stock     100,000       1,207,168  
Stockholder advances     -       129,438  
Net Cash Provided by Financing Activities     1,185,130       1,377,365  
                 
Net (Decrease) Increase in Cash     (53,634 )     (52,270 )
Cash Beginning of Period     73,210       91,518  
Cash End of Period   $ 19,576     $ 39,248  
                 
Supplemental Disclosure of Cash Flow Information:                
Cash Paid during the period for interest   $ 41,952     $ -  
Cash Paid during the period for taxes   $ -     $ -  
Non-Cash investing and financing activities                
Shares issued to settle shareholder obligations   $ -     $ 538,000  
Issuance of common stock to settle accrued expenses   $ -     $ 30,000  
Subscription receivables - warrants   $ (7,668 )   $ -  
Shares issued for promissory note fees   $ 143,298     $ -  
Loan conversion (fair value of shares issued: $312,375)   $ 183,220     $ -  
Equity features embedded in debt issued     -       36,667  
Shares issued for settlement of accrued legal settlements   $ 200,000     $ -  

 

See accompanying notes to the condensed unaudited consolidated financial statements.

 

6
 

 

GREENWAY TECHNOLOGIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

 

NOTE 1 – ORGANIZATION

 

Nature of Operations

 

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

 

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

 

Greenway’s GTL Technology

 

In August 2012, Greenway Technologies acquired 100% of Greenway Innovative Energy, Inc. (“GIE”) which owns patents and trade secrets for a proprietary technology to convert natural gas into synthesis gas (“syngas”). Based on 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. On February 15, 2013, GIE filed for its first patent. On November 4, 2013, GIE filed for a second patent covering other unique aspects of the design. Subsequently, the Company received Patent Nos. 8,574,501 B1 and 8,795,597 B2 covering the GTL conversion technology for the purpose of converting natural gas to clean synthetic fuels. The Company has identified several other areas in its technology and has and is filing for multiple additional patents.

 

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

 

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

 

7
 

 

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

 

Mining Interest

 

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

 

NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2019. These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018

 

Principles of Consolidation

 

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

 

8
 

 

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

 

Name of Entity   %     Entity   Incorporation   Relationship
Greenway Technologies, Inc.           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

 

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

 

Going Concern Uncertainties

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, as of September 30, 2019, we have an accumulated deficit of $29,435,460. For the nine-months ended September 30, 2019, we had no revenue, generated a net loss of $2,616,976 and used cash of $1,107,644 for operating activities. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to continue to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

 

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

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

Property and Equipment

 

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

 

9
 

 

Impairment of Long-Lived Assets

 

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

 

Revenue Recognition

 

The FASB issued ASC 606 as guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The company adopted the guidance on January 1, 2018 and applied the cumulative catch-up transition method. The transition adjustment to be recorded to stockholders’ deficit upon adoption of the new standard did not have a material effect upon the consolidated financial statements.

 

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

 

Equity Method Investment

 

On August 29, 2019, the Company entered into a Material Definitive Agreement to form OPM Green Energy, LLC. The Company contributed a limited license to use its proprietary and patented GTL technology for no actual cost basis in exchange for 45% interest in OPMGE. The Company evaluated its interest in OPMGE and determined that the Company does not control OPMGE. The Company accounts for its interest in OPMGE via the equity method of accounting. At September 30, 2019, OPMGE had no income statement activity. As noted in Note 9, the Company maintains a related party receivable from OPMGE related to capital expenditures. The Company expects to fully recover the receivable once OPMGE operations ramp up in 2020.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three-months or less to be cash equivalents. There were no cash equivalents at September 30, 2019, or December 31, 2018. Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.

 

10
 

 

Income Taxes

 

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

 

The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Open tax years, subject to IRS examination include 2014 – 2017.

 

Net Loss Per Share, basic and diluted

 

Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares issued and outstanding for the period. Shares issuable upon the exercise of warrants (11,499,226), shares convertible for debt (2,083,333) and shares outstanding but not yet issued (9,476,870) have been excluded as a common stock equivalent in the diluted loss per share because their effect would be anti-dilutive.

 

Derivative Instruments

 

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

 

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

 

See Note 6 below for the related discussion regarding the Company’s current convertible notes payable and warrants.

 

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Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

Description   Level 1     Level 2     Level 3  
September 30, 2019 Derivative Liabilities   $ -     $ -     $ -  
December 31, 2018 Derivative Liabilities   $ -     $ -     $ 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 in their valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:

 

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

 

The change in the notes payable derivative liabilities at fair value for the nine-month period ended September 30, 2019, is as follows:

 

      FairValue       Change in       New
Convertible
              Fair Value  
      January 1, 2019       Fair Value       Notes       Conversions       September 30, 2019  
                                         
Derivative Liabilities   $ (103,476 )   $ 64,899     $ -     $ 168,375     $ -  

 

Stock Based Compensation

 

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

 

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At September 30, 2019, the Company did not have any outstanding stock options.

 

Concentration and Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company places its cash with high credit quality institutions. At times, such deposits may be in excess of the FDIC insurance limit. There are no uninsured balances as of September 30, 2019.

 

Research and Development

 

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company generated a net credit in research and development expenses of $87,357, after adjusting for an over-accrual of $120,000 in anticipated contract research expenses from the University of Texas at Arlington (this was originally treated prospectively as a change in estimate), and incurred expenses of $75,000 for the three months ended September 30, 2019 and 2018, respectively, and for the nine months ended September 30, 2019 and 2018, $441,320 and $616,283, respectively.

 

Issuance of Common Stock

 

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

 

Impact of New Accounting Standards

 

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

 

NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT

 

    Range of Lives
in Years
    September 30, 2019     December 31, 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 was $0 for the nine months ended September 30, 2019 and 2018.

 

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NOTE 5 – TERM NOTES PAYABLE AND NOTES PAYABLE RELATED PARTIES

 

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

 

    September 30, 2019     December 31, 2018  
             
Secured notes payable at 18% per annum related to the Mabert LLC as Agent Loan Agreement dated September 14, 2018 for up to $1,500,000, shown net of debt discount of $140,038 and $90,619 (1)   $ 1,723,960     $ 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     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 (2)     166,667       166,667  
Unsecured convertible note payable at 4.0% per annum dated January 16, 2018 to a trust, payable January 16, 2020 (3)     0       144,000  
Total term notes (net of discounts)   $ 1,940,627     $ 1,048,917  

 

(1) On September 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 $1,863,998 (excluding debt discount of $140,038) through September 30, 2019, and through which Mr. Jones, and his wife provided $528,868 through December 31, 2018. The loan is fully secured, Mabert having filed a UCC-1 with the State of Texas. The Loan Agreement, Security Agreement and UCC-1 filing are incorporated by reference as Exhibits 10.48–10.50. 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 Class A common stock valued at $0.01 per share on an initial one-time basis at 3.67:1 and subsequently on a 2:1 basis for each dollar borrowed. For the period ended September 30, 2019, the Company issued an additional 1,170,260 shares of Class A common stock, as compared to the Company having issued 1,624,404 warrants as of December 31, 2018. Of these warrants, 766,667 were converted to common stock in January 2019, with 857,737 warrants remaining outstanding related to the 2018 issuance. Pursuant to ACS 470, the fair value attributable to a discount on the debt is $140,038 for the period ended September 30, 2019, and $90,619 for the year ended 2018; this amount is amortized to interest expense on a straight-line basis over the terms of the loans.

 

On April 30, 2019, the Company executed a Promissory Note 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.

 

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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.

 

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

 

(3) On January 16, 2018, the Company issued a convertible promissory note for $150,000, prior shown net a $6,000 principal payment at $144,000. This loan was in default for breach of payment during the period ending June 30, 2019. By its terms, the interest payable increased to 18% per annum on April 1, 2018. On July 24, 2019, the holder noticed the Company of its intent to convert and the note was converted to 3,906,610 shares of Class A common stock. See: Note 6 below.

 

NOTE 6 – 2018 CONVERTIBLE PROMISSORY NOTES

 

The Company issued a $166,667 convertible promissory note bearing interest at 4.50% per annum to an accredited investor, payable in equal installments of $6,000 commencing February 1, 2018 plus interest at rate of 4% per annum on December 20, 2018 and $80,000 plus accrued interest on December 20, 2019. The holder has the right to convert the note into common stock of the Company at a conversion price of $0.08 per share for each one dollar of cash payment which may be due, (which would be 1,083,333 shares for the $86,667 payment and 1,000,000 shares for the $80,000 payment). As of December 20, 2018, a material event of default occurred for breach of payment. The holder has the right but has not noticed the Company of its intent to convert. See Note 5 above.

 

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

 

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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. Instructions to the transfer agent for the issuance of such shares shall be issued as soon as practicable by the Company.

 

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 $58,494 based on the difference between the fair value of the 1,578,947 convertible shares at the valuation date and the $150,000 note value. The discount related to the beneficial conversion feature was being amortized over the term of the debt. The discount related to the beneficial conversion feature on the note was valued using the Black-Scholes Model. During the year ended December 31, 2018, the remaining 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 Black-Scholes Model parameters shown below.

 

    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 25, 2019, the Company wrote off the prior total $103,476 derivative liability as of the conversion date, recording a $81,975 and $64,899 loss in the fair value of a derivative for the three and nine months ended September 2019, respectively. See Note 5.

 

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NOTE 7 – ACCRUED EXPENSES

 

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

 

    September 30, 2019     December 31, 2018  
             
Accrued consulting fees   $ 427,018     $ 328,157  
Accrued consulting expense     249,500       356,078  
Miscellaneous expense     6,139       -  
Total accrued expenses   $ 682,657     $ 734,833  

 

NOTE 8 – CAPITAL STRUCTURE

 

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

 

The Company has filed under Rule 14a-101 a PRE14A Schedule proxy and notice for a Special Shareholders Meeting to be held December 11, 2019 in Arlington, Texas. There are several proposals requesting shareholder vote. Proposal 1 seeks shareholder approval of an amendment to the Company’s certificate of formation (“Certificate”) 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 seeks the approval of an amendment to the Certificate to change the name of the Company’s Class A Shares from “Class A” to “common stock” (“Common Stock”). The Common Stock would have the same par value $0.0001 per share, designations, powers, privileges, rights, qualifications, limitations, and restrictions as the current Class A Shares (such amendment, “Amendment No. 2”);

 

Proposal 3 seeks the approval of an amendment to the Certificate to eliminate Class B Shares of the Company, par value $0.0001 per share (the “Class B Shares”), as a class of capital stock of the Company (such amendment, “Amendment No. 3”). See Note 11 – Subsequent Events.

 

Class A Common Stock

 

At September 30, 2019, there were 296,815,547 total shares of class A common stock outstanding, including 9,126,870 shares not issued in the period reported.

 

During the three-months ended September 30, 2019, the Company: issued a net new 8,826,870 shares of restricted class A common 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 class A 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.

 

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

 

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

 

Class B Stock

 

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

 

Stock options, warrants and other rights

 

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

 

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

 

On October 1, 2015, the Company issued 4,000,000 warrants for legal work. The warrants are exercisable at $0.20 per share for a period of five years from the date of issue. The Company valued the warrants as of December 31, 2015, at $386,549 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 189%, expected conversion term of 4.75 years and risk-free interest rate of 1.75%. These warrants were not exercised before September 30, 2019 and have expired by their terms on October 1, 2019.

 

On February 3, 2017, the Company issued 6,000,000 warrants (4,000,000 at $0.35 for two years and 2,000,000 at $0.45 for three years) as part of a separation agreement with a co-founder and former president. The Company valued the warrants as of March 31, 2017, at $639,284 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 455%, expected conversion term of two and three years and risk-free interest rate of 1.75%. Of these, 4,000,000 warrants were not exercised and have expired by their terms.

 

On November 30, 2017, the Company issued 1,000,000 warrants at $0.30 for three years as part of a settlement of a shareholder dispute with MTG Holdings, Inc. The Company valued the warrants as of December 31, 2017, at $95,846 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 116%, expected conversion term of two and three years and risk-free interest rate of 1.37%. These warrants were extinguished in the comprehensive settlement agreement reached in March 2019. See Note 10 – Legal.

 

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

 

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In conjunction with the Mabert LLC Loan Agreement described herein above, the Company issued a combined total of 1,624,404 warrants at a purchase price of $0.01 per share for fifteen (15) years in the year ending December 31, 2018. In the third quarter ending September 30, 2018, the Company issued 366,667 warrants. In the fourth quarter, the Company issued 1,257,737 warrants, including 1,057,737 warrants to Kevin Jones, a director, and his spouse for loans they each separately made totaling $428,868 and $100,000 respectively, and 200,000 warrants to a third-party lender. All such warrants, excluding Mr. Jones’ 857,737 remaining warrants were converted to common stock in January 2019.

 

There were 641,489 warrants issued to various unaccounted individuals prior to 2014 that are all believed to have fifteen-year expirations. The Company is attempting to determine the ownership for each of the prior warrant grants and will adjust its outstanding warrants accordingly at yearend 2019.

 

NOTE 9 - RELATED PARTY TRANSACTIONS

 

Kevin Jones, a director and greater than 5% shareholder, made net advances to the Company in the amount of $505,130 through the three months ending September 30, 2019, converted to a renewable one-year Promissory Note, at 18% interest-only for the first year. See Note 5.

 

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 September 30, 2019, a total of $1,863,998 (n.i. debt discount of $140,038 as described in Note 5 – Term Notes Payable and Notes Payable Related Parties herein above) has been loaned to the Company by six shareholders, including Mr. Jones. See Note 5.

 

Through Mabert, Mr. Jones along with his wife and his company have loaned $1,258,998, and four other shareholders have loaned the balance. These loans are secured by the assets of the Company. A financing statement and UCC-1 have been filed according to Texas statutes. Should a default under the loan agreement occur, there could be a foreclosure or a bankruptcy proceeding filed by the Agent for these Shareholders. The actions of the Company in case of default can only be determined by the Shareholders. A foreclosure sale or distribution through bankruptcy could only result in the creditors receiving a pro rata payment based upon the terms of the loan agreement. Mabert did not nor will it receive compensation for its work as an agent for the lenders.

 

In the three months ending September 2019, the Company advanced $131,120 to OPM Green Energy LLC (“OPMGE”), an affiliate that, as reported on Form 8-K on August 29, 2019, Entry into a Material Definitive Agreement, the Company now owns a non-consolidating forty-five (45%) joint venture interest, for expenses related to operating the OPMGE GTL plant located in Wharton, Texas. The amount advanced was booked as a related party receivable by the Company and expects to fully recover the receivable from OPMGE as it ramps up its operations in 2020.

 

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Through September, 2019, other shareholders have made loans to the Company in the amount of $416,667, including Wildcat Consulting $100,000 (since paid down to $50,000 through the period ending September 30, 2019), Tunstall Canyon Group $166,667 and the Greer Family Trust $150,000 (for which one $6,000 principal payment was made in March 2018, and converted to stock on July 25, 2019).

 

NOTE 10 – COMMITMENTS and CONTINGENCIES

 

Employment Agreements

 

In August 2012, the Company entered into an employment agreement with Ray Wright, president of Greenway Innovative Energy, Inc., now chairman of the board for a term of 5 years with compensation of $90,000 per year. In July 2014, the president’s employment agreement was amended to increase his annual pay to $180,000. By its terms, the employment agreement automatically renewed on August 12, 2019 for a successive one-year period.

 

Effective May 10, 2018, the Company entered into employment agreements with John Olynick, as President, and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements were identical. John Olynick elected not to renew his employment agreement and resigned as President on July 19, 2019. Ransom Jones, as Chief Financial Officer, earns a salary of $120,000 per year. Mr. Jones also serves as the Company’s Secretary and Treasurer. During each year that Mr. Jones agreement is in effect, he is entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year. He is also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. Both Mr. Olynick and Mr. Jones received a grant of common stock (the “Stock Grant”) at the start of their employment equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. Mr. Jones is also entitled to participate in the Company’s benefit plans when such plans become available. The foregoing summary of the Mr. Jones employment agreements is qualified in its entirety by reference to the actual true and correct Employment Agreement, a copy of which is incorporated by reference as Exhibit 10.40.

 

Effective January 1, 2019, the Company entered into an employment agreement with Thomas Phillips, Vice President of Operations, reporting to the President of Greenway Innovative Energy, Inc., for a term of fifteen (15) months with compensation of $120,000 per year. Phillips is entitled to a no-cost grant of common stock on the effective date equal to 5,000,000 shares of the Company’s Rule 144 restricted Class A common stock, par value $.0001 per share, such shares to be issued at such time as the Company has the ability to issue such number of shares pursuant to approval by two-thirds of the Company’s shareholders at a duly call meeting of the shareholders, the next meeting scheduled for December 11, 2019. Mr. Phillips has elected to waive such share issuance for an indefinite period, or until such increase in the Company’s authorized shares allows for the issuance of such shares. Mr. Phillips is also entitled to participate in the Company’s benefit plans, when such become available. The foregoing summary of the Phillips’ Employment Agreement is qualified in its entirety by reference to the actual true and correct employment agreement, a copy of which is incorporated by reference as Exhibit 10.53.

 

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

 

Consulting Agreements

 

On July 10, 2017, the Company entered into a one-year consulting agreement with an individual, Ryan Turner, to provide business development services, including but not limited to enhanced digital marketing, assistance with shareholder communications and help in establishing industry relationships. Terms included monthly payments of $5,000 per month, plus approved expenses. After the first twelve-month initial term, the agreement is automatically renewable for successive twelve-month terms, unless otherwise terminated with written notice by the parties, and has been subsequently renewed until July 10, 2020.

 

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

 

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

 

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

 

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Leases

 

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

 

Greenway rents approximately 600 square feet of office space at 1521 North Cooper St., Suite 205, Arlington, Texas 76011, at a rate of $957 per month, under a one-year lease agreement, renewable for successive one-year terms in the Company’s sole discretion.

 

Each September, the Company pays $11,600 in annual maintenance fees on its Arizona BLM mining leases, under one-year lease agreements, renewable for successive one-year terms in the Company’s sole discretion in addition. These leases provide for 10% royalties based on production, if any. There has been no production to date.

 

Legal Matters

 

The Company was named as a co-defendant in an action brought against the Company and Mamaki Tea, Inc., alleging, among other things, that the Company was named as a co-guarantor on an $850,000 foreclosed note. On April 22, 2016, Greenway Technologies filed suit under Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc. (“Mamaki”), Hawaiian Beverages, Inc.(“HBI”), Curtis Borman and Lee Jenison for breach of a Stock Purchase Agreement dated October 29, 2015, wherein the Company sold its shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Company maintained its guaranty on the original loan as a component of the sale transaction. The Defendants failed to make payments of $150,000 each on November 30, 2015, December 28, 2015 and January 27, 2016. On January 13, 2017, the parties executed a Settlement and Mutual Release Agreement (Agreement). However, the Defendants again defaulted in their payment obligations under this new Agreement. Curtis Borman and Lee Jennison were co-guarantors of the obligations of Mamaki and HBI. To secure their guaranties, each of Curtis Borman and Lee Jennsion posted 1,241,500 and 1,000,000 shares, respectively, of the Company. Under the Agreement, the shares were valued at $.20. Due to the default under the Agreement, these shares were returned to the Company’s treasury shares. Curtis Borman subsequently filed for bankruptcy and the property was liquidated for $600,000, applied against the prior loan amount, leaving a remaining guaranteed loan payment balance of approximately $700,000, including accrued interest and legal fees. The parties entered into a Settlement Agreement providing 1,000,000 shares of Class A common stock subject to standard Rule 144 restrictions, and a three (3) year Promissory Note for $525,000 to settle all claims (recorded in Long Term Liabilities), with copies of the Settlement Agreement and Promissory Note filed by the Company on Form 8-K on October 1, 2019, and a copy of which is incorporated herein as Exhibit 10.54.

 

On April 9, 2018, the Company and Tonaquint, Inc. agreed to settle on Tonaquint’s exercise of a warrant option with a one-time issuance from Greenway Technologies of 1,600,000 shares of our common stock subject to a weekly leak out restriction equal to the greater of $10,000.00 and 8% of the weekly trading volume. Such issuance of stock was completed in connection with a legal opinion pursuant to Rule 144.

 

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

 

  The Company will 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 shall 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 $35,000 has been paid through the period ending September 30, 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 shall 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, of which $20,000 has been accrued for the period ending September 30,2019.
     
  The Company shall issue 1,500,000 restricted shares of its Class A 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 Rule 11 Agreement provided that if the Company timely performs through October 15, 2019, the Parties will file a Joint Motion for Dismissal and present Agreed Orders of Dismissal with prejudice for both lawsuits. A copy of the Rule 11 Agreement is incorporated by reference as Exhibit 10.52.

 

The Company has performed in all regards under the Rule 11 Agreement, including issuance of the 1,500,000 restricted shares, and is currently waiting for Mr. Gleason to sign the Settlement Agreement. The expense for such share issuance was accrued on the Company’s Balance Sheet for the period ending September 30, 2019 and increased by $45,000 based upon the actual value of the shares on the date of issuance. [See Note 11: Subsequent Events]

 

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The parties’ respective counsels have mutually agreed to extend the original October 15, 2019 settlement date until at least the end of the year while the parties wait for Mr. Gleason’s signature. Provided Gleason does not sign the Settlement Agreement, which further provides for the Motion for Dismissal and Agreed Orders of Dismissal with prejudice for both lawsuits, Greenway is confident in its defenses and intends to once again vigorously defend its interests.

 

On March 13, 2019, Chisos Equity Consultants, LLC (“Chisos”), a company controlled by a dissident shareholder, Richard Halden, filed suit against the Company alleging claims arising from a consulting agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. The Company answered the lawsuit and asserted a number of affirmative defenses. Over the last several months, the parties have been in negotiations to abate or dismiss the lawsuit and have effectively stayed the proceedings for the reporting period. Provided the parties cannot reach agreement to abate or dismiss the lawsuit, Greenway is confident in its defenses and intends to vigorously defend its interests.

 

On March 13, 2019, Richard Halden (“Halden”), a dissident shareholder in his capacity as an individual, filed suit against the Company alleging claims arising from a confidential severance and release agreement between the parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. The Company answered the lawsuit and asserted a number of affirmative defenses. Over the last several months, the parties have been in negotiations to abate or dismiss the lawsuit and have effectively stayed the proceedings for the reporting period. Provided the parties cannot reach agreement to abate or dismiss the lawsuit, Greenway is confident in its defenses and intends to vigorously defend its interests.

 

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

 

NOTE 11-SUBSEQUENT EVENTS

 

On October 15, 2019, the Company issued 1,500,000 shares of its Class A common stock to satisfy its obligations to Wildcat Consulting under the Rule 11 Agreement entered into by the parties on March 6, 2019. The cost of these shares was accrued and accounted for during the nine months ended September 30, 2019. The shares issued are being held in escrow by the Company’s legal counsel, to be delivered to Wildcat Consulting at such time as its principal, Mr. Marshall Gleason signs the Settlement Agreement. Provided Gleason does not sign the Settlement Agreement, Greenway is confident in its defenses and intends to once again vigorously defend its interests.

 

On October 19, 2019 the Company was served with a lawsuit by Norman Reynolds, a prior engaged counsel to 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 total of which Greenway vigorously disputes. 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.

 

On November 8, 2019, the Company filed under Rule 14a-101 a PRE14A Schedule proxy and notice for a Special Shareholders Meeting to be held December 11, 2019 in Arlington, Texas. There are four proposals presented requesting an affirmative shareholder vote.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

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

 

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

 

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

 

The following discussion and analysis of financial condition, results of operations, liquidity, and capital resources, should be read in conjunction with the financial statements and related notes included elsewhere in this Report, which were prepared assuming that we will continue as a going concern, and in conjunction with our Annual Form 10-K filed on April 19, 2019. As discussed in Note 2 to the consolidated financial statements, our recurring net losses and inability to generate sufficient cash flows to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. This discussion contains forward-looking statements that involve risks and uncertainties, including information with respect to our plans, intentions and strategies for our businesses. Our actual results may differ materially from those estimated or projected in any of these forward-looking statements.

 

In this Form 10-Q, “we,” “our,” “us,” the “Company” and similar terms in this report, including references to “UMED” and “Greenway” all refer to Greenway Technologies, Inc., and our wholly-owned subsidiary, Greenway Innovative Energy, Inc., unless the context requires otherwise.

 

Overview

 

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

 

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

 

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

 

Greenway’s GTL Technology

 

In August 2012, Greenway Technologies acquired 100% of Greenway Innovative Energy, Inc. (“GIE”) which owns patents and trade secrets for a proprietary technology to convert natural gas into synthesis gas (“syngas”). Based on a new, breakthrough process called Fractional Thermal Oxidation™ (“FTO”), the Company believes that GIE’s G-Reformer, combined with conventional Fischer-Tropsch (“FT”) processes, offers an economical and scalable method to converting natural gas to liquid fuel. On February 15, 2013, GIE filed for its first patent on its GTL technology. U.S. Patent number 8,574,501 was issued on November 5, 2013. On November 4, 2013, GIE filed for a second patent covering other unique aspects of the design. The Company has identified several other areas in its technology to file for patent protection and such efforts are ongoing.

 

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

 

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

 

On July 23, 2019, the Company announced that Mabert LLC, a company controlled by Greenway Director, Kevin Jones, which also acts as agent for the Company’s lenders, acquired INFRA Technology Group’s U.S. GTL plant and technology located in Wharton, Texas. Mabert purchased the entire 5.2-acre site, plant and equipment, including INFRA’s proprietary Fischer-Tropsch (“FT”) reactor system and operating license agreement.

 

Subsequently, the Company reported on Form 8-K on August 29, 2019, entry into a material definitive agreement whereby Greenway Technologies, Inc., a Texas corporation (the “Company”) entered into a joint venture with Mabert, Tom Phillips, an individual and vice president of operations and chief engineer for the Company, and OPM Green Energy, LLC, a Texas limited liability company (“OPMGE”), together with the Company, Mabert, and Phillips (altogether the “Members”). To facilitate the joint venture, the Members formed OPMGE pursuant to a Limited Liability Company Agreement of OPM Green Energy, LLC, dated August 23, 2019 (the “Agreement”), by and among the Members. Kevin Jones, a director of the Company, will serve as the sole manager of OPMGE. The related agreements are incorporated herein as Exhibits 10.55-10.57. As the first GTL operating plant using Greenway’s proprietary technology and equipment, the OPMGE 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’s Board of Directors voted on July 19, 2019, to adopt the resolution affirming GWTI’s partnership in the new joint venture. The resolution’s vote was passed with approval from four of the six GWTI Directors, with Kevin Jones and Ransom Jones abstaining from the vote.

 

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

 

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This proprietary technology is also unique in that it allows for transportable GTL plants with a much smaller footprint when compared to legacy large-scale technologies. The Company believes its technologies and processes will allow for several GTL plants to be built with substantially lower up-front and ongoing costs resulting in more profitable results for O&G operators. Greenway is now working to commercialize both its G-Reformer and its GTL solutions and is in discussions with a number of oil and gas companies, smaller oil and gas operators and other interested parties to license and obtain joint venture or other forms of capital funding to build its first complete gas-to-liquid plant.

 

GTL Industry –Market

 

GTL converts natural gas – the cleanest-burning fossil fuel – into high-quality liquid products that would otherwise be made from crude oil. These products include transport fuels, motor oils and the ingredients for everyday necessities like plastics, detergents and cosmetics. GTL products are colorless and odorless. They contain almost none of the impurities, e.g., sulphur, aromatics and nitrogen, that are found in crude oil.

 

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

 

Development of stringent environmental regulations by numerous governments to control pollution and promote cleaner fuel sources is expected to complement industry growth. U.S. guidelines implemented such as the Petroleum and Natural Gas Regulatory Board Act, 2006, Oilfields (Regulation and Development) Act of 1948, and Oil Industry (Development) Act, 1974 are likely to continue to encourage GTL applications in diverse end-use industries to conserve natural gas and other resources.

 

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

 

Mining Interest

 

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

 

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Company History

 

Greenway Technologies, Inc. was originally incorporated as Dynalyst Manufacturing Corporation (“Dynalyst”) under the laws of the State of Texas on March 13, 2002. In connection with the merger with Universal Media Corporation (“UMC”), a Nevada corporation, on August 17, 2009, the Company changed its name to Universal Media Corporation. The transaction was accounted for as a reverse merger, and Universal Media Corporation was the acquiring company on the basis that Universal Media Corporation’s senior management became the entire senior management of the merged entity and there was a change of control of Dynalyst. The transaction was accounted for as recapitalization of Dynalyst’s capital structure. In connection with the merger, Dynalyst issued 57,500,000 restricted common shares to the shareholders of Universal Media Corporation for 100% of Universal Media Corporation.

 

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

 

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

 

On June 22, 2017, Greenway Technologies, Inc.in recognition of its primary operational activity, approved the amendment of its certificate of formation and filed on June 23, 2017, with the Texas Secretary of State to change its name to: Greenway Technologies, Inc.

 

On June 26, 2019, the Company held its first annual shareholders meeting in Arlington, Texas. There were seven proposals presented for stockholder vote, including to approve the Company’s slate of directors, to amend the Company’s Certificate of Formation (Articles) and Bylaws, as well as to ratify the Company’s then current independent public accounting audit firm, which passed by an overwhelming margin at the meeting. The Company’s Form 8-K was filed on July 2, 2019 and which is incorporated herein by reference. On August 1, 2019, the Company filed an 8-K/A, noting that due to a potential tabulation error, they Company was reviewing the results for Proposals 1 - 4. As a result, and to resolve such potential errors, the Company has called for a Special Shareholders Meeting to be held December 11, 2019 in Arlington, Texas. Detailed information about each of the Proposals and the related proxy voting instructions can be found in the Schedule DEF14A filed with the SEC on November 18, 2019.

 

Employees

 

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

 

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Going Concern

 

The accompanying condensed consolidated financial statements to this Report on Form 10-Q have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2019, we have an accumulated deficit of $29,435,460. For the nine-months ended September 30, 2019, we incurred a net loss of $2,616,976 and used $1,107,644 net cash for operating activities. As a pre-revenue entity, these factors raise substantial doubt about the Company’s ability to continue as a going concern. While the Company is attempting to commence revenue generating operations and thereby generate sustainable revenues, the Company’s current cash position is not sufficient to support its ongoing daily operations and requires the Company to raise addition capital through debt and/or equity sources.

 

Accordingly, the ability of the Company to continue as a going concern is therefore in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management intends to raise additional funds by way of public or private offerings, or both. Management believes that the actions presently being taken to implement the Company’s business plan to generate revenues will provide the opportunity for the Company to continue as a going concern. While Management believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.

 

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

 

Three-months ended September 30, 2019, compared to Three-months ended September 30, 2018.

 

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

 

Operating Expenses.

 

General and Administrative Expenses. During the three-months ended September 30, 2019, General and Administrative expenses increased $119,933 to $339,507, as compared to $219,574 for the prior year three-months ended September 30, 2018. The increase was primarily the result of increased settlement expenses, related legal fees and accrued compensation in the period.

 

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Research and Development Expenses. During the three-months ended September 30, 2019, Research and Development expenses decreased $162,357, resulting in a gain of $87,357, as compared to $75,000 in the prior year three-months ended September 30, 2018. The recognized gain was primarily due to the reversal of certain prior accrued expenses related to research agreement credits from the University of Texas at Arlington and related development of the Company’s G-Reformer unit.

 

Interest Expense. During the three-months ended September 30, 2019, interest expense increased to $121,449 as compared to interest income of $5,476 in the prior year three-months ended September 30, 2018. The increase was primarily due to the increase in total notes payable executed during the period.

 

Derivative Adjustment. During the three-months ended September 30, 2019, the loss on the fair value of derivatives was $81,975 as compared to a loss of $56,168 for the prior year three-months ended September 30, 2018. The change was due to a change in the price per share changes related to a convertible note payable using the Black-Scholes Model for the period, and the conversion of the related last remaining convertible note requiring a derivative calculation in July 2019.

 

Net Loss. Our net loss increased to $511,354 for the three-months ended September 30, 2019 compared to a loss of $135,266 for the three-months ended September 30, 2018. The increase was primarily due to the increase in the loss in the fair value of a derivative and interest and settlement expenses versus one-time settlement income of $210,000 in the prior period.

 

Nine-months ended September 30, 2019, compared to Nine-months ended September 30, 2018.

 

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

 

Operating Expenses.

 

General and Administrative Expenses. During the nine-months ended September 30, 2019, General and Administrative expenses increased $69,052 to $1,100,433, as compared to $1,031,381 for the prior year nine-months ended September 30, 2018. The increase was primarily the result of increased settlement expenses, related legal fees and accrued compensation through the period.

 

Research and Development Expenses. During the nine-months ended September 30, 2019, Research and Development expenses decreased $174,963 to $441,320, as compared to $616,283 from the prior year nine-months ended September 30, 2018. The decrease was primarily due to a gain on the reversal of prior accrued expenses related to certain research agreement credits from the University of Texas at Arlington and related development of the Company’s G-Reformer unit.

 

Interest Expense. During the nine-months ended September 30, 2019, interest expense increased $255,9090 to $284,669 as compared to interest expense of $28,760 from the prior year nine-months ended September 30, 2018. The increase was primarily due to the increase in total notes payable executed by the Company during the period.

 

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Derivative Adjustment. During the nine-months ended September 30, 2019, the loss on derivative adjustment was $64,899 as compared to a loss of $18,581 for the prior year nine-months ended September 30, 2018. The change was due to a change in the price per share changes related to a convertible note payable using the Black-Scholes Model for the period, and the conversion of the Company’s last remaining convertible note requiring a derivative calculation in July 2019.

 

Net Loss. Our net loss increased to $2,616,976 for the nine-months ended September 30, 2019 compared to a net loss of $1,513,005 for the nine-months ended September 30, 2018. The increase in net loss was primarily due to the increase in settlement expenses, interest expense and accrued compensation over the prior year nine-month period.

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. In the nine-months ended September 30, 2019, our working capital deficit increased by $1,336,303 from year-end 2018 primarily as the result of increases in related party notes payable and accrued expenses of $1,085,710 and $1,085,055, respectively, offset by a reclass reduction in accrued management fees of $730,138 from the 2018 year-end accruals.

 

Operating activities

 

Net cash used for operating activities decreased during the nine-months ended September 30, 2019 to $1,107,644 from $1,429,635 for the nine-months ended September 30, 2018, primarily due to the increase in accrued expenses of $462,655 and legal settlements of $745,000, as compared to $0 for the same period in the prior year.

 

Investing activities

 

The Company advanced $131,121 to the OPMGE joint venture during the three months ended September 30, 2019 for certain operating expenses and initial capital costs associated with the opening of the Wharton, Texas GTL plant. The amount advanced was booked as a related party receivable by the Company, which expects to fully recover the receivable from OPMGE as it ramps up its operations in 2020.We had no investing activities during the nine-months ended September 30, 2018.

 

Financing Activities

 

Net cash provided by financing activities was $1,185,130 for the nine-months ended September 30, 2019, consisting primarily of the proceeds from new loans made under the Mabert Loan Agreement totaling $1,135,130, including loans totaling $730,130 in the period by Director and shareholder, Kevin Jones and his wife, Christine Earley, a related party. This is compared to cash primarily provided by sales of the Company’s Class A common stock of $1,207168 for the nine-months ended September 30, 2018.

 

Seasonality

 

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

 

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Impact of Inflation

 

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

 

Commitments

 

Employment Agreements

 

In August 2012, the Company entered into an employment agreement with Ray Wright, president of Greenway Innovative Energy, Inc., now chairman of the board for a term of 5 years with compensation of $90,000 per year. In July 2014, the president’s employment agreement was amended to increase his annual pay to $180,000. By its terms, the employment agreement automatically renewed on August 12, 2018 for a successive one-year period. During the years ended December 31, 2018 and 2017, the Company paid and accrued a total of $180,000 and $180,000, respectively, for the annual compensation payments, as well as accrued an additional $435,000 as an adjustment for prior periods not correctly accounted for.

 

Effective May 10, 2018, the Company entered into employment agreements with John Olynick, as President, and Ransom Jones, as Chief Financial Officer, respectively. The terms and conditions of their employment agreements were identical. John Olynick elected not to renew his employment agreement and resigned as President on July 19, 2019. Ransom Jones, as Chief Financial Officer, earns a salary of $120,000 per year. Mr. Jones also serves as the Company’s Secretary and Treasurer. During each year that Mr. Jones agreement is in effect, he is entitled to receive a bonus (“Bonus”) equal to at least Thirty-Five Thousand Dollars ($35,000) per year. He is also entitled to certain additional stock grants based on the performance of the Company during the term of their employment. Both Mr. Olynick and Mr. Jones received a grant of common stock (the “Stock Grant”) at the start of their employment equal to 250,000 shares each of the Company’s Common Stock, par value $.0001 per share (the “Common Stock”), such shares vesting immediately. Mr. Jones is also entitled to participate in the Company’s benefit plans, when such plans exist. The foregoing summary of the Mr. Jones employment agreements is qualified in its entirety by reference to the actual true and correct Employment Agreement, a copy of which is incorporated by reference as Exhibit 10.40.

 

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

 

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Consulting Agreements

 

On July 10, 2017, the Company entered into a one-year consulting agreement with an individual, Ryan Turner, to provide business development services, including but not limited to enhanced digital marketing, assistance with shareholder communications and help in establishing industry relationships. Terms included monthly payments of $5,000 per month, plus approved expenses. After the first twelve-month initial term, the agreement is automatically renewable for successive twelve-month terms, unless otherwise terminated with written notice by the parties, and has been subsequently renewed until July 10, 2020.

 

On November 28, 2017, the Company entered into a three-year consulting agreement with Chisos Equity Consultants, LLC for public relations, consulting and corporate communications services. The initial payment was 1,800,000 shares of the Company’s restricted common stock. Additional payments 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. The Company is currently in litigation over such termination action. See Note 10 – Legal Matters.

 

On September 7, 2018, Wildcat Consulting Group, LLC (“Wildcat”), a company controlled by a shareholder, Marshall Gleason, filed suit against the Company alleging claims arising from a Consulting Agreement between the Parties, seeking to recover monetary damages, interest, court costs, and attorney’s fees. On March 6, 2019, the Parties entered into a Rule 11 Agreement settling both disputes. Pursuant to the Rule 11 Agreement, the Parties agreed to abate this case until the earlier of a default of the performance of the Rule 11 Agreement or October 30, 2019. The Rule 11 Agreement provided that if the Company timely performs through October 15, 2019, the Parties will file a Joint Motion for Dismissal and present Agreed Orders of Dismissal with prejudice for both lawsuits. A copy of the Rule 11 Agreement is incorporated by reference as Exhibit 10.52.

 

The Company has performed in all regards under the Rule 11 Agreement and is currently waiting for Mr. Gleason to sign the Settlement Agreement. The parties’ respective counsels have mutually agreed to extend the original October 15, 2019 settlement date until at least the end of the year while the parties wait for Mr. Gleason’s signature. Provided Gleason does not sign the Settlement Agreement, which further provides for the Motion for Dismissal and Agreed Orders of Dismissal with prejudice for both lawsuits, Greenway is confident in its defenses and intends once again to vigorously defend its interests. See Note 10 – Legal Matters.

 

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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 Promissory Note for $150,000. As a result, only 3,750,000 shares are committed to be later issued under the original 2012 acquisition agreement. A copy of the Settlement Agreement and Promissory Note is incorporated by reference as Exhibit 10.36.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies include revenue recognition and impairment of long-lived assets.

 

We recognize revenue in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.

 

We evaluate our long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” which evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.

 

Stock-Based Compensation

 

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

 

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

 

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Recently Issued Accounting Pronouncements

 

In September 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to Greenway Technologies’ current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). We adopted this pronouncement as of January 1, 2019.

 

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

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Item 3. 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 10(f)(1) of Regulation S-K, we are not required to provide information requested by this item.

 

Item 4. Controls and Procedures.

 

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

 

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

 

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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 generally accepted accounting principles, 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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Changes in Internal Controls over Financial Reporting

 

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

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The nature of all legal proceedings we are involved in is discussed in ‘Note 10. Commitments – Legal Matters’ and ‘Note 11- Subsequent Events’ to our condensed consolidated financial statements included elsewhere in this report, which is incorporated herein by reference.

 

Item 1A. Risk Factors.

 

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

 

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

 

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

 

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

 

We have historically incurred losses.

 

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

 

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

 

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

 

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

 

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

 

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

 

  current and future direct sales and marketing efforts by large competitors;
  rapid and effective development of new, unique GTL techniques; and
  new and aggressive pricing methodologies.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  we are a small company with limited operating history;
     
  the limited scope of our sales and marketing efforts;
     
  our ability to attract new customers and satisfy our customers’ requirements;
     
  general economic conditions;
     
  changes in our pricing capabilities;
     
  our ability to expand our business;
     
  the effectiveness of our personnel;
     
  new product introductions; and
     
  extraordinary expenses such as litigation or other dispute-related settlement payments.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  Our ability to attract new and repeat customers;
     
  Our ability to keep current with the evolving requirements of our target market;
     
  Our ability to protect our proprietary GTL Technology;
     
  The ability of our competitors to offer new or enhanced GTL services; and
     
  Unanticipated delays or cost increases with respect to research and development.

 

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

 

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

 

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

 

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

 

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We may fail to establish and maintain strategic relationships.

 

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

 

Risks Relating to Our Mining Properties

 

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

 

Our mining properties do not have quantified known reserves.

 

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

 

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

 

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

 

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

 

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

 

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

 

Risks Relating to Our Stock

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

45
 

 

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

 

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

 

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

 

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

 

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

 

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

 

We do not intend to pay dividends.

 

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

 

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

 

We have a substantial amount of indebtedness, which requires significant interest payments. As of September 30, 2019, we had $6,716,007 of total liabilities, including total notes payable of $2,465,627 (net of debt discounts of $140,038), bearing average cash interest of 17.8% per year when current and 18% default interest if loans are not current.

 

46
 

 

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 us 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, all of which are significantly affected by financial, business, economic and other factors. We are not able to control many of these factors. If industry and economic conditions deteriorate, our cash flow may not be sufficient to allow us to pay principal and interest on our debt and meet our other obligations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  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 market, the Company’s management will strive to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

 

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

 

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

 

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

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the nine-month period ended September 30, 2019, we issued a book total of 10,693,537 shares of the Company’s Class A common stock, including 3,036,927 shares of restricted common stock to six (6) individuals for costs related to Promissory Notes the Company executed in 2019; 3,906,610 shares related to the conversion of a loan, 2,500,000 shares related to legal settlements and 1,250,00 through a private sale.

 

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

 

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

 

  The information contained in our annual report on Form 10-K under the Exchange Act.
     
  The information contained in any reports or documents required to be filed by Greenway Technologies under sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act since the distribution or filing of the reports specified above.
     
  A brief description of the securities being offered, and any material changes in our affairs that were not disclosed in the documents furnished.

 

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

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

49
 

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit
No.
  Identification of Exhibit
2.1**   Combination Agreement executed as of August 18, 2009, between Dynalyst Manufacturing Corporation and Universal Media Corporation, filed as Exhibit 10.2 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.1**   Articles of Incorporation of Dynalyst Manufacturing Corporation filed with the Secretary of State of Texas on March 13, 2002, filed as Exhibit 3.1 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.2**   Articles of Amendment of Articles of Incorporation of Dynalyst Manufacturing Corporation filed with the Secretary of State of Texas on June 7, 2006, filed as Exhibit 3.2 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.3**   Articles of Amendment of Articles of Incorporation of Dynalyst Manufacturing Corporation filed with the Secretary of State of Texas on August 28, 2009, changing the corporate name to Universal Media Corporation, filed as Exhibit 3.3 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.4**   Articles of Amendment of Articles of Incorporation of Universal Media Corporation filed with the Secretary of State of Texas on March 23, 2011, changing the corporate name to UMED Holdings, Inc., filed as Exhibit 3.4 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.5**   Articles of Amendment of Certificate of Formation of UMED Holdings, Inc. filed with the Secretary of State of Texas on June 23, 2017, changing the corporate name to Greenway Technologies, Inc., filed as Exhibit 3.1 to the registrant’s Form 8-K/A on July 20, 2017, Commission File Number 000-55030.
3.6**   Bylaws of Dynalyst Manufacturing Corporation, filed as Exhibit 3.5 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.7**   Articles of Incorporation of Greenway Innovative Energy, Inc. filed with the Secretary of State of Nevada on July 6, 2012, filed as Exhibit 3.7 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
3.8**   Bylaws of Greenway Innovative Energy, Inc., filed as Exhibit 3.8 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.

 

50
 

 

10.1**   Code of Ethics for Senior Financial Officers, filed as Exhibit 10.1 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.2**   Purchase Agreement dated as of May 1, 2012, between Universal Media Corporation and Mamaki Tea & Extract, Inc., filed as Exhibit 10.3 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.3**   Addendum and Modification to Purchase Agreement dated as of December 31, 2012, between Universal Media Corporation and Mamaki of Hawaii, Inc. formerly Mamaki Tea & Extract, Inc., filed as Exhibit 10.4 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.4**   Second Addendum and Modification to Purchase Agreement dated as of December 31, 2012, between Universal Media Corporation and Mamaki of Hawaii, Inc. formerly Mamaki Tea & Extract, Inc., filed as Exhibit 10.5 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.5**   Purchase Agreement dated August 29th, 2012, between Universal Media Corporation and Greenway Innovative Energy, Inc., filed as Exhibit 10.6 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.6**   Purchase Agreement dated as of February 23, 2012, between Rig Support Services, Inc. and UMED Holdings, Inc., filed as Exhibit 10.7 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.7**   Asset Purchase Agreement dated as of October 2, 2011, between Jet Regulators, L.C., R/T Jet Tech, L.P. and UMED Holdings, Inc., filed as Exhibit 10.8 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.8**   Employee Agreement dated May 27, 2011, between UMED Holdings, Inc. and Kevin Bentley, filed as Exhibit 10.9 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.9**   Employee Agreement dated May 27, 2011, between UMED Holdings, Inc. Randy Moseley, filed as Exhibit 10.10 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.10**   Employee Agreement dated May 27, 2011, between UMED Holdings, Inc. and Richard Halden, filed as Exhibit 10.11 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.11**   Employee Agreement dated August 29, 2012, between UMED Holdings, Inc. and Raymond Wright, filed as Exhibit 10.12 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.12**   Employee Agreement dated August 29, 2012, between UMED Holdings, Inc. and Conrad Greer, filed as Exhibit 10.13 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.13**   Consulting Agreement dated May 27, 2011, between UMED Holdings, Inc. and Jabez Capital Group, LLC, filed as Exhibit 10.14 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.

 

51
 

 

10.14**   Promissory Note in the amount of $850,000 dated August 17, 2012, executed by Mamaki Tea, Inc. payable to Southwest Capital Funding, Ltd., filed as Exhibit 10.15 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.15**   Modification of Note and Liens effective as of October 1, 2012, between Southwest Capital Funding, Ltd. and Mamaki Tea, Inc., filed as Exhibit 10.16 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.16**   Second Modification of Note and Liens effective as of December 20, 2012, between Southwest Capital Funding, Ltd., Mamaki Tea, Inc., and Mamaki of Hawaii, Inc., filed as Exhibit 10.17 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.17**   Promissory Note in the amount of $150,000 dated August 17, 2012, executed by Mamaki Tea, Inc. payable to Robert R. Romer, filed as Exhibit 10.18 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.18**   Addendum and Modification to Purchase Agreement dated as of December 31, 2012, between Rig Support Services, Inc. and UMED Holdings, Inc., filed as Exhibit 10.19 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.20**   Promissory Note in the amount of $158,000 dated September 18, 2014, executed by UMED Holdings, Inc. payable to Tonaquint, Inc., filed as Exhibit 10.20 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.21**   Warrant dated September 18, 2014, for $47,400 worth of UMED Holdings, Inc. shares issued to Tonaquint, Inc., filed as Exhibit 10.21 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.22**   Office Lease Agreement dated October 2015, between UMED Holdings, Inc. and The Atrium Remains the Same, LLC, filed as Exhibit 10.22 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.23**   Warrant dated October 31, 2015, for 4,000,000 shares issued to Norman T. Reynolds, Esq, filed as Exhibit 10.23 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.24**   Promissory Note in the amount of $36,000 dated March 8, 2016, executed by UMED Holdings, Inc. payable to Peter C. Wilson, filed as Exhibit 10.24 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.25**   Convertible Promissory Note in the amount of $224,000 dated May 4, 2016, executed by UMED Holdings, Inc. payable to Tonaquint, Inc., filed as Exhibit 10.25 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.26**   Severance and Release Agreement by and between UMED Holdings, Inc. and Randy Moseley dated November 11, 2016, filed as Exhibit 10.26 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.

 

52
 

 

10.27**   Settlement and Mutual Release Agreement dated January 13, 2017, executed by UMED Holdings, Inc. in connection with Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc., Hawaiian Beverages, Inc., Curtis Borman, and Lee Jenison, filed as Exhibit 10.27 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.28**   Warrant dated February 1, 2017, for 2,000,000 shares issued to Richard J. Halden, filed as Exhibit 10.28 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.29**   Warrant dated February 1, 2017, for 4,000,000 shares issued to Richard J. Halden, filed as Exhibit 10.29 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.30**   Severance and Release Agreement by and between UMED Holdings, Inc. and Richard Halden dated February 1, 2017, filed as Exhibit 10.30 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.31**   Assignment Agreement dated December 27, 2010, between Melek Mining, Inc., 4HM Partners, LLC, and UMED Holdings, Inc., filed as Exhibit 10.31 to the registrant’s Form 10-Q/A, amendment No. 1, on September 21, 2017, Commission File Number 000-55030.
10.32**   Consulting Agreement by and between the registrant and Chisos Equity Consultants, LLC, as amended on February 16, 2018, and March 19, 2018, filed as Exhibit 10.1 to the registrant’s Form 8-K, on March 21, 2018, Commission File Number 000-55030.
10.33**   Promissory Note in the amount of $100,000 dated November 13, 2017, executed by Greenway Technologies, Inc. payable to Wildcat Consulting Group LLC.
10.34**   Subordinated Convertible Promissory Note in the amount of $166,667 dated December 20, 2017, executed by Greenway Technologies, Inc. payable to Tunstall Canyon Group LLC.
10.35**   Warrant dated November 30, 2017 for 1,000,000 shares issued to MTG Holdings, LTD
10.36**   Greer Family Trust Promissory Note and Settlement. filed at Exhibit 10.34 to the registrant’s Form 10K on April 5, 2018, Commission File Number 000-55030.
10.37**   Warrant dated January 8, 2018 for 4,000,000 shares issued to Kent Harer.
10.38**   Settlement agreement by and between Greenway Technologies, Inc. and Tonaquint, Inc. dated April 9, 2018.
10.39**   Employment agreement with John Olynick, as President, dated May 10, 2018.
10.40**   Employment agreement with Ransom Jones, as Chief Financial Officer, Secretary and Treasurer, dated May 10, 2018.
10.41**   Consulting Agreement with Gary L. Ragsdale, Ph.D., P.E.
10.42**   Consulting Agreement with John Olynick
10.43**   Consulting Agreement with Marl Zoellers
10.44**   Consulting Agreement with Paul Alfano dba Alfano Consulting Services
10.45**   Consulting Agreement with Peter Hauser
10.46**   Consulting Agreement with William Campbell
10.47**   Consulting Agreement with Ryan Turner
10.48**   Amendment on July 30, 2014 to that certain Employment Agreement with Raymond Wright dated August 29, 2012

 

53
 

 

10.49**   Mabert LLC as Agent Loan Agreement dated September 14, 2018
10.50**   Mabert LLC as Agent Security Agreement dated September 14, 2018
10.51**   Texas UCC-1 filed by Mabert LLC as Agent on October 11, 2018, ending October 10, 2023
10.52**   Rule 11 Agreement, dated March 6, 2019, pursuant to a mutual settlement of all claims by Wildcat Consulting, LLC for the matters in Cause No. 2018-005801 and Cause No. 2018-006416-2, filed in the County Courts at Law in Tarrant County, TX on Sept 7, and September 27, 2018 respectively.
10.53**   Employment agreement with Thomas Phillips, as Vice President of Operations, dated April 1, 2019.
10.54*   Settlement Agreement executed on September 26, 2019 with Southwest Capital Funding, Ltd. to resolve all conflicts related to loan guarantees provided for Mamaki of Hawaii, Inc., Hawaiian Beverages, Inc., Curtis Borman, and Lee Jenison.
10.55*   Limited Liability Company Agreement of OPM Green Energy, LLC, dated August 23, 2019, by and among Greenway Technologies, Inc., a Texas corporation, Mabert, LLC, a Texas limited liability company, Tom Phillips, an individual, and OPM Green Energy, LLC, a Texas corporation.
10.56*   Subscription Agreement dated August 23, 2019, by and between Greenway Technologies, Inc., a Texas corporation, and OPM Green Energy, LLC, a Texas limited liability company.
10.57*   Intellectual Property License dated August 23, 2019, by and between Greenway Technologies, Inc., a Texas corporation, and OPM Green Energy, LLC, a Texas limited liability company.
31.1*   Certification of Kent Harer, President of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification of Ransom Jones, Chief Financial Officer and Principal Accounting Officer of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1*   Certification of Kent Harer, President of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2*   Certification of Ransom Jones, Chief Financial Officer and Principal Accounting Officer of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

 

* Filed herewith.

** Previously filed.

 

54
 

 

SIGNATURES

 

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

 

  GREENWAY TECHNOLOGIES, INC.
   
Date: November 19, 2019.    
     
  By /s/ Kent Harer
    Kent Harer, President
     
  By /s/ Ransom Jones
   

Ransom Jones, Chief Financial Officer and
Principal Accounting Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

55
 

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (hereinafter “Agreement”) dated September 30, 2019 is entered into by and between Southwest Capital Funding, Ltd. A Texas Limited Partnership (“Southwest”) and Greenway Technologies, Inc. f/k/a UMED Holdings Inc. (“Greenway”) (Southwest and Greenway are referred to individually as a “Party” and collectively herein as the “Parties”).

 

RECITALS:

 

WHEREAS, Southwest and Greenway are parties to a lawsuit pending in Hawaii, cause no. 16-1-0342, in the Circuit Court of the Third Circuit, State of Hawaii, styled Southwest Capital Funding, Ltd. v. Mamaki Tea, Inc., et. al. (the “Lawsuit”).

 

WHEREAS, without admission, including liability, and to avoid the time, cost and uncertainty of continued litigation, Southwest and Greenway, for sufficient consideration, including the mutual covenants in this agreement, intend to fully and finally compromise and settle all claims between them to the date of this agreement, all as more particularly hereinafter8 provided.

 

NOW THEREFORE, for the consideration stated herein and the mutual promises and agreements set forth herein, the Parties hereby agree as follows:

 

A. SETTLEMENT

 

1. The Parties agree to the entry of a Stipulated Judgment in the Lawsuit, with Southwest awarded judgment against Greenway in the amount of $740,000.00, in the form attached hereto as Exhibit A.

 

2. Greenway agrees to provide Southwest a Promissory Note in the amount of $525,000.00, 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 copy of the Promissory Note is attached hereto as Exhibit B.

 

3. Greenway agrees to issue and deliver to Southwest 1,000,000 shares of Rule 144 restricted Class A common stock valued at $0.05 per share ($50,000.00 – Income to Southwest/Expense to GWTI), such restrictive legend providing no longer than the statutory six (6) months restrictions. However, provided there is no default on the Promissory Note, Southwest agrees to not sell any stock for at least one year from the date of this Agreement. An event of default under this Settlement Agreement shall be created and exist in the event that Greenway no longer has any securities registered pursuant to Section 12(a) of the Securities Exchange Act of 1934, as amended.

 

4. Southwest agrees to not domesticate, abstract, execute, and/or otherwise attempt to enforce the Stipulated Judgment until such time as Greenway fails to make a payment on the Promissory Note as the same shall become due and payable, and Southwest gives written notice of such default to Greenway and/or their counsel, and such failure continues unremedied for five business days thereafter. In all events, Greenway is entitled to a credit against the Stipulated Judgment for any payment made towards the Promissory Note and a $50,000 credit for the stock delivered pursuant to paragraph 3.

 

SETTLEMENT AGREEMENT – Page 1  
 

 

5. Upon receipt of payment of all amounts due under the Promissory Note, Southwest agrees to release Greenway from all obligations arising under the Stipulated Judgment and to execute and deliver to Greenway a Release of Judgment.

 

B. RELEASE

 

1. For the consideration stated herein, and except for the Stipulated Judgment and the obligations undertaken by the parties in this Settlement Agreement and Promissory Note, Southwest, for itself, its officers, shareholders, directors, agents, assigns, successors, and representatives, hereby releases all claims of whatever nature, known or unknown, which it may have against Greenway, its officers, shareholders, directors, agents, assigns, successors, and representatives, which claims arise from occurrences to the date of this agreement, including without limitation, the suit described herein

 

2. For the consideration stated herein, Greenway for itself, its officers, shareholders, directors, agents, assigns, successors, and representatives, hereby releases all claims of whatever nature, known or unknown, which it may have against Southwest, its officers, shareholders, directors, agents, assigns, successors, and representatives, which claims arise from occurrences to the date of this agreement, including without limitation, the suit described herein.

 

C. REPRESENTATIONS AND WARRANTIES

 

1. As a material inducement to the Parties’ entry into this agreement, each Party unconditionally represents that at the signing of this agreement and delivery of any documents hereunder:

 

i. such Party has the right and power to enter into this agreement;

 

ii. this agreement and all other agreements delivered in connection with this agreement have been or will be duly executed by and delivered by such Party and are valid and binding agreements of such Party enforceable against such Party in accordance with their respective terms;

 

iii. execution and delivery of this agreement and all other documents delivered in connection herewith will not conflict with or result in a breach of any of the terms, conditions, or provisions of or constitute a default under any other agreement or instrument to which such Party is a Party or by which such Party is bound or by any law, statute, regulation, rule, order, writ, injunction, or decree of any governmental instrumentality or court;

 

SETTLEMENT AGREEMENT – Page 2  
 

 

iv. such Party, as such Party’s interest may appear, has complete and unrestricted power to sell, transfer, assign, and deliver to the other the interests and release under this and other documents delivered hereunder; and

 

v. such Party is the owner and holder of all claims and causes of action released in paragraph 3 and has not previously assigned, in whole or in part (by operation of law or otherwise) any such claims or interests.

 

2. The Parties shall hold each other harmless and indemnify each of them and their officers, directors, shareholders, agents, assigns, heirs, successors, and representatives from liability and loss from, and the cost of defense (including without limitation, reasonable attorneys’ and accountants’ fees) of claims arising from breach, failure or falsity of representations and warranties in this agreement, or from the claims of third parties brought over one of the Parties against another.

 

D. GENERAL CONDITIONS

 

1. This agreement shall be governed and construed in accordance with the laws of the State of Texas, enforcement of which by suit on claims arising from breach, failure, or falsity of representations and warranties as provided for herein shall entitle the successful party to reasonable and necessary attorneys’ fees, and is payable and performable in Dallas County, Texas.

 

2. The obligations of the Parties under this agreement shall survive the execution and delivery of this agreement.

 

3. This agreement is binding on and inures to the benefit of the parties hereto and their respective heirs, successors, and assigns.

 

4. The Parties shall execute any additional documents that are reasonably necessary to effectuate or evidence the terms of this agreement.

 

5. The provisions of this Settlement Agreement comprise all the terms, conditions, agreements, and representations of the parties hereto respecting the subject matter of this Settlement Agreement which can be modified or amended only in writing signed by the parties. The Parties represent and acknowledge that each does not rely, has not relied upon, and expressly disclaims any reliance upon any representation by a party, written or oral, except as expressly set forth herein.

 

6. This agreement may be executed and evidenced in multiple counterparts.

 

SETTLEMENT AGREEMENT – Page 3  
 

 

E. NOTICES

 

Any notice or payment required to be given under this agreement shall be made by electronic mail to the following addresses:

 

If to Greenway, notice shall be sent to:

 

 

SIGNED as of the date first noted above.

 

Southwest Capital Funding, Ltd.  

Greenway Technologies, Inc.

f/k/a UMED Holdings Inc.

         
/s/ S. Kent Hope   /s/? Ransom B. Jones
By S. Kent Hope   By Ransom Jones
Its: Manager   Its: Chief Financial Officer

 

SETTLEMENT AGREEMENT – Page 4  
 

 

EXHIBIT A TO SETTLEMENT AGREEMENT

[Stipulated Judgement approved as to form and when fully executed to be inserted here]

 

Carlsmith Ball LLP    

Tom E. Roesser

ASB Tower, Suite 2100

1001 Bishop Street

Honolulu, HI 96813

Tel No. 808.523.2500

Fax No. 808.523.0842

 

3241  

Katherine A. Garson

121 Waianuenue Avenue

P.O. Box 686

Hilo, HI 96721-0686

Tel No. 808.935.6644

Fax No. 808.935.7975

5748  

 

Attorneys for Plaintiff

SOUTHWEST CAPITAL FUNDING, LTD.

 

 

IN THE CIRCUIT COURT OF THE THIRD CIRCUIT

 
STATE OF HAWAI’I

 

SOUTHWEST CAPITAL FUNDING, LTD., a Texas limited partnership,

 

Plaintiff,

 

vs.

 

MAMAKI TEA, INC., a Nevada corporation, MAMAKI OF HAWAII, INC., a Nevada corporation, TIMOTHY ANDREW BENKO a.k.a. TIMOTHY A. BENKO, MARY ROBERTA CAPONE a.k.a. MARY R. CAPONE a.k.a. MARY T. CAPONE, BANK OF AMERICA, N.A., a national association, ROBERT R. ROMER, JOE LACOSTE, CURT BORMAN, UMED HOLDINGS, INC., a Texas corporation, and DOE INDIVIDUALS 1-50, and DOE ENTITIES 1-50,

CIVIL NO. 16-1-0342

(Foreclosure)

 

STIPULATED JUDGMENT; ORDER

 

 

 

 

 

 

 

 

 

No Trial Date Set

 

[caption continued on next page]

 

Defendants.

 

 

MAMAKI TEA, INC., a Nevada corporation; MAMAKI TEA OF HAWAII, INC., a Nevada corporation, and CURT BORMAN,

 

Counterclaimants and

Crossclaimants,

 

vs.

 

SOUTHWEST CAPITAL FUNDING, LTD., and UMED HOLDINGS, INC.,

 

Counterclaim Defendants and

Crossclaim Defendants.

 

 

MAMAKI TEA, INC., a Nevada corporation, MAMAKI OF HAWAII, INC., a Nevada corporation and CURT BORMAN,

 

Third-Party Plaintiffs,

 

vs.

 

TERRY BRAUDRICK and TERRY CHESNUT aka TERRY CHESTNUT,

 

Third-Party Defendants.

 

 

TERRY BRAUDRICK,

 

Third-Party Defendant/

Counterclaimant/Third-Party

Plaintiff,

 

vs.

 

MAMAKI TEA, INC., a Nevada corporation, MAMAKI OF HAWAII, INC., a Nevada corporation, and CURT BORMAN,

 

Counterclaim Defendants,

 

and

 

MAMAKI TEA & EXTRACT, INC., a Nevada corporation, HAWAII BEVERAGES, INC., a Nevada corporation and DOES 1-100,

 

Third-Party Defendants.

 

 

 

     
 

 

STIPULATED JUDGMENT

 

IT IS HEREBY STIPULATED by and between Plaintiff SOUTHWEST CAPITAL FUNDING, LTD. (“Southwest”) and Defendant UMED HOLDINGS, INC. in Civil No. 16-1-0342, and pursuant to Hawai’i Rules of Civil Procedure Rule 54, that final judgment be entered against Defendant UMED HOLDINGS, INC. as follows:

 

1. Judgment is entered in favor of Southwest and against Defendant UMED Holdings, Inc., now known as Greenway Technologies, Inc., in the amount of SEVEN HUNDRED FORTY THOUSAND AND NO/100 DOLLARS ($740,000.00) (the “Judgment Amount”).

 

2. Southwest is also awarded post-judgment interest on the Judgment Amount at the statutory rate of ten percent (10%) per annum from and after the date of the Court’s approval and entry of this Final Judgment.

 

3. This Court shall retain jurisdiction in this matter to resolve any dispute arising from this Stipulated Judgment, and shall have the discretion to award reasonable attorneys’ fees and costs against the non-prevailing party in any such dispute.

 

4. This Stipulated Judgment may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same agreement.

 

DATED: Hilo, Hawai’i, _________________________.

 

   
 

TOM E. ROESSER

KATHERINE A. GARSON

   
 

Attorneys for Plaintiff

SOUTHWEST CAPITAL FUNDING, LTD.

   
   
   
 

Attorneys for Defendant

Greenway Technologies, Inc.

f/k/a UMED Holdings, Inc.

 

APPROVED AND SO ORDERED:

 

 

 

JUDGE OF THE ABOVE-ENTITLED COURT

 

SOUTHWEST CAPITAL FUNDING, LTD. v. MAMAKI TEA, INC., et al., Civil No. 16-1-0342, Circuit Court of the Third Circuit, STIPULATED JUDGMENT; ORDER

 

  2  
 

 

EXHIBIT B TO SETTLEMENT AGREEMENT

[Promissory Note approved as to form and when fully executed to be inserted here]

 

PROMISSORY NOTE

 

$525,000.00

 

STATE OF TEXAS §  
  §  
COUNTY OF DALLAS §  

 

September 26, 2019

 

FOR VALUE RECEIVED, the undersigned, Greenway Technologies, Inc. f/k/a UMED Holdings Inc. (“Maker”), unconditionally promises to pay to the order of Southwest Capital Funding, Ltd. (“Holder”) the principal sum of Five Hundred and Twenty Five Thousand Dollars ($525,000.00), with interest at the rate of 7.7% per annum (calculated on the basis of a 365 day year) on the unpaid principal balance (the “Applicable Rate”). Principal and interest under this note (the “Note”) are due and payable as follows:

 

Semi-annual payments of accrued interest shall be due and payable on February 15 and August 15 of each year, with the first such installment due on February 15, 2020. All principal and any accrued and unpaid interest shall be due and payable on August 15, 2022 (the “Maturity Date”)

 

At the option of the holder of this Note, the entire principal balance and accrued interest owing hereon shall at once become due and payable, without notice or demand, upon the occurrence at any time of any of the following events (“Events of Default”):

 

  (1) failure to make prompt payment of any interest hereon when due;
     
  (2) the termination, dissolution or cessation of the business, or
     
  (3) the bankruptcy or insolvency of, the assignment for the benefit of creditors by, or an appointment of a receiver for, any of the property of any party liable for the payment hereof, whether as maker, endorser, guarantor, surety or otherwise.

 

The failure to exercise the option to accelerate the maturity hereof upon the happening of any one or more of the Events of Default specified herein shall not constitute a waiver of the right of the holder hereof to exercise the same or any other option at that time or at any subsequent time with respect to such uncured default or any other event of uncured default hereunder or under any instrument securing, governing or evidencing the loan evidenced hereby. The remedies of the holder hereof, as provided herein and in any instrument securing, governing or evidencing the loan evidenced hereby, shall be cumulative and concurrent and may be pursued separately, successively or together, as often as occasion therefor shall arise, at the sole discretion of the holder hereof. The acceptance by the holder hereof of any payment hereon which is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the rights of the holder hereof to exercise the foregoing option or any other option granted to the holder hereof in this Note or in any other instrument securing, governing or evidencing the loan evidenced hereby, at that time or at any subsequent time, or nullify any prior exercise of any such option.

 

     
 

 

After an Event of Default or after the maturity hereof, the principal hereof and past-due interest hereon shall bear interest at eighteen percent (18%) per annum.

 

Except as otherwise expressly provided herein, the undersigned and all other parties now or hereafter liable for the payment hereof, whether as endorser, guarantor, surety, or otherwise, severally waive demand, presentment, notice of dishonor, notice of intention to accelerate the indebtedness evidenced hereby, notice of the acceleration of the indebtedness evidenced hereby, diligence in collecting, grace, notice and protest, and consent to all extensions which from time to time may be granted by the holder hereof and to all partial payments hereon, whether before or after the maturity hereof.

 

If this Note is not paid when due, whether at the maturity hereof or by acceleration, or if this Note is collected through a bankruptcy, probate or other court, whether before or after the maturity hereof, the undersigned agrees to pay all costs of collection, including but not limited to reasonable attorneys’ fees, incurred by the holder hereof.

 

All agreements between the undersigned and the holder hereof, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity hereof or otherwise, shall the interest contracted for, charged, received, paid or agreed to be paid to the holder hereof, exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the holder hereof in excess of the maximum lawful amount, the interest payable to the holder hereof shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the holder hereof shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal hereof and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal hereof, such excess shall be refunded to the undersigned. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full period until payment in full of the principal so that the interest hereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the undersigned and the holder hereof.

 

This Note may be prepaid, in whole or in part, at any time and from time to time, without premium, penalty, or notice. Except as otherwise specified herein, any prepayment hereon shall be applied first to accrued interest then due hereon and next to the last maturing installment of principal due hereunder.

 

     
 

 

Any notice or other communication required or permitted hereby, or convenient to the holder, shall be deemed delivered when deposited (a) in a receptacle of the United States Postal Service, as registered or certified mail, return receipt requested, postage prepaid, or (b) with an expedited courier service, fees prepaid and addressed to the undersigned at its address.

 

All obligations, covenants, and terms of payment are expressly performable solely in Dallas County, Texas. The substantive laws of the State of Texas shall govern the validity, construction, enforcement, and interpretation of this Note. In the event of a dispute involving this Note, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

 

Executed the date first above written.

 

  Maker:
   
  Greenway Technologies, Inc.
  f/k/a UMED Holdings Inc.

 

  /s/ Ransom B. Jones
  By: Ransom Jones
  Its: Chief Financial Officer

 

     
 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

OPM GREEN ENERGY, LLC

 

Dated as of August 20, 2019

 

THE MEMBERSHIP INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY JURISDICTION. NO MEMBERSHIP INTEREST MAY BE SOLD OR OFFERED FOR SALE (WITHIN THE MEANING OF ANY SECURITIES LAW) UNLESS A REGISTRATION STATEMENT UNDER ALL APPLICABLE SECURITIES LAWS WITH RESPECT TO THE MEMBERSHIP INTEREST IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS IS THEN APPLICABLE TO THE MEMBERSHIP INTEREST. A MEMBERSHIP INTEREST ALSO MAY NOT BE TRANSFERRED OR ENCUMBERED UNLESS THE APPLICABLE PROVISIONS OF THIS AGREEMENT ARE SATISFIED.

 

   
     

 

LIMITED LIABILITY COMPANY AGREEMENT
OF
OPM GREEN ENERGY, LLC

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS 1
   
1.1 Definitions. 1
1.2 Construction. 6
     
ARTICLE II FORMATION 7
   
2.1 Formation. 7
2.2 Name. 7
2.3 Registered Office and Agent; Principal and Other Offices. 7
2.4 Purpose. 7
2.5 Duration. 7
2.6 No State-Law Partnership 7
2.7 Qualification. 7
     
ARTICLE III MEMBERS; DISPOSITIONS OF MEMBERSHIP INTERESTS; REMOVAL 7
   
3.1 Members. 7
3.2 Withdrawal. 7
3.3 Dispositions. 7
3.4 Admission of New Members. 15
3.5 Interests in a Member. 15
3.6 Transfer upon Termination of Marital Relationship 15
3.7 Liability to Third Parties. 15
3.8 Lack of Authority. 15
3.9 Units. 15
3.10 Profits Interests. 15
     
ARTICLE IV CAPITAL CONTRIBUTIONS 16
   
4.1 Initial Contributions. 16
4.2 Additional Contributions. 16
4.3 Return of Contributions. 16
4.4 Advances by Members. 16
4.5 No Deficit Restoration Obligation. 16
     
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS 16
   
5.1 Distributions. 16
5.2 Allocations of Net Profits and Net Losses. 17
5.3 Income Tax Allocations. 19
5.4 Allocations Upon Transfer. 20
5.5 Capital Accounts. 20
5.6 Amendments for Changes in Income Tax Regulations. 21
5.7 Consent to Allocations. 21
5.8 Withholding. 22

 

  -i-  
     

 

ARTICLE VI MANAGEMENT 22
   
6.1 Management by Manager. 22
6.2 Appointment 23
6.3 Resignation. 23
6.4 Action of the Manager. 23
6.5 No Compensation. 23
6.6 Officers. 23
     
ARTICLE VII ACTIONS AND MEETINGS OF MEMBERS 24
   
7.1 Rights or Powers of the Members. 24
7.2 Voting Rights. 24
7.3 Meetings. 24
7.4 Actions without Meeting. 25
     
ARTICLE VIII STANDARD OF CARE; LIABILITY; INDEMNIFICATION; DUTIES 25
   
8.1 Standard of Care. 25
8.2 Exculpation 25
8.3 Indemnification. 26
8.4 Transactions with Members. 27
8.5 General. 27
     
ARTICLE IX REPRESENTATIONS AND WARRANTIES 27
   
9.1 Representations and Warranties. 27
     
ARTICLE X TAXES 28
     
10.1 Preparation of Tax Returns. 28
10.2 Tax Elections. 28
10.3 Tax Matters Representative. 29
     
ARTICLE XI BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS 29
   
11.1 Books and Records. 29
11.2 Reports. 29
11.3 Accounts. 30
11.4 Restriction on Information Rights. 30
     
ARTICLE XII PURCHASE RIGHTS 30
   
12.1 Purchase Events. 30
12.2 Forfeiture. 33
     
ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION 33
   
13.1 Dissolution. 33
13.2 Liquidation and Termination. 34
13.3 Compliance with Timing Requirements of Regulations. 35
13.4 Termination of the Company. 35

 

  -ii-  
     

 

ARTICLE XIV GENERAL PROVISIONS 35
   
14.1 Offset. 35
14.2 Notices. 35
14.3 Entire Agreement; Supersedure; Additional Agreements. 35
14.4 Effect of Waiver or Consent. 35
14.5 Amendment or Modification. 36
14.6 Binding Effect. 36
14.7 Governing Law; Venue. 36
14.8 Waiver of Jury Trial. 36
14.9 Equitable Remedies. 36
14.10 Attorneys’ Fees. 36
14.11 Severability of Provisions. 37
14.12 Further Assurances. 37
14.13 Waiver of Certain Rights. 37
14.14 Spousal Consents. 37
14.15 Powers of Attorney. 37
14.16 Counterparts. 38

 

EXHIBIT A – Units and Sharing Ratios

 

  -iii-  
     

 

LIMITED LIABILITY COMPANY AGREEMENT
OF
OPM GREEN ENERGY, LLC

 

This Limited Liability Company Agreement (this “Agreement”), dated as of August 20, 2019 (the “Effective Date”), is entered into by and among the Members, as defined below.

 

RECITALS

 

WHEREAS, OPM Green Energy, LLC (the “Company”) was formed pursuant to the filing of a Certificate of Formation (as defined below) with the Secretary of State of the State of Texas on June 7, 2019; and

 

WHEREAS, the Members desire to enter into this Agreement to establish the governance of the Company.

 

AGREEMENT

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein and intending to be legally bound, the parties hereto hereby enter into this Agreement pursuant to the provisions and upon the terms and conditions herein contained, and hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

1.1 Definitions.

 

As used in this Agreement, these terms have the following meanings: 

 

Adjusted Capital Account” means with respect to any Member, the balance in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

 

(i) credit to such Capital Account any amounts which such Member is obligated to restore or is treated as obligated to restore pursuant to Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations or the penultimate sentence in each of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations; and

 

(ii) debit to such Capital Account such Member’s share of the items described in Sections 1.704-1(b)(2)(ii)(d)(4); 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.

 

This definition of Adjusted Capital Account is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistently therewith.

 

Adjustment Period” means any period of time that begins on the date the Certificate of Formation was filed in the office of the Secretary of State of the State of Texas (in the case of the first Adjustment Period) or the day following the end of the immediately preceding Adjustment Period (with respect to each subsequent Adjustment Period) and ends on the first to occur of: (i) the last day of a Fiscal Year; (ii) the day immediately preceding the date of the “liquidation” of a Member’s interest in the Company (within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations); or (iii) the date on which the Company is terminated under Article XIII.

 

Admission Date” has the meaning set forth in Section 3.3(g).

 

Affiliate” means with respect to any Person, (i) any other Person directly or indirectly controlled by, controlling, or under direct or indirect common control with the specified Person, (ii) any member of the Immediate Family of such Person, or (iii) a trust created for the benefit of a member of the Immediate Family of such Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of that Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.

 

Agreement” has the meaning set forth in the preamble hereto.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC] 

 

  Page 1 of 39  
     

 

Applicable Offered Units” shall mean the Offered Units with respect to those Members holding Units.

 

Applicable ROFO Rightholders” shall mean, in the case of a proposed Disposition of Units, all Members (including any Member to whom a Disposition is proposed to be made but excluding Profit Unit Members) other than the Disposing Member.

 

Buyer” has the meaning set forth in Section 12.1(a).

 

Capital Account” has the meaning set forth in Section 5.5.

 

Capital Contribution” means the total amount of cash and the Fair Market Value of any other assets contributed to the Company by a Member, net of liabilities assumed or to which the assets contributed are subject.

 

Certificate of Formation” has the meaning set forth in Section 2.1.

 

Code” means the Internal Revenue Code of 1986, as amended.

 

Company” has the meaning set forth in the recitals hereto.

 

Company Minimum Gain” shall mean the amount computed under Section 1.704-2(d)(l) of the Regulations with respect to the Company’s nonrecourse liabilities as determined under Section 1.752-1(a)(2) of the Regulations.

 

Company Nonrecourse Deductions” shall mean any loss, deduction, or Code Section 705(a)(2)(B) expenditure (or item thereof) that is attributable to nonrecourse liabilities (as defined in Section 1.752-1(a)(2) of the Regulations) of the Company.

 

Consultant” has the meaning set forth in Section 12.1(e).

 

Covered Person” means any Member, Manager or Officer of the Company and any Person of whom such Member, Manager or Officer is the legal representative.

 

Deceased Spouse” has the meaning set forth in Section 3.6.

 

Dispose,” “Disposing,” or “Disposition” means a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance (including by operation of law), or the acts thereof.

 

Disposing Member” has the meaning set forth in Section 3.3(b).

 

Disposition Notice” has the meaning set forth in Section 3.3(b).

 

Disqualification Event” means any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act.

 

Drag-Along Members” has the meaning set forth in Section 3.3(c).

 

Drag-Along Notice” has the meaning set forth in Section 3.3(c).

 

Drag-Along Sale” has the meaning set forth in Section 3.3(c).

 

Dragging Members” has the meaning set forth in Section 3.3(c).

 

Effective Date” has the meaning set forth in the preamble hereto.

 

Electronic Transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved, and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.

 

Exercising Buyer” has the meaning set forth in Section 12.1(b).

 

Fair Market Value” means, with respect to any property, the value that would be obtained in an arm’s length transaction for ownership of such property for cash between an informed and willing seller and an informed and willing purchaser, each with an adequate understanding of the facts and under no compulsion to buy or sell. Except as otherwise described herein, the determination of the Fair Market Value of any property shall be determined in good faith by the Manager.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 2 of 39  
     

 

Fiscal Year” means the fiscal year of the Company ending December 31 of each calendar year.

 

Forfeiting Member” has the meaning set forth in Section 12.2.

 

Forfeiture Event” means a Member’s forfeiture of Profit Units, as set forth in the applicable Unit Award Agreement for each Member in respect of such Member’s Profit Units, as applicable.

 

General Interest Rate” means a rate per annum equal to the lesser of (i) a varying rate per annum that is equal to the interest rate publicly quoted by JPMorgan Chase from time to time as its prime commercial or similar reference interest rate, with adjustments in that varying rate to be made on the same date as any change in that rate, and (ii) the maximum rate permitted by applicable law.

 

Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(i) The initial Gross Asset Value of any asset contributed (or deemed to have been contributed) by a Member to the Company in connection with the execution and delivery of this Agreement and the initial Gross Asset Value of any other asset contributed (or deemed to have been contributed) by a Member to the Company shall be the gross Fair Market Value of such asset.

 

(ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross Fair Market Values as of the following times: (a) the acquisition of an additional Membership Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for a Membership Interest; (c) the liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; or (d) a grant of an interest in the Company as consideration for the provision of services to or for the benefit of the Company by a new or existing Member.

 

(iii) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross Fair Market Value of such asset on the date of the distribution.

 

(iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 732(d), Code Section 734(b), or Code Section 743(b), but only to the extent that (a) such adjustments are taken into account in determining Capital Accounts pursuant to clause (vi) of the definition of Net Profit or Net Loss and (b) an adjustment pursuant to clause (ii) immediately above is not required in connection with the transaction.

 

GWTI” means Greenway Technologies, Inc.

 

Hypothetical Tax Liability” means with respect to any Member as of any particular time of determination the amount of Net Profits (excluding any income from guaranteed payments) allocated to a Member under Section 5.2 for an applicable Adjustment Period in which Net Profits were allocated to such Member, taking into account the amounts and character of such items, multiplied by the Maximum Tax Rate for each such Adjustment Period. The Manager shall determine each Member’s Hypothetical Tax Liability in good faith, and shall base such determination on such reasonable assumptions as the Manager determines in good faith to be appropriate.

 

Immediate Family” of an individual shall mean (i) the individual’s spouse, brothers, sisters, parents, in-laws, children and grandchildren (including legal adoptive relationships in each case) and (ii) the children and grandchildren of the individual’s brothers and sisters (including legal adoptive relationships in each case).

 

[Limited Liability Company Agreement of OPM Green Energy, LLC] 

 

  Page 3 of 39  
     

 

Independent Third Party” means, with respect to any Member, any Person who is not an Affiliate of such Member.

 

Liquidation Value” means the aggregate proceeds which would be received by the Members as described in IRS Notice 2005-43 if (i) the assets of the Company as a going concern were sold at their Fair Market Value; (ii) the Company satisfied and paid in full all of its obligations and liabilities (including all taxes, costs and expenses incurred in connection with such transaction and any reserves established by the Manager for contingent liabilities); and (iii) such net sale proceeds were then distributed in accordance with this Agreement in a liquidation context, all as determined by the Manager in good faith.

 

Manager” means the manager of the Company designated pursuant to Article VI, but does not include any Person who has ceased to be the manager of the Company.

 

Marital Option” has the meaning set forth in Section 3.6.

 

Maximum Tax Rate” for a particular Adjustment Period means the maximum federal income tax rate applicable to individuals under Section 1 of the Code for each such tax year, plus the rate of tax imposed under Section 1411 of the Code for such year.

 

Member” means any Person executing this Agreement as of the Effective Date as a member or hereafter admitted to the Company as a member as provided in this Agreement, but does not include any Person who has ceased to be a member in the Company.

 

Member Nonrecourse Debt” shall mean any nonrecourse debt of the Company that meets the requirements set forth in Section 1.704-2(b)(4) of the Regulations.

 

Member Nonrecourse Debt Minimum Gain” shall mean the minimum gain attributable to Member Nonrecourse Debt as determined under Section 1.704-2(i)(3) of the Regulations.

 

Member Nonrecourse Deductions” shall mean any loss, deduction, or Code Section 705(a)(2)(B) expenditure, or item thereof, that is attributable to a Member Nonrecourse Debt, as determined by Section 1.704-2(i)(2) of the Regulations.

 

Member ROFO Exercise Notice” has the meaning set forth in Section 3.3(b)(iv).

 

Membership Interest” means the interest of a Member in the Company, including rights to distributions (liquidating or otherwise), allocations, information, and to consent or approve.

 

Member Spouse” has the meaning set forth in Section 3.6.

 

Net Profit” or “Net Loss” shall mean, for each Adjustment Period, an amount equal to the Company’s taxable income or loss for such Adjustment Period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

 

(i) Any income of the Company that is exempt from federal income tax or not otherwise taken into account in computing Net Profit or Net Loss shall be added to such taxable income or loss;

 

(ii) Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures under Code Section 704(b), and not otherwise taken into account in computing Net Profit or Net Loss, shall be subtracted from such taxable income or loss;

 

(iii) if the Gross Asset Value of any Company property is adjusted as provided in clause (ii) or (iii) of the definition of Gross Asset Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such taxable income or taxable loss;

 

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(iv) Gain or loss resulting from any disposition of any Company asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value;

 

(v) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there shall be taken into account depreciation on the assets’ respective Gross Asset Values for such Adjustment Period determined in accordance with Section 1.704-1(b)(2)(iv)(g) of the Regulations;

 

(vi) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s Membership Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Net Profit or Net Loss; and

 

(vii) Any income, gain, loss or deduction specially allocated pursuant to this Agreement shall not be included in the determination of Net Profit or Net Loss. The amounts of the items of Company income, gain, loss, or deduction available to be specially allocated pursuant to Sections 5.2(b), 5.2(c), 5.2(d), 5.2(e), 5.2(f) and 5.2(g) shall be determined by applying rules analogous to those set forth in clauses (i) through (vi) above.

 

Non-Disposing Members” has the meaning set forth in Section 3.3(c).

 

Non-Member Spouse” has the meaning set forth in Section 3.6.

 

Offered Units” has the meaning set forth in Section 3.3(b)(i).

 

Officer” and “Officers” have the meanings set forth in Section 6.6.

 

Participation Threshold” has the meaning set forth in Section 3.10(d).

 

Pass-Through Member” has the meaning set forth in Section 10.3.

 

Permitted Disposition” has the meaning set forth in Section 3.3(a).

 

Person” means an individual person, partnership, limited partnership, limited liability company, trust, corporation, joint venture, unincorporated organization, other entity or organization and a governmental entity or any department, agency or political subdivision thereof.

 

Proceeding” has the meaning set forth in Section 8.3(a).

 

Profit Units” means those Units designed with an asterisk on Exhibit A.

 

Profit Unit Members” means any holder of Profit Units other than Tom Phillips, but solely with respect to such Profit Units and not with respect to any other Units held by such Person.

 

Purchase Date” means the date a Purchase Event occurs.

 

Purchase Event” has the meaning set forth in Section 12.1(a).

 

Purchase Interest” has the meaning set forth in Section 12.1(a).

 

Purchasing Rightholders” has the meaning set forth in Section 3.3(b)(vi)(B).

 

Regulations” or “Treasury Regulations” means the income tax regulations promulgated under the Code and effective as of the Effective Date and any future amendments to the regulations and any corresponding provisions of succeeding regulations that are mandatory.

 

Regulatory Allocations” has the meaning set forth in Section 5.2(c).

 

[Limited Liability Company Agreement of OPM Green Energy, LLC] 

 

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Required Interest” means Membership Interests representing an aggregate Sharing Ratio of more than 51% of the Units entitled to vote on a matter; provided, however, that any Profit Units held by Profit Unit Members shall not be taken into account when determining the relative Sharing Ratios for purposes of determining the Required Interest.

 

Revised Partnership Audit Procedures” means the provisions of Subchapter C of Subtitle A, Chapter 63 of the Code, as amended by the Bipartisan Budget Act of 2015, P.L. 114 74 (together with any subsequent amendments thereto, Regulations promulgated thereunder, and published administrative interpretations thereof).

 

ROFO Portion” means, with respect to each Member not Disposing of Units pursuant to Section 3.3(b) at any time, such Member’s pro rata portion in accordance with the number of Units (excluding any Profit Units held by Profit Unit Members) held by each such Member as compared to the total number of Units (excluding any Profit Units held by Profit Unit Members) held by all the Members exercising a purchase right pursuant to Section 3.3(b).

 

ROFO Rightholder Option Period” has the meaning set forth in Section 3.3(b)(iv).

 

Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time.

 

Seller” has the meaning set forth in Section 12.1(a).

 

Sharing Ratio” means, with respect to each Member as of any particular time of determination, the fraction, expressed as a percentage, equal to the quotient of (i) the number of Units held by such Member, divided by (ii) the aggregate number of Units held by all Members. Upon any change in the Sharing Ratios of the Members, the Manager shall amend Exhibit A to reflect such Sharing Ratios.

 

Subscription Documents” has the meaning set forth in Section 14.3.

 

Tax Distributions” has the meaning set forth in Section 5.1(b).

 

Tax Matters Representative” has the meaning set forth in Section 10.3.

 

TBOC” means the Texas Business Organizations Code, as amended from time to time.

 

Unit” means a unit of Membership Interest held by a Member.

 

Unit Award Agreement” means a Unit Award Agreement entered into between the Company and a Member under which Profit Units are granted to such Member.

 

Unvested Unit” means any Profit Unit that is subject to vesting or forfeiture that has not become vested in accordance with the applicable Unit Award Agreement or other grant document that governs the grant of any such Profit Unit.

 

Vested Unit” means any Profit Unit that is subject to vesting or forfeiture that has become vested in accordance with the applicable Unit Award Agreement or other grant document that governs the grant of any such Profit Unit.

 

1.2 Construction.Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine, and neuter. All references to Articles and Sections refer to articles and sections of this Agreement, and all references to Exhibits are to Exhibits attached hereto, each of which is made a part hereof for all purposes. Titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference. Such titles and captions shall not be construed to define, limit, extend or describe the scope of this Agreement nor the intent of any provision hereof. The word “including” (in its various forms) means including without limitation.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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ARTICLE II

FORMATION

 

2.1 Formation. The Company has been organized as a Texas limited liability company by the filing of a Certificate of Formation (the “Certificate of Formation”) under and pursuant to the TBOC.

 

2.2 Name. The name of the Company is “OPM Green Energy, LLC” and all Company business must be conducted in that name or such other names that comply with applicable law as the Manager may select from time to time.

 

2.3 Registered Office and Agent; Principal and Other Offices. The registered office of the Company required by the TBOC to be maintained in the State of Texas shall be the office of the initial registered agent named in the Certificate of Formation or such other office (which need not be a place of business of the Company) as the Manager may designate from time to time in the manner provided by law. The registered agent of the Company in the State of Texas shall be the initial registered agent named in the Certificate of Formation or such other Person or Persons as the Manager may designate from time to time in the manner provided by law. The principal office of the Company in the United States shall be at 892 Meadow Hill Road, Fort Worth, Texas 76108, or such other place as the Manager may designate from time to time, which need not be in the State of Texas, and the Company shall maintain records there as required by the TBOC. The Company may have such other offices as the Manager may designate from time to time.

 

2.4 Purpose. The Company may engage in any lawful act or activity for which a limited liability company may be formed under the TBOC.

 

2.5 Duration. The period of duration of the Company is perpetual, unless the Company dissolves in accordance with the provisions of this Agreement.

 

2.6 No State-Law Partnership The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member or Manager be a partner or joint venturer of any other Member or Manager, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise.

 

2.7 Qualification. The Manager and the Officers may take any and all actions deemed reasonably necessary by the Manager or any of the Officers to qualify the Company in foreign jurisdictions.

 

ARTICLE III

MEMBERS; DISPOSITIONS OF MEMBERSHIP INTERESTS; REMOVAL

 

3.1 Members. The Members of the Company are (a) as of the execution hereof, the Persons set forth on Exhibit A as Members, each of which is admitted to the Company as a member effective contemporaneously with the execution by such Person of this Agreement, and (b) any other Person that is admitted as a member of the Company subsequent to effectiveness of this Agreement in accordance herewith. The capitalization of the Company is set forth in the books and records of the Company and on Exhibit A, as the same may be amended from time to time.

 

3.2 Withdrawal. A Member does not have the right or power to withdraw from the Company as a member.

 

3.3 Dispositions.

 

  (a) Restrictions.

 

(i) Except for Dispositions made pursuant to Section 3.3(b), 3.3(c) or 3.6 or Article XII, a Member may not Dispose of all or any portion of its Units unless such Member obtains the consent of the Manager and the Members holding a Required Interest; provided, however, that no such consent will be required for a Disposition of Units by any Member to any Affiliate of such Member (but only to the extent such Disposition is to an Affiliate described in clause (i) of the definition of “Affiliate” herein), provided that the Disposing Member continues to be liable for its obligations hereunder (a “Permitted Disposition”).

 

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(ii) Notwithstanding anything to the contrary contained herein, no Member may Dispose of all or any portion of its Units at any time if such action would (A) cause the Company to be treated as an association taxable as a corporation for United States Federal income tax purposes, (B) require the Company to become registered under the Securities Exchange Act of 1934, as amended, or (C) subject the Company to the Investment Company Act of 1940, as amended.

 

(iii) Notwithstanding anything to the contrary contained herein, except for a Permitted Disposition or Disposition made pursuant to Section 3.3(c), 3.6, Article XII or the terms of the applicable Unit Award Agreement, no Member may Dispose of all or any portion of any Profit Units.

 

(iv) Any attempted Disposition of Units, other than in strict accordance with this Section 3.3 (including satisfaction of the requirements set forth in Section 3.3(e)), will be, and is hereby declared, null and void ab initio. The Members agree that a breach of the provisions of this Section 3.3 may cause irreparable injury to the Company and to the other Members for which monetary damages (or other remedy at law) are inadequate in view of (A) the complexities and uncertainties in measuring the actual damages that would be sustained by reason of the failure of a Member to comply with such provision and (B) the uniqueness of the Company’s business and the relationship among the Members. Accordingly, the Members agree that the provisions of this Section 3.3 may be enforced by specific performance or injunctive relief as appropriate without the necessity of posting a bond or other security or proving actual damages.

 

(v) In connection with any attempted Disposition of Units, each of the Members has the right to obtain – before the consummation of any proffered Disposition – an independent valuation of the proposed Disposition at the expense of such Member. If any Member wishes to challenge any attempted Disposition of Units on the basis that it does not constitute an arm’s length transaction involving reasonable value for such Units, the Member must do so in writing as soon as practical and the Company, Manager, and Members shall resolve such challenge – informally and then by mediation if necessary – before the attempted Disposition of Units may be consummated and finalized.

 

  (b) Right of First Offer.

 

(i) Except for Permitted Dispositions or Dispositions made pursuant to Section 3.3(c) (after complying with this Section 3.3(b)) or 3.6 or Article XII, this Section 3.3(b) applies to any proposed Disposition of any Units, including a Drag-Along Sale described in Section 3.3(c). If at any time a Member (the “Disposing Member”) desires to Dispose of any of its Units (the “Offered Units”) to an Independent Third Party or another Member, prior to offering such Units to such Person, such Member will, first, obtain the consent of the Manager and, following receipt of such consent, provide written notice (a “Disposition Notice”) to the Company and the Applicable ROFO Rightholders prior to the proposed Disposition. The Disposition Notice must set forth the identity of the Independent Third Party or other Member that is the proposed purchaser, the number of Units the Disposing Member wishes to Dispose of and the consideration, terms and conditions upon which it proposes to Dispose of such Units. The Disposition Notice shall constitute the Disposing Member’s offer to sell the Offered Units to the Applicable ROFO Rightholders for the consideration to be paid by such Independent Third Party or other Member as described in the Disposition Notice, which offer shall be irrevocable for a period of 60 days. The Applicable ROFO Rightholders shall have the rights set forth in this Section 3.3(b).

 

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(ii) Upon receipt of the Disposition Notice, each Applicable ROFO Rightholder shall have the right to purchase the Applicable Offered Units in accordance with the procedures set forth in Section 3.3(b)(iv). Notwithstanding the foregoing, the Applicable ROFO Rightholders may only exercise their right to purchase the Offered Units if, after giving effect to all elections made under this Section 3.3(b), no less than all of the Offered Units will be purchased by the Applicable ROFO Rightholders.

 

(iii) Reserved.

 

(iv) Following delivery of the Disposition Notice, the Applicable ROFO Rightholders shall have the right to purchase the Applicable Offered Units. For a period of 30 days (or in the case of a Drag-Along Sale, five (5) days) following the delivery of the Disposition Notice (such period, the “ROFO Rightholder Option Period”), each Applicable ROFO Rightholder shall have the right to elect irrevocably to purchase all or none of its ROFO Portion of the Applicable Offered Units by delivering a written notice to the Company and the Disposing Member (a “Member ROFO Exercise Notice”) specifying its desire to purchase its ROFO Portion of the Applicable Offered Units, on the terms and respective purchase prices set forth in the Disposition Notice. In addition, each Applicable ROFO Rightholder shall include in its Member ROFO Exercise Notice the number of remaining Applicable Offered Units that it wishes to purchase if any other Applicable ROFO Rightholders do not exercise their rights to purchase their entire ROFO Portions of the Applicable Offered Units. Any Member ROFO Exercise Notice shall be binding upon delivery and irrevocable by the Applicable ROFO Rightholder.

 

(v) The failure of any Applicable ROFO Rightholder to deliver a Member ROFO Exercise Notice by the end of the ROFO Rightholder Option Period shall constitute a waiver of their respective rights of first offer under this Section 3.3(b) with respect to such Disposition of Offered Units, but shall not affect their respective rights with respect to any future Dispositions.

 

(vi) Upon the expiration of the ROFO Rightholder Option Period, the Applicable Offered Units shall be allocated for purchase among the Applicable ROFO Rightholders as follows:

 

(A) First, to each Applicable ROFO Rightholder having elected to purchase its entire ROFO Portion of such Units, such Applicable ROFO Rightholder’s ROFO Portion of such Units; and,

 

(B) Second, the balance, if any, not allocated under clause (A) above, shall be allocated to those Applicable ROFO Rightholders who set forth in their Member ROFO Exercise Notices a number of Applicable Offered Units that exceeded their respective ROFO Portions (the “Purchasing Rightholders”), in an amount, with respect to each such Purchasing Rightholder, that is equal to the lesser of:

 

(1) the number of Applicable Offered Units that such Purchasing Rightholder elected to purchase in excess of its ROFO Portion; or

 

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(2) the product of (x) the number of Applicable Offered Units not allocated under clause (A), multiplied by (y) a fraction, the numerator of which is the offered number of Applicable Offered Units that such Purchasing Rightholder elected to purchase in excess of its ROFO Portion, and the denominator of which is the aggregate number of Applicable Offered Units that all Purchasing Rightholders elected to purchase in excess of their respective ROFO Portion.

 

The process described in clause (ii) shall be repeated until no Offered Units remain or until such time as all Purchasing Rightholders have been permitted to purchase all Applicable Offered Units that they desire to purchase.

 

(vii) In the event that the Applicable ROFO Rightholders shall have, in the aggregate, exercised their respective rights to purchase all and not less than all of the Offered Units, then the Disposing Member shall sell such Offered Units to the Applicable ROFO Rightholders, and the ROFO Rightholders shall purchase such Offered Units, as allocated in accordance with the foregoing, within 60 days following the delivery of the Disposition Notice (which period may be extended for a reasonable time not to exceed 90 days to the extent reasonably necessary to obtain required approvals or consents from any governmental authority); provided that (A) if the consideration set forth in the Disposition Notice is cash consideration, the consideration will be payable in cash unless the Disposing Member agrees to accept non-cash consideration for all or any part of the consideration and (B) if the consideration set forth in the Disposition Notice is non-cash consideration, the consideration may be paid in cash with an equivalent value to such non-cash consideration as determined by the Manager. Each Disposing Member and Applicable ROFO Rightholders shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 3.3(b)(vii), including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate. At the closing of any sale and purchase pursuant to this Section 3.3(b)(vii), the Disposing Member shall deliver to the participating Applicable ROFO Rightholders certificates (if any) representing the Offered Units to be sold, free and clear of any liens or encumbrances (other than those contained in this Agreement), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the purchase price therefor from such Applicable ROFO Rightholders by certified or official bank check or by wire transfer of immediately available funds.

 

(viii) In the event that the Applicable ROFO Rightholders shall not have collectively elected to purchase all of the Offered Units within 30 days (or in the case of a Drag-Along Sale, five (5) business days) following the delivery of the Disposition Notice, then, the Disposing Member may Dispose of all of such Offered Units, at a price per Applicable Offered Unit not less than specified in the Disposition Notice and on other terms and conditions which are not materially more favorable in the aggregate to the proposed purchaser than those specified in the Disposition Notice, but only to the extent that such Disposition occurs within 180 days after expiration of the ROFO Rightholder Option Period (or in the case of a Drag-Along Sale, pursuant to Section 3.3(c)). Any Offered Units not Disposed of within such 180-day period will be subject to the provisions of this Section 3.3(b) upon subsequent Disposition. For the avoidance of doubt, and notwithstanding anything herein to the contrary, the Members agree that in the case of a Drag-Along Sale, if the Applicable ROFO Rightholders have not collectively elected to purchase all of the Offered Units within 5 days following the delivery of the Disposition Notice, the Drag-Along Sale may proceed pursuant to the terms of Section 3.3(c) and no other requirements of this Section 3.3(b) shall apply.

 

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  (c) Drag-Along Rights.

 

(i) If the Members holding a Required Interest (the “Dragging Members”) elect to Dispose of all of their Units to any Person other than a Person to which a Permitted Disposition may be made, or cause a sale of substantially all of the assets of the Company then the Dragging Members will, after complying with the obligations set forth in Section 3.3(b), have the right to elect that all Members (the “Drag-Along Members”) Dispose of all of their Units on the same terms and conditions set forth in the Disposition Notice (a “Drag-Along Sale”) by delivering notice (a “Drag-Along Notice”) to the Drag-Along Members not later than 20 days prior to the closing of such Disposition. The Drag-Along Notice shall provide the anticipated closing date for the Drag-Along Sale and must set forth the consideration, terms and conditions of the Drag-Along Sale. Each Member agrees that, with respect to a Drag-Along Sale:

 

  (A) if such transaction requires approval of the Members, to (1) vote (in person, by proxy or by action by written consent, as applicable) all Units that any such Member owns or over which such Member otherwise exercises voting power in favor of such Drag-Along Sale and (2) vote in opposition to any and all other proposals that could reasonably be expected to delay or impair the ability of the Members or the Company to consummate such Drag-Along Sale;
     
  (B) if such transaction is a Disposition of Units, to sell all Units beneficially held by such Member (free and clear of any impermissible encumbrances) to the Person to whom the Dragging Members propose to sell their Units, and on the same terms and conditions as the Dragging Members;
     
  (C) to execute and deliver all related documentation and take such other action in support of the Drag-Along Sale as shall reasonably be requested by the Dragging Members or the Company in order to carry out the terms and provision of this Section 3.3(c), including delivering to the Dragging Members such instrument of transfer as is sufficient at law to assign and transfer such Units and executing any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, filing and any similar or related documents;
     
  (D) not to deposit, and to cause its Affiliates not to deposit, except as provided in this Agreement, any Units owned by such Member in a voting trust or subject any Units to any arrangement or agreement with respect to the voting of such Units, unless specifically requested to do so by the proposed acquirer in connection with the Drag-Along Sale;
     
  (E) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Drag-Along Sale; and
     
  (F) if such transaction includes the sale, contribution, exchange, redemption, cancellation or other disposition of securities convertible into or exchangeable for Units, or options, warrants or other rights to purchase such equity securities, each Member holding such securities shall sell, contribute, exchange, redeem, cancel or otherwise dispose of such securities or options, warrants or other rights on the terms and conditions approved by the Dragging Members.

 

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(ii) If, within 90 days after delivery to the Drag-Along Members of a Drag-Along Notice (which 90-day period will be extended if any of the transactions contemplated by the Drag-Along Sale are subject to regulatory approval until the expiration of 10 days after all such approvals have been received, but in no event later than 120 days following delivery to the Drag-Along Members of the Drag-Along Notice), the Drag-Along Sale has not been consummated on substantially the same terms and conditions set forth in the Disposition Notice, the Dragging Members will not conduct any Disposition of its Units without again complying with Section 3.3.

 

(iii) Concurrently with the consummation of a Drag-Along Sale, the Dragging Members will (A) notify the Drag-Along Members of the closing of such sale, (B) remit to each Drag-Along Member the total consideration for the Units held by such Drag-Along Member, and (C) promptly after the consummation of the Drag-Along Sale furnish such other evidence of the consummation, including the date thereof, and the terms of the Disposition as may be reasonably requested by the Drag-Along Members.

 

(iv) Upon the consummation of a Drag-Along Sale, all of the Members will receive the same form of consideration. The consideration to be paid to the Members in a Drag-Along Sale shall be allocated among the Members in the same proportion as the proceeds, if any, such Members would have received if all of the assets of the Company were sold for the aggregate consideration to be paid to the Members in a Drag-Along Sale and the Company were then liquidated in accordance with this Agreement.

 

(v) Each Drag-Along Member shall execute the applicable purchase agreement, if applicable, and make or provide the same representations, warranties, covenants, indemnities, and agreements (including with respect to any escrow, holdback or similar arrangement) as the Dragging Members make or provide in connection with the Drag-Along Sale; provided, that each Drag-Along Member shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Units, authorization, execution, and delivery of relevant documents, enforceability of such documents against the Drag-Along Member, and other matters relating to such Drag-Along Member, but not with respect to any of the foregoing with respect to any other Members or their Units; provided, further, that all representations, warranties, covenants, and indemnities shall be made by the Dragging Members and each Drag-Along Member severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Dragging Members and each Drag-Along Member, in each case in an amount not to exceed the aggregate proceeds received by the Dragging Members and each such Drag-Along Member in connection with the Drag-Along Sale.

 

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(d) Admission of Assignee as a Member. Any Person that acquires any Units through a Disposition has the right to be admitted to the Company as a Member only (i) if such Disposition is effected in strict compliance with this Section 3.3 and (ii) in the case of any Disposition other than a Permitted Disposition to an Affiliate controlled by the Disposing Member or a Disposition made pursuant to Section 3.3(c), if such admission as a Member is approved by the Manager. Any Person that acquires any Units through a Permitted Disposition to an Affiliate controlled by the Disposing Member or a Disposition made pursuant to Section 3.3(c), in each case in strict compliance with this Section 3.3, shall automatically be admitted as a Member. The Manager shall amend Exhibit A to reflect any admission of an assignee as a Member as permitted by this Section 3.3, which amendment shall not require the consent of any Member.

 

(e) Requirements Applicable to Dispositions and Admissions. In addition to the requirements set forth in Sections 3.3(a) through 3.3(d), any Disposition of any Units (other than pursuant to Section 3.6 or Article XII) and any admission of an assignee as a Member will also be subject to the following requirements, and such Disposition (and admission, if applicable) will not be effective unless such requirements are complied with; provided, however, that the Manager, in its sole and absolute discretion, may waive any of the following requirements:

 

(i) The following documents must be delivered to the Company and must be reasonably satisfactory, in form and substance, to the Manager:

 

(A) A copy of the instrument pursuant to which the Disposition is effected.

 

(B) An instrument, executed by the Members making the Disposition and their assignee(s), containing the following information and agreements, to the extent they are not contained in the instrument described in the foregoing subsection (A): (1) the notice address of the assignee(s); (2) the portion of the Units to be held after the Disposition by the Members making the Disposition and their assignee(s); (3) the assignee(s)’s ratification of this Agreement and agreement to be bound by it, and affirmation that any representations and warranties of the assignee(s) that are required by the Company, in its reasonable discretion, are true and correct (which agreement shall include the assignee(s)’ notice address for purposes of Section 14.2); and (4) representations and warranties by the Members making the Disposition and their assignee(s) that the Disposition and admission are being made in accordance with all laws and all transfer requirements under this Section 3.3.

 

(C) Unless the Units subject to the Disposition are registered under the Securities Act and any applicable state securities laws, a favorable opinion of legal counsel reasonably acceptable to the Manager, to the effect that the Disposition and admission are being made pursuant to a valid exemption from registration under those laws and in accordance with those laws.

 

(D) An opinion of tax counsel reasonably acceptable to the Manager that such Disposition will not, alone or in combination with any earlier or scheduled transactions, cause the Company to cease to be a partnership for federal income tax purposes. To the extent an acceptable tax opinion is not provided, the Disposing Member may instead provide a full indemnification (on an after tax basis) reasonably acceptable to the Manager indemnifying the members not disposing of their Units (the “Non-Disposing Members”) and their Affiliates against any adverse tax consequences of such Disposition having an effect described in such clause, including any interest, penalties and reasonable costs.

 

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(ii) The Disposing Member and its assignee(s) will pay, or reimburse the Company and the Non-Disposing Members for, all reasonable costs and expenses incurred by the Company and the Non-Disposing Members in connection with the Disposition and admission, including the reasonable legal fees incurred in connection with the legal opinions referred to in the foregoing subsection (i), on or before the tenth day after the receipt by that Person of an invoice for the amount due.

 

(iii) No Disposition of Units will effect a release of the Disposing Member from any liabilities to the Company or the other Members incurred prior to the effective date of such Disposition.

 

(iv) The Disposition will not result in a default under, breach of any material obligation contained in, or cause the failure of a material condition contained in, any material agreement to which the Company is a party, unless a consent to or waiver of such default, breach or failure of condition has been obtained from the other party or parties to such agreement.

 

(f) Assignee Rights. A Disposition made in conformance with Section 3.3 shall be effective as of the date of the Disposition and shall be shown on the books and records of the Company. All items of income, gain, loss, deduction and credit shall be allocated between the Disposing Member and the assignee according to Section 706 of the Code. Distributions with respect to Units Disposed in a Disposition made before the effective date of such Disposition shall be paid to the Disposing Member, and distributions with respect to Units Disposed in a Disposition made after such date shall be paid to the assignee. Unless and until a Person that acquires Units through a Disposition becomes a Member in accordance with Section 3.3(d), such Person shall not be entitled to any of the rights granted to a Member hereunder or under applicable law, other than the rights granted specifically to assignees pursuant to this Section 3.3(f) and to have the other rights granted to assignees as required by the TBOC; provided that, without relieving any Disposing Member from any such limitations or obligations and as more fully described in Section 3.3(g), such Person shall be bound by any limitations and obligations of a Member contained herein by which a Member would be bound on account of the ownership of Units (including the obligation, if any, to make and return Capital Contributions on account of such Units or to Dispose of such Units pursuant to Section 3.3(c), Section 3.6 or Article XII).

 

(g) Disposing Member’s Rights and Obligations. Any Member who shall Dispose of any Units or any portion of Membership Interests shall cease to be a Member with respect to such Units or portion of Membership Interests and shall no longer have any rights or privileges with respect to such Units or portion of Membership Interests. Unless and until the assignee is admitted as a Member in accordance with the provisions of this Section 3.3 (the “Admission Date”), (i) such assigning Member shall retain all of the duties, liabilities and obligations of a Member with respect to such Units or portion of Membership Interests, including the obligation (together with its assignee pursuant to Section 3.3(f)) to make and return Capital Contributions on account of such Units or portion of Membership Interests pursuant to the terms of this Agreement and (ii) the Manager may, in its sole discretion, reinstate all or any portion of the rights and privileges of such assigning Member with respect to such Units or portion of Membership Interests for any period of time prior to the Admission Date. Nothing contained herein shall relieve any Person who Disposes of any such Units or portion of Membership Interests from any liability of such Person to the Company or the Members with respect to such Units or portion of Membership Interests that may exist on the Admission Date or that is otherwise specified in the TBOC and incorporated into this Agreement or for any liability to the Company or any other Person or for any breaches of any representations, warranties or covenants by such Person (in its capacity as a holder of Membership Interests or any portion thereof) contained herein or in the other agreements with the Company.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 14 of 39  
     

 

3.4 Admission of New Members. Subject to Sections 3.9 and 4.2, additional Persons may be admitted to the Company as Members and Units may be issued to those Persons upon obtaining with the unanimous, written approval of the (i) Manager, (ii) Mabert, LLC, and (iii) Greenway Technologies, Inc. (“GWTI”). An admission of a new Member is effective only after the new Member has executed a ratification of this Agreement and an agreement to be bound by it, and affirmation that that any representations and warranties of the new Member that are required by the Company, in its reasonable discretion, are true and correct (which agreement shall include the new Member’s notice address for purposes of Section 14.2). The Manager shall amend Exhibit A and the relevant provisions of this Agreement to reflect any admission of a new Member and the issuance of additional Units, which amendment shall not require the consent of any Member.

 

3.5 Interests in a Member. Without the consent of the Manager, a Member that is not a natural person may not cause or permit an interest, direct or indirect, in itself to be Disposed of such that, after the Disposition, such Member shall cease to be controlled by substantially the same Persons who control it as of the date of its admission to the Company. On any breach of the provisions of the preceding sentence, the Company shall have the option to buy, and on exercise of that option the breaching Member shall sell, the breaching Member’s Membership Interest, all in accordance with Article XII as if there had been a Purchase Event with respect to the Membership Interest held by such Member.

 

3.6 Transfer upon Termination of Marital Relationship. The interest in the Company of each Person (a) who was married to a Member and who acquired his or her interest in the Company as a result of a divorce, marital dissolution or agreement relating thereto or pursuant to a partition or similar agreement or (b) who acquired his, her or its interest in the Company as a beneficiary or distributee of the assets of any deceased Person (whether pursuant to a will, intestate succession or otherwise) who was married to a Member (a “Deceased Spouse”) and who was not already a Member immediately prior to such distribution or bequest, is subject to an option to purchase (the “Marital Option”) in favor of the Member from whom the interest was acquired with respect to any acquisition described in the preceding clause (a) hereof or the Member who was married to the Deceased Spouse immediately prior to the death of the Deceased Spouse with respect to any acquisition further described in the preceding clause (b) hereof (either the “Member Spouse”). Upon the exercise of a Marital Option, the Person who owns the interest in the Company subject to the Marital Option (the “Non-Member Spouse”) must sell the interest in the Company at the price and on the other terms and conditions agreed upon by the Non-Member Spouse and the Member Spouse. If the purchase of an interest in the Company is not completed (whether by reason of a failure to exercise the Marital Option or to agree upon price, terms or conditions or any other reason) within 60 calendar days after the Marital Option becomes exercisable, the failure will constitute a Purchase Event (as defined in Section 12.1(a)) with regard to the interest in the Company covered by that Marital Option, and the provisions of Article XII will apply, provided that in no event will the Non-Member Spouse who owns the interest subject to the Marital Option have any right to purchase the interest in the Company of any Person.

 

3.7 Liability to Third Parties. No Member shall be liable for the debts, obligations or liabilities of the Company, including under a judgment decree or order of a court.

 

3.8 Lack of Authority. No Member, in its capacity as such, has the authority or power to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company.

 

3.9 Units. General. The Membership Interests of the Members shall be represented by Units, which may be divided into one or more types, classes or series, with each type or class or series having the rights and privileges, including voting rights, if any, set forth in this Agreement. A Membership Interest shall for all purposes be personal property. No Member has any interest in specific assets or property of the Company. Ownership of a Unit (or fraction thereof) shall not entitle a Member to call for a partition or division of any asset or property of the Company or for any accounting.

 

(a) Authorized Units. The Company may issue up to 1,000 Units in accordance with this Agreement, or such greater number of Units as unanimously approved in writing by the (i) Manager, (ii) Mabert, LLC, and (iii) GWTI. The Company may issue fractional Units. The Company shall maintain a schedule of all Members from time to time with the Units held by them (as the same may be amended, modified or supplemented from time to time in accordance with the terms of this Agreement), a copy of which as of the Effective Date is attached hereto as Exhibit A.

 

(b) Voting. Subject to Article VII, the holders of Units shall vote together as a single class; provided that the holders of Profit Units that are Profit Unit Members may not vote such Profit Units on any matters except as expressly set forth herein or as required by non-waivable provisions of the TBOC.

 

(c) Uncertified Units. Units shall be recorded in book-entry form and no Member shall have the right to demand that the Company produce and/or deliver certificates representing such Units.

 

3.10 Profits Interests.

 

(a) All Profit Units are anticipated to be “profits interests” (within the meaning of Rev. Proc. 93-27, 1993-2 C.B. 343 (1993))) for U.S. federal income tax purposes with the recipient’s participation limited to the income and asset appreciation of the Company arising after the date of issuance of any such Profit Units. Additional Profit Units may be issued as determined by the Manager and shall be issued pursuant to a Unit Award Agreement.

 

(b) All Profit Units will be subject in all respects to the terms of any applicable award agreement entered into in connection with the grant or issuance of such Profit Units, including, without limitation, provisions in any applicable award agreement providing for vesting, forfeiture and repurchase with respect to the Profit Units.

 

(c) Immediately upon receipt of Profit Units, the Member will have no initial Capital Account balance and the Profit Units received shall not entitle such Person to any portion of the capital of the Company at the time of such Person’s admission to the Company as a Member, such that if the Company’s assets were sold at Fair Market Value immediately after the grant to such Member of Profit Units and the proceeds distributed in complete liquidation of the Company, the Profit Units so received would entitle such Member to receive no share of those proceeds. In connection with any issuance of Profit Units, the Capital Accounts of the then existing Members shall be adjusted to reflect the Liquidation Value.

 

(d) Upon the issuance of any Profit Units, the Company shall specify the “Participation Threshold” applicable to such Profit Units. The Participation Threshold for Profit Units shall mean an amount equal to the Liquidation Value of the Company as of the date of issuance; provided, however, the Participation Threshold shall not be less than zero dollars ($0). The grant of Profit Units that is intended to constitute a profits interest to a Member is intended to comply with Rev. Proc. 93-27, 1993-2 CB 343 (1993) and Rev. Proc. 2001-43, 2001-2 CB 191 (2001) and shall be interpreted consistently therewith.

 

(e) In connection with the issuance of any Profit Units, the Manager is hereby authorized and directed to elect to apply the safe harbor set forth in Proposed Treasury Regulation § 1.83-3(1) (under which the Fair Market Value of such Profit Units that are granted in connection with the performance of services is treated as being equal to the Liquidation Value of that interest) and to file a “liquidation value” election pursuant to Section 83(b) of the Code with respect to the Profit Units (pursuant to Treasury Notice 2005-43 and any succeeding guidance or authority issued by the Internal Revenue Service with respect thereto).

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 15 of 39  
     

 

ARTICLE IV
CAPITAL CONTRIBUTIONS

 

4.1 Initial Contributions. Upon the execution of this Agreement, each Member has contributed cash and other property reflected in the books and records of the Company with respect to such Member and shall receive the number of Units set forth opposite such Member’s name on Exhibit A. The initial Sharing Ratios of the Members are set forth on Exhibit A. 

4.2 Additional Contributions. If at any time after the Effective Date, the Manager determines to raise capital in excess of the Capital Contributions described in Section 4.1 to properly carry out or further the business of the Company, the Manager shall have the right to raise such additional capital and, to the extent the Person(s) investing such capital are not already Members but subject to the provisions of Sections 3.4, 3.9 and 6.1(b), to admit such Person(s) as Additional Members. No Member shall have any obligation to make any additional Capital Contributions without its consent.

 

4.3 Return of Contributions. A Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member’s Capital Contributions.

 

4.4 Advances by Members. If the Company does not have sufficient cash to pay its obligations, any Member(s) that may agree to do so with the consent of the Manager may advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 4.4 shall constitute a loan from the Member to the Company, bear interest at the General Interest Rate from the date of the advance until the date of payment, and is not a Capital Contribution.

 

4.5 No Deficit Restoration Obligation. A Member is not required to contribute or lend any cash or property to the Company to enable the Company to return any other Member’s Capital Contributions or to make any distribution to any other Member, even if such first Member has a deficit balance in its Capital Account. 

 

ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS

 

5.1 Distributions.

 

(a) From time to time the Manager shall determine to what extent (if any) the Company’s cash on hand exceeds its current and anticipated needs, including for operating expenses, debt service and a reasonable contingency reserve. If the Manager determines that such an excess exists, the Manager may, in its discretion, cause the Company to distribute such excess to all Members pro rata in proportion to their relative Sharing Ratios; provided, however, that 100% of any distributable cash obtained by the Company as a result of the sale of any property or assets leased to the Company under the Lease Agreement, dated as of July 22, 2019, by and between Mabert, LLC and the Company, shall, first, be distributed to Mabert, LLC until Mabert, LLC has received an amount equal to its Capital Contributions and, then, shall be distributed to all Members pro rata in proportion to their relative Sharing Ratios; provided, further, that any Unvested Units shall not be taken into account when determining the relative Sharing Ratios for purposes of this Section 5.1(a). Notwithstanding the foregoing provisions of this Section 5.1(a), a holder of Profit Units shall begin to share in distributions pursuant to this Section 5.1(a) in respect of such Profit Units only from and after the point at which the aggregate amount of distributions pursuant to this Section 5.1(a) with respect to all Units (other than Unvested Units) that were outstanding immediately prior to the issuance of such Profit Units is equal to the Participation Threshold for such Profit Units, increased by any additional Capital Contributions made after the issuance of such Profit Units. Any amounts not distributed with respect to any Profit Units based on a Participation Threshold limitation shall be reallocated to the other Members not subject to such limitation as if such Profit Units had not been issued, all as determined and interpreted in good faith by the Manager.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 16 of 39  
     

 

(b) From time to time the Manager shall determine to what extent (if any) the Company’s cash on hand exceeds its current and anticipated needs, including for operating expenses, debt service and a reasonable contingency reserve. If the Manager determines that such an excess exists, the Manager may, in its discretion, cause the Company to distribute such excess to all Members pro rata in proportion to their relative Sharing Ratios.

 

(c) Prior to the application of Section 5.1(a), provided that funds are available therefor and except as otherwise prohibited by law, excess cash of the Company may be distributed to each Member to provide such Member with cash to pay all or any portion of such Member’s Hypothetical Tax Liability after taking into consideration the cumulative aggregate distributions previously made to such Member pursuant to this Section 5.1(b) since the date of this Agreement and pursuant to Section 5.1(a) as of the first day of the applicable Adjustment Period (the “Tax Distributions”). Tax Distributions may be made on an annual or other basis in a manner reasonably determined by the Manager to enable the Members to satisfy both estimated and final tax payment requirements. To the extent any Tax Distribution is made to a Member pursuant to this Section 5.1(b), the future distributions to such Member pursuant to Section 5.1(a) or Section 13.2(d) shall be reduced by the amount of any prior Tax Distributions pursuant to this Section 5.1(b) until the amount of aggregate distributions received by such Member are equal to the amount such Member would have received had this Section 5.1(b) not been in effect.

 

(d) Notwithstanding anything to the contrary contained herein, the Members hereby acknowledge and agree that the Company’s ability to make any distributions to its Members may be subject to restrictions under applicable law and/or the satisfaction of certain covenants and approvals pursuant to loans with third parties and/or associated security agreements or mortgages to which the Company is a party or by which its assets may be bound and that the distributions due to the Members pursuant to this Agreement may be prohibited by such applicable law, loans and/or security agreements.

 

5.2 Allocations of Net Profits and Net Losses. General Profit and Loss Allocations.

 

(a) For each Fiscal Year (or portion thereof), except as otherwise provided in this Agreement, Net Profits and Net Losses (and, to the extent necessary, individual items of income, gain, loss or deduction) of the Company shall be allocated among the Members in a manner such that, after giving effect to the special allocations set forth in Sections 5.2(b) and 5.2(c), the Capital Account balance of each Member, immediately after making such allocations, is, as nearly as possible, equal to (i) the distributions that would be made to such Member pursuant to Section 13.2(d) if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their Gross Asset Value, all Company liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Gross Asset Value of the assets securing such liability), and the net assets of the Company were distributed, in accordance with Section 13.2 (d), to the Members immediately after making such allocations, minus (ii) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

 

(b) Special Allocations. Notwithstanding any other provisions of this Section 5.2, the following special allocations shall be made for each taxable period:

 

(i) Notwithstanding any other provision of this Section 5.2, if there is a net decrease in Minimum Gain during any taxable period, each Member shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(6), (g)(2) and (j)(2)(i). For purposes of this Section 5.2(b), each Member’s Capital Account shall be determined and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.2 with respect to such taxable period. This Section 5.2(b)(i) is intended to comply with the partnership minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 17 of 39  
     

 

(ii) Notwithstanding the other provisions of this Section 5.2 (other than (i) above), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any taxable period, any Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Section 1.704-2(i)(4) and (j)(2)(ii). For purposes of this Section 5.2(b) each Member’s Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.2, other than Section 5.2(b)(i) above, with respect to such taxable period. This Section 5.2(b)(ii) is intended to comply with the partnership nonrecourse debt minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(iii) Except as provided in Sections 5.2(b)(i) and 5.2(b)(ii) above, in the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by such Treasury Regulation, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Sections 5.2(b)(i) and 5.2(b)(ii).

 

(iv) In the event any Member has a deficit balance in its Adjusted Capital Account at the end of any taxable period, such Member shall be specially allocated items of Company income or gain in the amount of such excess as quickly as possible; provided, however, that an allocation pursuant to this Section 5.2(b)(iv) shall be made only if and to the extent that such Member would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.2(b) have been tentatively made as if this Section 5.2(b) were not in this Agreement.

 

(v) Nonrecourse Deductions for any taxable period shall be allocated to the Members in proportion to the last allocation of Net Profits or Net Losses allocated pursuant to Section 5.2(a) for such period.

 

(vi) Member Nonrecourse Deductions for any taxable period shall be allocated 100% to the Member that bears the Economic Risk of Loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704 2(i). If more than one Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such Economic Risk of Loss.

 

(vii) To the extent an adjustment to the tax basis of any Company asset pursuant to section 734(b) or 743(b) of the Code is required, pursuant to section 1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining Adjusted Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such section of the Regulations.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 18 of 39  
     

 

(viii) No amount of loss or deduction shall be allocated pursuant to Section 5.2 to the extent that such allocation would cause any Member to have a deficit balance in its Adjusted Capital Account at the end of such period (or increase any existing deficit balance in its Adjusted Capital Account). All loss and deductions in excess of the limitation set forth in the preceding sentence shall be allocated among such other Members, who have positive Adjusted Capital Account balances, in proportion to their respective Membership Interests until each Member’s Adjusted Capital Account balance is reduced to zero.

 

(c) Curative Allocation. The allocations set forth in Section 5.2(b) (other than Section 5.2(b)(vii)) (the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 5.2(c). Therefore, notwithstanding any other provision of this Article V (other than the Regulatory Allocations), but subject to the Code and the Treasury Regulations, the Board shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement. In exercising its discretion under this Section 5.2(c), the Board shall take into account future Regulatory Allocations that, although not yet made, are likely to offset other Regulatory Allocations previously made.

 

(d) Profits Interests. Notwithstanding any other provisions of this Agreement, all outstanding Unvested Units shall be treated as Vested Units for purposes of allocating Net Profits and Net Losses pursuant to this Section 5.2 (including for the purposes of determining amounts distributable to the Members in the case of any hypothetical distribution or liquidation).

 

5.3 Income Tax Allocations.

 

(a) Except as provided in this Section 5.3, each item of income, gain, loss and deduction of the Company for federal income tax purposes shall be allocated among the Members in the same manner as such items are allocated for book purposes under Section 5.2.

 

(b) The Members recognize that there may be a difference between the Gross Asset Value of a Company asset and the asset’s adjusted tax basis at the time of the property’s contribution or revaluation pursuant to this Agreement. In such a case, all items of tax depreciation, cost recovery, amortization, and gain or loss with respect to such asset shall be allocated among the Members to take into account the disparities between the Gross Asset Values and the adjusted tax basis with respect to such properties in accordance with the provisions of sections 704(b) and 704(c) of the Code and the Treasury Regulations under those sections; provided, however, that any tax items not required to be allocated under sections 704(b) or 704(c) of the Code shall be allocated in the same manner as such gain or loss would be allocated for book purposes under Section 5.2. The Manager shall choose an allocation method permitted by the Treasury Regulations and make any elections or other decisions relating to such allocations.

 

(c) All items of income, gain, loss, deduction and credit allocated to the Members in accordance with the provisions hereof and basis allocations recognized by the Company for federal income tax purposes shall be determined without regard to any election under Section 754 of the Code which may be made by the Company; provided, however, such allocations, once made, shall be adjusted as necessary or appropriate to take into account the adjustments permitted by sections 734 and 743 of the Code.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 19 of 39  
     

 

(d) If any deductions for depreciation, cost recovery or depletion are recaptured as ordinary income upon the sale or other disposition of Company properties, the ordinary income character of the gain from such sale or disposition shall be allocated among the Members in the same ratio as the deductions giving rise to such ordinary income character were allocated.

 

5.4 Allocations Upon Transfer. All items of income, gain, loss, deduction and credit allocable to Units that may have been transferred shall be allocated between the transferor and the transferee based on the portion of the calendar year during which each was recognized as the owner of such Units, without regard to the results of Company operations during any particular portion of that calendar year and without regard to whether cash distributions were made to the transferor or the transferee during that calendar year; provided, however, that this allocation must be made in accordance with a method permissible under Code Section 706 and the regulations thereunder. If any Units are Disposed of or redeemed in compliance with the provisions of this Agreement, all distributions with respect to which the record date is before the date of such Disposition or redemption shall be made to the Disposing Member, and all distributions with respect to which the record date is after the date of such Disposition, in the case of a Disposition other than a redemption, shall be made to the transferee.

 

5.5 Capital Accounts. A separate capital account (“Capital Account”) shall be maintained for each Member, as follows:

 

(a) There shall be credited to each Member’s Capital Account the amount of any cash actually contributed by such Member to the capital of the Company (or deemed contributed pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(c)), the Gross Asset Value of any property contributed by such Member to the capital of the Company (net of any liabilities secured by such property that the Company is considered to assume or to take subject to under Code Section 752) and such Member’s share of the Net Profit (and all items thereof) of the Company and any items of net income or gain specially allocated to the member in accordance with Section 5.2 (b) or (c) There shall be charged against each Member’s Capital Account the amount of all cash distributed to such Member by the Company (or deemed distributed pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(c)), the Gross Asset Value of any property distributed to such Member by the Company (net of any liability secured by such property that the Member is considered to assume or take subject to under Code Section 752) and such Member’s share of the Net Loss or items of expenses, education or loss specially allocated to the member in accordance with Section 5.2 (b) or (c). Company Nonrecourse Deductions and Member Nonrecourse Deductions (and all items thereof) of the Company.

 

(b) If the Company at any time distributes any of its assets in kind to any Member, the Capital Account of each Member shall be adjusted to account for that Member’s allocable share (as determined under Section 5.2) of the Net Profit or Net Loss that would have been realized by the Company had it sold the assets that were distributed at their respective Gross Asset Values immediately prior to their distribution.

 

(c) Any adjustments to the tax basis (or Gross Asset Value) of Company property under Code Sections 732, 734 or 743 will be reflected as adjustments to the Capital Accounts of the Members, only in the manner and to the extent provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(d) Upon the decision of the Manager, the Capital Accounts of the Members shall be adjusted to reflect a revaluation of Company property to its Gross Asset Value on the date of adjustment upon the occurrence of any of the following events:

 

(i) An increase in any new or existing Member’s Membership Interest resulting from the contribution of money or property by such Member to the Company,

 

(ii) Any reduction in a Member’s Membership Interest resulting from a distribution to such Member in redemption of all or part of its Membership Interest, unless such distribution is pro rata to all Members in accordance with their respective allocable shares of Company property, and

 

(iii) Whenever otherwise allowed under Treasury Regulations Section 1.704-1(b)(2)(iv)(f).

 

The adjustments to Capital Accounts shall reflect the manner in which the unrealized Net Profit or Net Loss (and items in the nature of income and loss) inherent in the property would be allocated (as determined under Section 5.2) if there were a disposition of the Company’s property at its Gross Asset Value on the date of adjustment.

 

(e) For purposes of Section 5.2, a Member’s Capital Account shall be reduced by the net adjustments, allocations and distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) which as of the end of the Company’s taxable year are reasonably expected to be made to such Member, and shall be increased by the sum of (i) any amount which the Member is required to restore to the Company upon liquidation of its Membership Interest in the Company (or which is so treated pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c)) pursuant to the terms of this Agreement or under state law, (ii) the Member’s share (as determined under Treasury Regulations Section 1.704-2(g)(1)) of the Company Minimum Gain, (iii) the Member’s share (as determined under Treasury Regulations Section 1.704-2(i)(5)) of Member Nonrecourse Debt Minimum Gain and (iv) the Member’s share (as determined under Section 752 of the Code) of any recourse indebtedness of the Company to the extent that such indebtedness could not be repaid out of the Company’s assets if all of the Company’s assets were sold at their respective Gross Asset Values as of the end of the Adjustment Period and the proceeds from the sales were used to pay the Company’s liabilities. For the purposes of clause (iv) above, the amounts computed pursuant to clause (i) above for each Member shall be considered to be proceeds from the sale of the assets of the Company to the extent such amounts would be available to satisfy (directly or indirectly) the indebtedness specified in clause (iv).

 

(f) It is the intention of the Members that the Capital Accounts of the Company be maintained strictly in accordance with the Capital Account maintenance requirements of Treasury Regulations Section 1.704-1(b). The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such regulations and any amendment or successor provision thereto.

 

(g) A deficit in a Member’s Capital Account shall not be considered an asset of the Company.

 

5.6 Amendments for Changes in Income Tax Regulations. It is intended that the allocations in this Article V effect an allocation for federal income tax purposes in a manner consistent with Sections 704 and 706 of the Code and comply with any limitations or restrictions therein. The Manager shall have complete discretion to make the allocations pursuant to this Article V and the allocations and adjustments to Capital Accounts in any manner consistent with Sections 704 and 706 of the Code. 

 

5.7 Consent to Allocations. Each Member as a condition of becoming a Member expressly consents to the foregoing allocations as set forth in this Article V

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 21 of 39  
     

 

5.8 Withholding.

 

(a) Notwithstanding any other provision of this Agreement to the contrary, the Manager is authorized to take any action that the Manager determines to be necessary or appropriate to cause the Company to comply with any foreign or U.S. federal, state or local withholding or deduction requirement in respect of any allocation, payment or distribution by the Company to any Member or other Person. Any withholdings authorized by this Section 5.8 shall be made at the applicable statutory rate under the applicable tax law unless the Manager shall have received an opinion of counsel or other evidence satisfactory to the Manager to the effect that a lower rate is applicable, or that no withholding is applicable.

 

(b) To the extent that the aggregate of such payments to a Member for any period exceeds the distributions to which such Member is entitled for such period, the amount of such excess shall be considered a loan from the Company to such Member. Such loan shall bear interest (which interest shall be treated as an item of income to the Company) at the General Interest Rate until discharged by such Member by repayment, including repayments out of distributions to which such Member would otherwise be subsequently entitled.

 

(c) The Company may (but shall not be required to), where permitted by the rules of any taxing authority, file a composite, combined or aggregate tax return reflecting the income of the Company and pay the tax, interest and penalties of some or all of the Members on such income to the taxing authority, in which case the Company shall inform the Members of the amount of such tax, interest and penalties so paid.

 

(d) Each Member shall provide such identifying numbers and other certificates as are requested by the Company to enable it to comply with any tax reporting or withholding requirement under the Code or any applicable state, local or foreign tax law. Notwithstanding the foregoing provisions of this Section 5.8, the Manager shall have no liability to the Company or any Member for failure to request or obtain such information from any Member, or to withhold in respect of any Member who has not furnished such information to the Manager.

 

ARTICLE VI
MANAGEMENT

 

6.1 Management by Manager.

 

(a) Generally. Except as expressly provided herein, the Manager shall have the exclusive authority to manage the business and affairs of the Company and its subsidiaries; provided, however, that the Manager shall not undertake any action or cause the Company to undertake any action in contravention of the TBOC or this Agreement. The Manager shall devote such time to the affairs of the Company as the Manager, in its sole discretion, deems appropriate. The actions of the Manager taking in accordance with the provisions of this Agreement shall bind the Company. No Member of the Company, in its capacity as such, shall have any authority or right to act on behalf of or bind the Company, unless otherwise provided herein or unless specifically authorized by the Manager pursuant to a duly adopted resolution expressly authorizing such action. The validity of any transaction, agreement or payment involving the Company and any Affiliate of the Manager permitted by the terms of this Agreement shall not be affected by reason of the relationship between the Manager and such Affiliate.

 

(b) Major Decisions. Notwithstanding anything to the contrary in this Agreement, the Manager may not take, approve or consent to any of the following actions without the consent or approval of the Members holding a Required Interest:

 

(i) redeem or repurchase Units, unless such redemption or repurchase is being made pursuant to Article XII;

 

[Limited Liability Company Agreement of OPM Green Energy, LLC] 

 

  Page 22 of 39  
     

 

(ii) (A) liquidate, dissolve or wind-up the business and affairs of the Company, or (B) effect any merger, acquisition, consolidation or other business combination involving the Company;

 

(iii) license, sell, assign, transfer, abandon or otherwise dispose of all or substantially all of the assets, properties or goodwill of the Company outside the ordinary course of business;

 

(iv) increase the total number of Units that may be issued by the Company; and

 

(v) authorize or approve, or enter into an agreement to take, any of the actions described above in this Section 6.1(b).

 

6.2 Appointment. The Manager of the Company as of the Effective Date shall be Kevin Jones. The Manager need not be a resident of or have a place of business in the State of Texas. The Manager does not need be a Member. The Manager cannot be removed or replaced (with or without cause) except by a vote of all of the Members; provided, however, that upon the death of the Manager, then the Members holding a Required Interest shall have the right to appoint a replacement Manager.

 

6.3 Resignation. The Manager may resign at any time by delivering written notice to the Company. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Upon the Manager’s resignation, Members holding a Required Interest shall have the right to appoint a replacement Manager. 

 

6.4 Action of the Manager. Any action required or permitted to be taken by the Manager may be taken without a meeting, by written consent, if signed by or on behalf of the Manager and the writing is filed with the minutes of the proceedings of the Manager. 

 

6.5 No Compensation. The Manager shall be not entitled to any compensation from the Company; however, the Manager and its representatives shall be entitled to be reimbursed for reasonable out-of-pocket costs and expenses incurred in the course of their service hereunder, subject to substantiation requirements for federal income tax purposes.

 

6.6 Officers. The Manager may, from time to time, designate one or more Persons to be officers of the Company (each, an “Officer” and collectively, the “Officers”). No Officer need be a resident of the State of Texas or a Member. Any Officer so designated shall have such authority and perform such duties as the Manager may, from time to time, delegate to him or her. The Manager may assign titles to particular Officers. Unless the Manager decides otherwise, if the title is one commonly used for Officers of a business corporation formed under the TBOC, the assignment of such title shall constitute the delegation to such Officer of the authority and duties that are normally associated with that office, subject to any specific delegation of authority and duties made to such Officer by the Manager pursuant to this Section 6.6. Each Officer shall hold office until the Officer’s successor shall be duly designated or until such Officer’s death or until such Officer shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same person. The salaries or other compensation, if any, of the Officers and agents of the Company shall be fixed from time to time by the Manager. Any Officer may resign as such at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Manager. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Any Officer may be removed as such, either with or without cause, by the Manager for any reason; provided, however, that such removal shall be without prejudice to the contract rights, if any, of the person so removed. Designation of an Officer shall not of itself create contract rights. Any vacancy occurring in any office of the Company may be filled by the Manager.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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ARTICLE VII

ACTIONS AND MEETINGS OF MEMBERS

 

7.1 Rights or Powers of the Members. No Member, in its capacity as such, has the authority or power to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company. 

 

7.2 Voting Rights. Members shall have the right to vote only on each matter that is subject to the vote or approval of the Members as expressly (a) set forth in this Agreement or (b) required by applicable law. Unless expressly provided otherwise in this Agreement or the TBOC, any such vote or consent shall require the vote or consent of the Members holding a majority of the Units entitled to vote on such matter. As set forth more fully in Section 3.9(c), the Profit Unit Members shall not be entitled to any vote in respect of such Profit Units. 

 

7.3 Meetings.

 

(a) Meetings of the Members may be called by (i) the Manager or (ii) a Member or group of Members holding more than 33.33% of the Membership Interests.

 

(b) Written notice stating the place, date, and time of the meeting and, in the case of a meeting of the Members not regularly scheduled, describing the purposes for which the meeting is called, shall be delivered not fewer than 10 days and not more than 60 days before the date of the meeting to each Member, by or at the direction of the Manager or the Member(s) calling the meeting, as the case may be. The Members may hold meetings at the Company’s principal office or at such other place, within or outside the State of Texas, as the Manager or the Member(s) calling the meeting may designate in the notice for such meeting.

 

(c) Any Member may participate in a meeting of the Members by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting can talk to and hear each other, and participation in a meeting by these means shall constitute presence in person at such meeting.

 

(d) On any matter that is to be voted on by the Members, a Member may vote in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission, or as otherwise permitted by applicable law. Every proxy shall be revocable in the discretion of the Member executing it unless otherwise provided in such proxy; provided, that such right to revocation shall not invalidate or otherwise affect actions taken under such proxy prior to such revocation. In lieu of a proxy, a Member may grant an irrevocable power of attorney to conduct the affairs of such Member with respect to Company matters, including matters relating to the organization, internal affairs, or termination of the Company.

 

(e) The business to be conducted at such meeting need not be limited to the purpose described in the notice and can include other business to be conducted by the Members; provided, that the Members shall have been notified of the meeting in accordance with Section 7.3(b). Attendance of a Member at any meeting shall constitute a waiver of notice of such meeting, except where a Member attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

 

(f) A quorum of any meeting of the Members shall require the presence, whether in person or by proxy, of the Members holding a majority of the Membership Interests. Subject to Section 7.4, no action may be taken by the Members unless the appropriate quorum is present at a meeting.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(g) Subject to Section 7.4 and any other provision of this Agreement or the TBOC requiring the vote, consent, or approval of a different percentage of the Membership Interests, no action may be taken by the Members at any meeting at which a quorum is present without the affirmative vote of the Members holding a majority of the Membership Interests.

 

7.4 Actions without Meeting. Notwithstanding the provisions of Section 7.3, any matter that is to be voted on, consented to, or approved by Members may be taken without a meeting, without prior notice, and without a vote if consented to, in writing or by Electronic Transmission, by a Member or Members holding not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which each Member entitled to vote on the action is present and votes. A record shall be maintained by the Manager of each such action taken by written consent of a Member or Members. 

 

ARTICLE VIII

STANDARD OF CARE; LIABILITY; INDEMNIFICATION; DUTIES

 

8.1 Standard of Care.

 

(a) Fiduciary Duties. In the exercise of rights and performance of duties hereunder, each Member (subject to Section 8.4, to the extent applicable) (in such Member’s capacity as a Member) and the Manager shall, to the fullest extent permitted by applicable law, have no fiduciary duties to the Company or to any other Member. This section is not intended to modify, amend or otherwise affect the fiduciary duties, if any, that any Member and/or Manager owes to any Person unrelated to its status as a Member or Manager of the Company.

 

8.2 Exculpation.

 

(a) Limited Liability. No Covered Person shall be liable to the Company or any Member for any loss, damage or claim incurred by reason of any act or omission, including any mistake of fact or error in judgment, taken, suffered or made by such Covered Person; provided that this provision does not eliminate or limit the liability of such Covered Person for acts or omissions that constitute such Covered Person’s gross negligence, intentional misconduct, knowing violation of law, breach of any duty owed to the Company or its Members (subject to Section 8.1) or fraud as determined by final, non-appealable judgment of a court having competent jurisdiction.

 

(b) Reliance on Information. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 25 of 39  
     

 

8.3 Indemnification.

 

(a) Right to Indemnification. Subject to the limitations and conditions as provided in this Section 8.3, each Covered Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (hereinafter a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that such Person is or was a Member, Manager or Officer of the Company or is or was serving at the request of the Company as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise shall be indemnified by the Company to the fullest extent permitted by the TBOC, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment) against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including attorneys’ fees) actually incurred by such Person in connection with such Proceeding, and indemnification under this Section 8.3 shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Section 8.3 shall be deemed contract rights, and no amendment, modification or repeal of this Section 8.3 shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any such amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Section 8.3 could involve indemnification for negligence or under theories of strict liability; provided, however, that notwithstanding the foregoing or any other provision of this Agreement, the Company shall not provide indemnification to any Covered Person in respect of conduct that constitutes gross negligence, intentional misconduct, knowing violation of law, breach of any duty owed to the Company or its Members (subject to Section 8.1) or fraud as determined by final, non-appealable judgment of a court having competent jurisdiction.

 

(b) Advance Payment. The right to indemnification conferred in this Section 8.3 shall include the right to be paid or reimbursed by the Company the reasonable expenses incurred by a Person of the type entitled to be indemnified under Section 8.3(a) who was, is or is threatened to be made a named defendant or respondent in a Proceeding in advance of the final disposition of the Proceeding and without any determination as to the Person’s ultimate entitlement to indemnification; provided, however, that the payment of such expenses incurred by any such Person in advance of the final disposition of a Proceeding, shall be made only upon delivery to the Company of a written affirmation by such Person of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification under this Section 8.3 and a written undertaking, by or on behalf of such Person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified Person is not entitled to be indemnified under this Section 8.3 or otherwise.

 

(c) Indemnification of Officers, Employees and Agents. The Company, upon a determination by the Manager, may indemnify and advance expenses to an employee (other than an Officer) or an agent of the Company to the same extent and subject to the same conditions under which it may indemnify and advance expenses to the Manager or a Member or Officer of the Company under this Section 8.3; and the Company, upon a determination by the Manager, may indemnify and advance expenses to Persons who are not or were not Members, Officers, employees or agents of the Company or the Manager but who are or were serving at the request of the Company as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such a Person to the same extent that it may indemnify and advance expenses to the Manager or to Members and Officers of the Company under this Section 8.3.

 

(d) Insurance. The Company may purchase and maintain insurance, at its expense, to protect itself and any Person who is or was serving as a Manager, Officer, employee or agent of the Company or is or was serving at the request of the Company as a Manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under this Section 8.3.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 26 of 39  
     

 

8.4 Transactions with Members. The Company may transact business with (including entering into or modifying any contractual arrangements with) any Member or Affiliate of a Member, provided that the terms of any such transaction with a Member or one of its Affiliates are comparable to, or at least as favorable to the Company as, the terms of a transaction at arm’s length between unaffiliated parties as determined by the Manager. Each of any transaction between the Company and a Member or its Affiliates that has been approved by the Manager shall be deemed to be at arm’s length between unaffiliated parties. A Member or an Affiliate of a Member that transacts business with the Company owes no duty to the Company or the other Members to exercise or to refrain from exercising in any particular manner its rights or powers as a participant in that transaction, including those arising under any contract with the Company, and (subject to the proviso in the first sentence of this Section 8.4) such Member or such Affiliate of a Member may realize profits from that transaction. 

 

8.5 General.

 

(a) No Guarantee; Other Agreements. The Members acknowledge and agree that the Members and their Affiliates do not guarantee the performance of the Company. In no event will the provisions of this Article VIII relieve any Member or any of its Affiliates from liability pursuant to the provisions of any contract or transaction that may be entered into between the Company and such Member or any of its Affiliates.

 

(b) Modification of Duties. This Article VIII constitutes a modification and disclaimer of duties and obligations (express, implied, fiduciary or otherwise) under the TBOC or other applicable law with respect to the matters described in this Article VIII. The Members (and the Members on behalf of the Company) hereby (i) agree that (A) the terms of this Article VIII to the extent that they modify or limit a duty or other obligation, if any, that a Manager may have to the Company or any Member under the TBOC or other applicable law are reasonable in form, scope and content and (B) the terms of this Article VIII shall control to the fullest extent possible if it is in conflict with a duty, if any, that a Manager may have to the Company or any Member, under the TBOC or any other applicable law and (ii) waive to the fullest extent permitted by the TBOC any duty or other obligation, if any, that a Manager may have to the Company or any Member, pursuant to the TBOC or any other applicable law, to the extent necessary to give effect to the terms of this Article VIII.

 

ARTICLE IX
REPRESENTATIONS AND WARRANTIES

 

9.1 Representations and Warranties. Each Member, severally and not jointly, represents and warrants to the Company and each other Member that: 

 

(a) For each such Member that is not an individual, such Member is duly organized, validly existing and in good standing under the laws of the state of its organization.

 

(b) For each such Member that is not an individual, such Member has full power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action of such Member. Such Member has duly executed and delivered this Agreement.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 27 of 39  
     

 

(c) For each such Member that is an individual, such Member has full capacity to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. Such Member has duly executed and delivered this Agreement.

 

(d) This Agreement constitutes the legal, valid and binding obligation of such Member, enforceable against such Member in accordance with its terms. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, require no action by or in respect of, or filing with, any governmental authority.

 

(e) The execution, delivery and performance by such Member of this Agreement and the consummation of the transactions contemplated hereby do not (i) conflict with or result in any violation or breach of any provision of any of the organizational documents of such Member, (ii) conflict with or result in any violation or breach of any provision of any applicable law or (iii) require any consent or other action by any Person under any provision of any material agreement or other instrument to which the Member is a party.

 

(f) Except for this Agreement, such Member has not entered into or agreed to be bound by any other agreements or arrangements of any kind with any other party with respect to the Units, including agreements or arrangements with respect to the acquisition or disposition of the Units or any interest therein or the voting of the Units (whether or not such agreements and arrangements are with the Company or any other Member).

 

ARTICLE X
TAXES

 

10.1 Preparation of Tax Returns. The Manager shall arrange for the preparation of all returns of Company income, gain, loss, deduction, credit, and other items necessary for federal, state, and local income tax purposes and shall use commercially reasonable efforts to cause the same to be filed in a timely manner. Each Member shall furnish to the Manager all pertinent information in its possession relating to Company operations that is necessary to enable the Company’s income tax returns to be prepared and filed. 

 

10.2 Tax Elections. The Manager shall determine whether to make any available tax election. Neither the Company, the Manager, nor any Member may make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law, and no provision of this Agreement (including Section 2.6) shall be construed to sanction or approve such an election. 

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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10.3 Tax Matters Representative. The Manager shall designate an eligible Person to be the “partnership representative” of the Company for any tax period subject to the provisions of Section 6223 of the Code, as amended by the Revised Partnership Audit Procedures (the “Tax Matters Representative”), and in such capacity shall represent the Company in any disputes, controversies or proceedings with the Internal Revenue Service or with any state, local, or non-U.S. taxing authority and is hereby authorized to take any and all actions that it is permitted to take by applicable laws when acting in that capacity. The Tax Matters Representative as of the Effective Date shall be the Manager. Each Person (a “Pass-Through Member”) that holds or controls Units as a Member on behalf of, or for the benefit of another Person or Persons, or which Pass-Through Member is beneficially owned (directly or indirectly) by another Person or Persons will, within thirty (30) days following receipt from the Tax Matters Representative of any notice, demand, request for information or similar document, convey such notice or other document in writing to all holders of Interests in the Company holding such interests through a Pass-Through Member. In the event the Company will be the subject of an income tax audit by any federal, state or local authority, to the extent the Company is treated as an entity for purposes of such audit, including administrative settlement and judicial review, the Tax Matters Representative will be authorized to act for, and its decision will be final and binding upon, the Company and each Member thereof. The Members acknowledge and agree that it is the intention of the Members to minimize any obligations of the Company to pay taxes and interest in connection with any audit of the Company, including, if the Tax Matters Representative so determines, by means of elections under Section 6226 of the Code and/or the Members filing amended returns under Section 6225(c)(2) of the Code, in each case as amended by the Revised Partnership Audit Procedures. The Members agree to cooperate in good faith, including without limitation by timely providing information reasonably requested by the Tax Matters Representative and making elections and filing amended returns reasonably requested by the Tax Matters Representative, and by paying any applicable taxes, interest and penalties, to give effect to the preceding sentence. The Company shall make any payments it may be required to make under the Revised Partnership Audit Procedures and, in the Tax Matters Representative’s reasonable discretion, allocate any such payment among the current or former Members of the Company for the “reviewed year” to which the payment relates in a manner that reflects the current or former Members’ respective Membership Interests in the Company for that year and any other factors taken into account in determining the amount of the payment. To the extent payments are made by the Company on behalf of or with respect to a current Member in accordance with this Section 10.3, such amounts shall, at the election of the Tax Matters Representative, (i) be applied to and reduce the next distribution(s) otherwise payable to that Member under this Agreement or (ii) be paid by that Member to the Company within thirty (30) days of written notice from the Tax Matters Representative requesting the payment. In addition, if any such payment is made on behalf of or with respect to a former Member, that Member shall pay over to the Company an amount equal to the amount of such payment made on behalf of or with respect to it within thirty (30) days of written notice from the Tax Matters Representative requesting the payment. Any amounts required to be paid by any current or former Member to the Company pursuant to this Section 10.3 that have not been paid within thirty (30) days of written notice from the Tax Matters Representative requesting such payment shall accrue interest at the General Interest Rate plus two percent (2%) per annum from the date that the payment was made on behalf of or with respect to such Member until the date that such amount is paid to the Company. Any cost or expense incurred by the Tax Matters Representative in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, will be paid by the Company, and the Tax Matters Representative shall be entitled to be indemnified by the Company (solely out of Company assets) with respect to any action brought against it in connection with the settlement of any such proceeding. The provisions contained in this Section 10.3 shall survive the dissolution of the Company and the withdrawal of any Member or the Disposition of any Member’s Units and shall apply to any current or former Member. 

 

ARTICLE XI

BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS

 

11.1 Books and Records. The Company shall keep books and records of accounts and shall keep the consents of its Members. The books of account for the Company shall be maintained on an appropriate federal income tax basis in accordance with the terms of this Agreement, except that the Capital Accounts of the Members shall be maintained in accordance with Section 5.3. The calendar year shall be the accounting year of the Company. Except as set forth in Section 11.4, books and records shall be made available to Members in accordance with the TBOC. 

 

11.2 Reports. On or before the 90th day following the end of each Fiscal Year during the term of the Company, or as soon as possible thereafter, the Manager shall cause the Company to furnish each Member with a copy of the Company’s federal income tax return for that Fiscal Year. The Manager also may cause to be prepared or delivered such other reports as they may deem appropriate. The Company shall bear the costs of all these reports. 

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 29 of 39  
     

 

11.3 Accounts. The Manager shall establish and maintain one or more separate bank and investment accounts and arrangements for Company funds in the Company name with financial institutions and firms that the Manager determines. The Manager may not commingle the Company’s funds with the funds of any Member. 

 

11.4 Restriction on Information Rights. No Profit Unit Member shall have any right to receive, review or copy Exhibit A to this Agreement or any books, records or other information of the Company to the extent such restriction is permitted by the TBOC. 

 

ARTICLE XII

PURCHASE RIGHTS

 

12.1 Purchase Events.

 

(a) In General. In the event that any of the events set forth below (each a “Purchase Event”) shall have occurred to or in respect of a Member (such Member or such Member’s estate, trustee, receiver, or successor-in-interest as applicable, the “Seller”), the Company, or, if the Company notifies the Members other than the Seller and its Affiliates in writing that it is assigning all or any portion of its purchase right hereunder to such Members, such Members (the Company or such Members, as applicable, the “Buyer(s)”), shall, subject to Section 12.1(f), have the continuing right to purchase the Membership Interest of the Seller (pro rata in accordance with the number of Units held by each such Member as compared to the total number of Units held by all the Members exercising a purchase right under this Article XII, excluding in each case, any Profit Units held by Profit Unit Members), including all debts and obligations of the Company owing to the Seller (the “Purchase Interest”). Any purchase and sale of a Purchase Interest pursuant to this Section 12.1(a) shall be in an amount due and payable as determined pursuant to the provisions of this Article XII. Notwithstanding the foregoing, for the avoidance of doubt, the Manager, in its sole and absolute discretion, may waive the Company’s purchase right described in this Article XII or elect to not assign the Company’s purchase right described in this Article XII to the Members. A Purchase Event is:

 

(i) any withdrawal or retirement from the Company by the Seller other than as expressly permitted under this Agreement;

 

(ii) the Seller shall make an assignment for the benefit of creditors, commence (as the debtor) a case in bankruptcy, or commence (as the debtor) any proceeding under any other insolvency law;

 

(iii) a case in bankruptcy or any other proceeding under any other insolvency law is commenced against the Seller (as the debtor) and is consented to by the Seller or remains un-dismissed for 90 days, or the Seller consents to or admits the material allegations against it in any such case or proceeding;

 

(iv) a trustee, receiver, agent, liquidator or sequestrator (however named) is appointed or authorized to take charge of all or substantially all of the property of the Seller for the purpose of enforcing a lien against such property or for the purpose of general administration of such property for the benefit of creditors and such appointment or authorization is consented to by the Seller or is not overturned within 90 days;

 

(v) the Seller shall fail generally to pay its debts as they become due, or suffer any writ of attachment or execution or any similar process to be issued or levied against it or all or substantially all of its property which is not released, stayed, bonded or vacated within 90 days after its issue or levy;

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(vi) the Seller shall suffer any writ of attachment or execution or any similar process to be issued or levied against the Membership Interest of the Seller which is not released, stayed, bonded or vacated within 90 days after its issue or levy;

 

(vii) any attempted Disposition by the Seller of any of its rights or interest in the Company or this Agreement except as permitted by Article III;

 

(viii) the Seller shall commence to dissolve or wind-up and liquidate the assets of its business;

 

(ix) the death of the Seller;

 

(x) the Seller is declared legally incompetent to administer his or her affairs;

 

(xi) any Disqualification Event of or with respect to the Seller;

 

(xii) any felony criminal indictment of the Seller;

 

(xiii) if the Seller is not a natural person, the occurrence of any of the events described in the foregoing clauses (ix) through (xii) with respect to the natural person who controls the Seller;

 

(xiv) the occurrence of a “deemed Purchase Event” as set forth in any Unit Award Agreement under which Seller was granted Profit Units, if applicable, provided that if any such deemed Purchased Event shall overlap with a Purchase Event set forth in this Section 12.1, then the occurrence of such “deemed Purchase Event” shall be the Purchase Event that occurs hereunder;

 

(xv) the occurrence of an event described in Section 3.5; and

 

(xvi) the occurrence of an event described in Section 3.6, but only to the extent described in Section 3.6.

 

For the avoidance of doubt, the rights of the Company set forth in this Article XII, shall be in addition to, and not in lieu of, any purchase rights set forth in the applicable Unit Award Agreement with respect to any Member.

 

(b) Procedures; Purchase Price.

 

(i) The Company shall notify all Members promptly after it has knowledge of the occurrence of a Purchase Event. In such notice or at any time thereafter, the Company may elect to assign all or any portion of its purchase rights under this Article XII to the Members. In the event that the Company elects to exercise its right under Section 12.1(a) it may give the Seller written notice of such election at any time after the date on which the Company first has knowledge of the occurrence of such Purchase Event. If the Company assigns all or any portion of its purchase rights under this Article XII to the Members, each Member (other than the Seller) will have the option exercisable for a period of 60 days after receipt of the Company’s notice of assignment to elect to acquire all, but not less than all, of such Members’ pro rata portion (in accordance with the number of Units held by each such Member as compared to the total number of Units held by all of the Members, excluding, in each case, any Profit Units held by Profit Unit Members) of the portion of the Purchase Interest assigned by the Company to the Members, by delivery of written notice to the Company and the Seller.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(ii) If options to purchase have been exercised by the Company and the Members with respect to some but not all of the Purchase Interest by the end of the 60-day period specified in the last sentence of the foregoing subsection (i), then the Company shall, immediately after the expiration of such period, send written notice to those Members who fully exercised their option within such period (the “Exercising Buyers”). Each Exercising Buyer shall have an additional option to purchase all or any part of the balance of any such remaining unsubscribed portion of the Purchase Interest. To exercise such additional option, an Exercising Buyer must deliver a written notice to the Company and the Seller within 10 days after the expiration of the 60-day period specified in the last sentence of the foregoing subsection (i). In the event there are two or more such Exercising Buyers that choose to exercise the last-mentioned option for a portion of the Purchase Interest in excess of the portion available, the remaining portion available for purchase under this subsection (ii) shall be allocated to such Exercising Buyers pro rata (in accordance with the number of Units held by each such Member as compared to the total number of Units held by all of the Members, excluding, in each case, any Profit Units held by Profit Unit Members). If the options to purchase the remaining shares are exercised in full by the Exercising Buyers, the Company shall immediately notify all of the Exercising Buyers and the Seller of that fact.

 

(iii) The amount of the purchase price for the Purchase Interest in connection with any Purchase Event (unless agreed upon by the Seller and the all applicable Buyers within 30 days after the first Buyer’s notice to the Seller) shall be the amount which the Seller would have received with respect to the Purchase Interest had all of the property of the Company been sold at a price equal to the Fair Market Value of such property (determined (i) as of the date the Seller receives notice of the Buyer(s)’ election to purchase, and (ii) in accordance with the provisions of Section 12.1(e)), all liabilities of the Company were satisfied, and the net proceeds of such sale had been distributed to the Members in liquidation pursuant to Section 13.2(c).

 

(c) Closing and Terms. The closing of such sale shall take place within 60 days after the date the Seller receives notice of the Buyer(s) election to purchase. The time and place of the closing shall be designated by the Buyer(s) within the first 30 days of said 60 day period, and the purchase price shall be payable upon terms and conditions agreed to between the Buyer(s) and the Seller, or if the Buyer(s) and the Seller are unable to agree, then as follows: (i) 25% of the total purchase price shall be paid by the Buyer(s) to the Seller in cash at the closing and (ii) the remaining portion of the purchase price shall be evidenced by a promissory note(s) given by the Buyer(s) in favor of the Seller, which promissory note(s) shall bear interest on the unpaid principal balance at the General Interest Rate and require three equal payments of principal plus all accrued and unpaid interest thereon with payment being due on the first, second and third anniversary dates, respectively, of the closing date. Each party shall bear its own legal and accounting fees, if any. At least five business days before the closing, the Seller shall deliver all appropriate documents of transfer in form satisfactory for execution at the closing. The purchase price hereunder may be funded by insurance or otherwise.

 

(d) Effect on Seller’s Interest. From the Purchase Date to the date of the Disposition of the Purchase Interest under this Article XII, the Units represented by the Purchase Interest will be excluded from any calculation of aggregate Sharing Ratios for purposes of any approval required of Members under this Agreement, except for approvals required by Section 14.5. All distributions of cash or assets due to the Seller by the Company from the Purchase Date to the date of the closing of the purchase may be applied against obligations of the Seller. Without limiting the generality of any other provision of this Agreement, upon the exercise of the purchase option, the Seller, without further action, will have no rights in the Company or against the Company or any Member other than the right to receive payment for the Purchase Interest in accordance with Section 12.1(c). In connection with the closing of any purchase referenced in this Article XII, the Company must (i) use commercially reasonable efforts to cause any guaranty of the debt of the Company provided by Seller or its Affiliates to be released or the debt to be refinanced without Seller or any of its Affiliates being a guarantor, and (ii) indemnify the Seller for all liabilities and losses arising from incidents or transactions occurring after the closing.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(e) Procedure for Determination of Fair Market Value. In the event that the value of all or any part of the property of the Company is required to be determined for purposes of Article XII, the value, unless otherwise agreed upon, shall be determined as provided in this Section 12.1(e). Within 10 days after a determination of value is determined to be required under Article XII, the Company and the Seller shall select a mutually agreeable independent, qualified valuation consultant (a “Consultant”). If the Company and the Seller cannot agree on a Consultant within a reasonable time, they shall each promptly select an independent valuation consultant and those two consultants shall promptly select a third independent, qualified valuation consultant to be the Consultant. The Consultant so selected shall proceed to determine promptly the Fair Market Value of the property in question in accordance with such methods and techniques as shall enable the Consultant to complete the valuation of all such property within 30 days of appointment and in the least expensive manner reasonably possible while obtaining a reasonable determination of the Fair Market Values of the properties including if necessary, procedures producing a result less formal than an appraiser’s opinion as to value. The Consultant shall deliver a written report of its determination of Fair Market Value to all interested parties and, absent fraud or manifest error, this determination shall be final and binding on the interested parties for purposes of this Article XII. After determination of the Fair Market Value of the Company property, the Manager shall make a determination of the amount due to each Member in accordance with Section 12.1(b) hereof as if all the property of the Company were sold at the Fair Market Value determined by the Consultant, the liabilities of the Company were satisfied, and the proceeds of the sale paid and/or distributed pursuant to Section 13.2(c). For purposes of this Section 12.1(e), no minority discount or lack of marketability discount shall be applied. The fees and expenses of the Consultant shall be borne by the Seller.

 

(f) Purchase Event Relating to the Termination of Marital Relationship. For a period of 30 days following the date on which the failure to complete a purchase of an interest in the Company pursuant to Section 3.6 results in a Purchase Event pursuant to such Section, only the Member Spouse (as defined in Section 3.6) shall have the right to exercise the purchase option pursuant to this Article XII. The Member Spouse may exercise its purchase option by delivering notice of such exercise to the Seller (i.e., the Non-Member Spouse) and the other Members within such 30 day period. If the Member Spouse does not exercise its option within such 30 day period, Article XII shall apply without regard to this Section 12.1(f).

 

12.2 Forfeiture. Upon the occurrence of a Forfeiture Event with respect to a Member (the “Forfeiting Member”), all of the Forfeiting Member’s Profit Units shall be forfeited to the Company for no consideration without further action by the Forfeiting Member or the Company. As of the date on which the Forfeiture Event occurred, the Forfeiting Member’s Profit Units shall not constitute outstanding Units. The Manager is authorized to amend Exhibit A in accordance with this Section 12.2.

 

ARTICLE XIII

DISSOLUTION, LIQUIDATION AND TERMINATION

 

13.1 Dissolution. The Company shall dissolve and its affairs shall be wound up on the first to occur of the following: 

(a) The approval of a Required Interest of the Members;

 

(b) entry of a decree of judicial dissolution of the Company under Section 11.051 of the TBOC; or

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(c) the sale or other disposition of all or substantially all of the Company’s assets.

 

The death, expulsion, withdrawal, bankruptcy or dissolution of a Member or the occurrence of any other event which terminates the continued membership of a Member shall not dissolve the Company.

 

13.2 Liquidation and Termination. On dissolution of the Company, the Manager shall act as liquidator unless the Members holding a Required Interest select another liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the TBOC. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Manager. The steps to be accomplished by the liquidator are as follows: 

 

(a) as promptly as possible after dissolution and again after final liquidation, the liquidator shall cause a proper accounting to be made of the Company’s assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;

 

(b) the liquidator shall cause the notice described in Section 11.052(a)(2) of the TBOC to be mailed to each known creditor of and claimant against the Company;

 

(c) the liquidator shall pay, satisfy or discharge from Company funds all of the debts, liabilities and obligations of the Company (including all expenses incurred in liquidation and any advances described in Section 4.4) or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and

 

(d) all remaining assets of the Company shall be distributed to the Members pro rata to the Members in proportion to their relative Sharing Ratios.

 

All distributions in kind to the Members shall be made net of, and subject to, the costs, expenses, and liabilities theretofore incurred or for which the Company has committed prior to the date of termination with respect to such distributions in kind. The distribution of cash and/or property to a Member in accordance with the provisions of this Section 13.2 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company’s property. Notwithstanding the foregoing or anything herein to the contrary, the Members agree that following dissolution of the Company, the assets contributed to the Company by GWTI as part of its Capital Contribution may be distributed by the liquidator to GWTI, but may not be distributed by the liquidator to any other Member, or transferred to any third party, without the prior written consent of GWTI. In the event that the assets contributed to the Company by GWTI are so distributed to GWTI in connection with a dissolution of the Company, GWTI shall be deemed to have received a return of its Capital Contribution in full. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.

 

GWTI’s Property. It is expressly understood and agreed that (i) GWTI’s contribution to the Company consists of a license to use certain of its intellectual property and related assets (collectively, “GWTI’s Property”) pursuant to the Intellectual Property License, with an effective date of August 20, 2019, by and between GWTI and the Company, but that ownership of GWTI’s Property shall in all events remain with GWTI; and (ii) in the event of any actual liquidation or termination of the Company, or any type of meritorious legal or equitable action by any creditor of Licensee and/or Licensee’s officers, directors, or members that is likely to exceed the assets of the Company excluding GWTI’s Property, GWTI’s Property may not be liened, encumbered, pledged, or otherwise assigned to or for the benefit of any creditor or other party, and GWTI may in its sole discretion take all steps necessary to prevent any other party from exerting control over, moving, and/or gaining access to GWTI’s Property.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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13.3 Compliance with Timing Requirements of Regulations. It is the intent of the Members that the allocations provided in Section 5.2 result in distributions required pursuant to Section 13.2(d) being in accordance with positive Capital Accounts as provided for in the Treasury Regulations under Code Section 704(b). However, if after giving hypothetical effect to the allocations required by Section 5.2, the Capital Accounts of the Members are in such ratios or balances that distributions pursuant to Section 13.2(d) would not be in accordance with the positive Capital Accounts of the Members as required by the Treasury Regulations under Code Section 704(b), such failure shall not affect or alter the distributions required by Section 13.2(d). Rather, Net Profit and Net Loss (or items thereof) shall be allocated among the Members in a manner which, to the extent possible, will result in the Capital Account of each Member having a balance prior to distribution equal to the amount of distributions to be received by such Member pursuant to Section 13.2(d)

 

13.4 Termination of the Company. On completion of the distribution of Company assets as provided herein, the Company is terminated, and the Manager (or such other Person or Persons as the TBOC may require or permit) shall file a certificate of termination with the Secretary of State of the State of Texas and take such other actions as may be necessary to terminate the Company. 

 

ARTICLE XIV

 

GENERAL PROVISIONS

 

14.1 Offset. Whenever the Company is to pay any sum to any Member, any amounts that Member owes the Company may be deducted from that sum before payment. 

 

14.2 Notices. Except as expressly set forth to the contrary in this Agreement, all notices, requests, or consents provided for or permitted to be given under this Agreement must be in writing and must be given either by delivering that writing to the recipient in person, by courier (including nationally recognized overnight courier), or by confirmed email transmission; and a notice, request, or consent given under this Agreement is effective on receipt or refusal of receipt by the Person to receive it. All notices, requests, and consents to be sent to a Member must be sent to or made at the address or email address given for that Member on Exhibit A hereto with respect to such Member or in the instrument described in Section 3.3(e)(i)(B) or 3.4, or such other address or email address as that Member may specify by notice to the other Members. Any notice, request, or consent to the Company or the Manager must be given to the Company or the Manager at the then current address of the principal office of the Company. Whenever any notice is required to be given by law, the Certificate of Formation or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 

 

14.3 Entire Agreement; Supersedure; Additional Agreements. This Agreement, together with any Subscription Document, constitutes the entire agreement of the Members relating to the Company and supersedes all prior contracts or agreements of the Members with respect to the Company, whether oral or written. The representations and warranties of each Member in, and the other provisions of, any subscription or contribution agreement(s) or Unit Award Agreement(s) between the Company and such Member and/or any instruments or documents delivered by such Member under Section 3.3 (collectively, the “Subscription Documents”) shall survive the execution and delivery of this Agreement. 

 

14.4 Effect of Waiver or Consent. A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Company. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default until the applicable statute-of-limitations period has run. 

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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14.5 Amendment or Modification. Except as otherwise provided in Sections 3.3, 3.4, 3.9(b) or Article XII, or as necessary to give effect to the provisions of this Agreement, this Agreement may be amended or modified from time to time only by a written instrument adopted by the Manager and the Members holding a Required Interest; provided, that, except as provided by Sections 3.3, 3.4, 3.9(b) or Article XII, or as necessary to give effect to the provisions of this Agreement, the allocation or distribution provisions of this Agreement may not be amended to the extent such amendment affects the allocations or distributions to any Member or materially increases the obligations of any Member without the consent of such Member; provided, further, that this Agreement may not be amended to the extent that such amendment materially and adversely affects any Member differently than other similarly situated Members without the consent of such Member. In addition, the Manager may amend this Agreement without the consent of the Members that merely corrects any error or ambiguity that does not adversely affect any Member in a material manner. 

 

14.6 Binding Effect. Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and inures to the benefit of the Members and their respective heirs, legal representatives, successors, and assigns. 

 

14.7 Governing Law; Venue. This Agreement shall be construed, enforced, and governed by the internal laws of the State of Texas (without regard to its choice of law principles). Any proceedings with respect to disputes under or relating to the Company or this Agreement shall occur exclusively in the federal or state courts located in Dallas County, Texas. All proceedings, hearings and other events in which the parties must be present shall take place in Dallas, Texas.

 

14.8 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT.

 

14.9 Equitable Remedies. Each party hereto acknowledges that the other parties hereto would be irreparably damaged in the event of a breach or threatened breach by such party of any of its obligations under this Agreement and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to an injunction from a court of competent jurisdiction (without any requirement to post bond) granting such parties specific performance by such party of its obligations under this Agreement. In the event that any party files a suit to enforce the covenants contained in this Agreement (or obtain any other remedy in respect of any breach thereof), the prevailing party in the suit shall be entitled to receive in addition to all other damages to which it may be entitled, the costs incurred by such party in conduction the suit, including reasonable attorney’s fees and expenses. 

 

14.10 Attorneys’ Fees. In the event that any party hereto institutes any legal suit, action or proceeding, including arbitration, against another party in respect of a matter arising out of or relating to this Agreement, the prevailing party in the suit, action or proceeding shall be entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding, including reasonable attorneys’ fees and expenses and court costs. 

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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14.11 Severability of Provisions. If any provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable to any extent in any jurisdiction, the remainder of this Agreement and the application of that provision to other Persons or circumstances or in other jurisdictions is not affected thereby and that provision shall be enforced to the greatest extent permitted by law.

 

14.12 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions. 

 

14.13 Waiver of Certain Rights. Each Member irrevocably waives any right it may have to maintain any action for dissolution of the Company or for partition of the property of the Company. 

 

14.14 Spousal Consents. The undersigned spouses, if any, of the Members join in the execution of this Agreement to evidence that their community property interest, if any, in the Company shall be bound by the terms of this Agreement, including restrictions on Disposition, Section 3.6, the provisions of Article XII and Section 14.15. The termination of the marital relationship of any Member and such Member’s spouse for any reason shall not have the effect of removing any Units otherwise subject to this Agreement from the coverage hereof. In the event any Member should hereafter become married to any Person other than such Member’s existing spouse, such Member shall cause such new spouse promptly to execute an instrument acceptable to the Manager pursuant to which said new spouse shall agree to be bound by the terms of this Agreement, including the terms of this Section 14.14. Furthermore, each of the undersigned spouses, if any, of the Members hereby appoints the Member to whom he or she is married as his or her attorney in fact to represent him or her in all matters with regard to the Company and to bind his or her interest, jointly with the applicable Member’s, including by execution of any document relating to the Company. This power of attorney is given each such spouse in consideration of the agreements and covenants of the Company and the Members in connection with the transactions contemplated by this Agreement and is coupled with an interest and shall be irrevocable unless and until this Agreement terminates in accordance with its terms, and will survive the death, incompetency or disability of such spouse. 

 

14.15 Powers of Attorney.

 

(a) Each of the Members, and the undersigned spouses, if any, of each of the Members, does hereby constitute and appoint the Manager and the liquidators, and their respective designees, any of which may act without the joinder of the others, with full power of substitution, as its true and lawful agents and attorneys in fact, with full power and authority in its name, place and stead, to execute, swear to, acknowledge, deliver, file and record (i) all instruments, documents and certificates that may from time to time be required by any law to effectuate, implement and continue the valid and subsisting existence of the Company, (ii) all instruments, documents and certificates which the Manager deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement effected in accordance with Section 14.5, (iii) all instruments, documents and certificates relating to the admission, withdrawal or substitution of any Member pursuant to Articles III and XII, and (iv) all instruments, documents and certificates that may be required to effectuate the dissolution and termination of the Company in each case in accordance with the provisions of this Agreement.

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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(b) Each of the Members, and the undersigned spouses, if any, of each of the Members, does hereby constitute and appoint the Manager, the liquidators and their respective designees, any of which may act without the joinder of the others, with full power of substitution, as its proxies and true and lawful agents and attorneys in fact, with full power and authority in its name, place and stead, with respect to the matters set forth herein, including election of the Manager in accordance with Article VI and regarding any Drag-Along Sale pursuant to Section 3.3(c), and hereby authorizes each of them to represent, vote and consent, if and only if the party (i) fails to vote or consent or (ii) attempts to vote or consent (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such Member’s Membership Interests in favor of the election of persons as Manager determined pursuant to and in accordance with the terms and provisions of this Agreement or approval of any Drag-Along Sale pursuant to and in accordance with the terms and provisions of Section 3.3(c) or to take any action necessary to effect the provisions of Section 3.3(c), including the execution, delivery, filing and recording of any and all instruments, documents and certificates which the Manager or designee of the Dragging Members deems appropriate or necessary to effect the provisions of Section 3.3(c).

 

(c) Each of the proxies and powers of attorney granted pursuant to this Section is given in consideration of the agreements and covenants of the Company and the Members in connection with the transactions contemplated by this Agreement and each is coupled with an interest and shall be irrevocable unless and until this Agreement terminates in accordance with its terms, and will survive the death, incompetency, disability or dissolution of such Member. Each Member, and such Member’s spouse, if any, hereby revokes any and all previous proxies or powers of attorney with respect to the Membership Interests.

 

14.16 Counterparts. This Agreement may be executed (including by Electronic Transmission) in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument. 

 

* * * * *

 

IN WITNESS WHEREOF, the Manager and the Members have executed and adopted this Agreement as of the date first set forth above.

 

{Signatures on the Following Page}

 

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

  Page 38 of 39  
     

 

  MANAGER:
   
  /s/ Kevin Jones
  KEVIN JONES
     
  MEMBERS:
     
  MABERT, LLC
     
  By: /s/ Kevin Jones
  Name: Kevin Jones
  Title: Managing Member
     
  GREENWAY TECHNOLOGIES, INC.
   
  By: /s/ Kent Harer
  Name: Kent Harer
  Title: President (Acting)
     
    /s/ Thomas Phillips
    THOMAS PHILLIPS
     
    THE UNDERSIGNED SPOUSE OF THE MEMBER NAMED ABOVE HEREBY CERTIFIES THAT HE/SHE HAS READ THIS AGREEMENT, UNDERSTANDS EACH PROVISION, AND AGREES TO BE BOUND BY THE TERMS SET FORTH IN THIS AGREEMENT, INCLUDING SECTION 14.14.
     
     
    Print Name:________________________________

 

[Limited Liability Company Agreement of OPM Green Energy, LLC]

 

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EXHIBIT A

 

UNITS & SHARING RATIOS

 

Member   Units     Sharing Ratio  
Mabert, LLC 892 Meadow Hill Road Fort Worth, Texas 76108 Attn: Kevin Jones Email: kevin@acfteam.com     300       42.857 %
Greenway Technologies, Inc. 1521 N. Cooper St. Arlington, Texas 76011 Attn: Raymond Wright Email:raymond.wright@gwtechinc.com     300       42.857 %
Tom Phillips 239 West Jefferson Blvd. Dallas, Texas 75208 Email: tom.phillips@gwtechinc.com     100 *     14.286 %
Total:     700       100.00 %
Authorized Units:     1,000          

 

Units designated with an asterisk (*) are Profit Units.

 

[Exhibit A]

 

   
     

 

 

SUBSCRIPTION AGREEMENT

 

This SUBSCRIPTION AGREEMENT (this “Agreement”), with an effective date of August 20, 2019 (the “Effective Date”), is entered into by and among OPM Green Energy, LLC, a Texas limited liability company (the “Company”), and Greenway Technologies, Inc., a Texas corporation (“Investor”). The Company and Investor are each referred to herein as a “Party” and collectively as the “Parties.” Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Company Agreement (defined below).

 

RECITALS

 

WHEREAS, concurrent with the execution hereof, Investor and the Company have entered into that certain Intellectual Property License, dated as of the date hereof, by and between Investor and the Company (the “License Agreement”);

 

WHEREAS, as consideration for the License Agreement, the Company desires to issue 300 Units (the “Units”) to Investor on the terms set forth in this Agreement;

 

WHEREAS, in connection with the transactions contemplated by this Agreement, Investor shall become a party to the Company’s Limited Liability Company Agreement, dated as of the date hereof (as further amended from time to time, the “Company Agreement”).

 

NOW, THEREFORE, in consideration of the premises, mutual covenants, and agreements contained herein and in the License Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor, intending to be legally bound, agree as follows:

 

1. Contribution and Issuance. Subject to compliance with any applicable terms of the Company Agreement, the Company shall issue to Investor, and Investor hereby accepts, the Units. The Parties agree that the value of the benefit of the License Agreement to the Company, as lessee, shall be deemed to be a Capital Contribution (as defined in the Company Agreement) of Investor to the Company.

 

2. Company Agreement. Upon execution of this Agreement, Investor shall be admitted to the Company as a Member (as defined in the Company Agreement) and shall be bound by and receive the benefit of the terms of the Company Agreement, the terms of which are hereby incorporated by reference herein as if set out herein in full.

 

3. Representations and Warranties of the Parties. The Company hereby represents and warrants to Investor, and Investor hereby represents and warrants to the Company, that the statements in this Section 3 are true and correct as of the date hereof:

 

(a) it is duly organized, validly existing and in good standing as an entity under the laws of the jurisdiction where it is organized and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder;

 

(b) all necessary actions have been taken by such Party and its members, managers, partners, shareholders or trustees, as applicable, to authorize the execution and delivery of this Agreement and the Company Agreement and to consummate the transactions hereunder and to perform its obligations hereunder and thereunder;

 

(c) this Agreement has been duly executed and delivered by such Party and constitutes a valid and binding agreement of such Party, enforceable in accordance with its terms, and the Company Agreement, when executed and delivered by the parties thereto, will constitute a valid and binding agreement of such Party, enforceable in accordance with its terms; and

 

(d) in the case of Investor, Investor understands that the Units have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or under any state securities laws. Investor also understands that the Units are being offered and sold pursuant to an exemption from registration contained in the Securities Act and applicable state securities laws based in part upon Investor’s representations contained in this Agreement. Investor hereby further represents and warrants as follows:

 

1. Investor must bear the economic risk of this investment indefinitely unless the Units are registered pursuant to the Securities Act, or an exemption from registration is available under the Securities Act and applicable state securities laws. Investor understands that the Company has no present intention of registering the Units. Investor also understands that there is no assurance that any exemption from registration under the Securities Act and under applicable state securities laws will be available and that, even if available, such exemption may not allow Investor to transfer all or any portion of the Units under the circumstances, in the amounts or at the times Investor might propose.

 

   
 

 

2. Investor is acquiring the Units for Investor’s own account for investment only, and not with a view towards their distribution.

 

3. Investor represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

 

4. Investor has read the Company Agreement and understands the terms and conditions thereof, including the restrictions regarding any disposition of the Units.

 

5. Investor has had the opportunity to ask for and obtain all information that it deems relevant to its investment in the Company, including without limitation information regarding the terms and conditions of its investment in the Company and the Company’s business, financial affairs, and facilities.

 

(e) Investor is not subject to any Disqualification Event (as defined below), except for Disqualification Events both (A) covered by Rule 506(d)(2)(ii) or 506(d)(2)(iii) under the Securities Act and (B) disclosed in writing in reasonable detail to the Company. Investor has exercised reasonable care to determine the accuracy of the representation made by him or her in this section and agrees to confirm to the Company promptly following the Company’s reasonable request therefor, that the representations and warranties given by Investor hereunder continue to be accurate. “Disqualification Event” means any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act.

 

4. Miscellaneous.

 

(a) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties, their distributees, heirs, legal representatives, executors, administrators, successors and assigns.

 

(b) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and shall be binding upon the Party who executed the same, but all of such counterparts shall constitute the same Agreement. This Agreement may be validly executed and delivered by facsimile, PDF or other electronic transmission.

 

(c) Entire Agreement. This Agreement, the License Agreement and the Company Agreement constitute the entire agreement between the Parties relating to the subject matter hereof and supersede all previous contracts and agreements between the Parties hereto, both oral and written. In the event of any conflict between the Company Agreement and this Agreement, the terms of the Company Agreement will govern.

 

(d) Further Assurances. Each Party shall execute and deliver all such further and additional instruments and agreements and shall take such further and additional actions, as may be reasonably necessary or desirable to evidence or carry out the provisions of this Agreement or to consummate the transactions contemplated hereby.

 

(e) Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Texas, without giving effect to the conflicts of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

 

* * * * *

 

[Remainder of page intentionally left blank]

 

    Page 2 of 3
 

 

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.

 

  COMPANY:
   
  OPM GREEN ENERGY, LLC,
  a Texas limited liability company
     
  By: /s/ Kevin Jones
  Name: Kevin Jones
  Title: Manager

 

  InvestoR:
   
  GREENWAY TECHNOLOGIES, INC.,
  a Texas corporation
     
  By: /s/ Kent Harer               
  Name: Kent Harer
  Title: President (Acting)

 

[Subscription Agreement]

 

   
 

 

Intellectual Property License

 

This Intellectual Property License (the “License” or “Agreement”) is entered into by and between Greenway Technologies, Inc., a Texas corporation having a place of business 1521 N Cooper St, Suite 205, Arlington, Texas 76011 (the “Licensor” or (“GWTI”)), and OPM Green Energy, LLC (“OPM”), a Texas limited liability company having a place of business at 892 Meadow Hill Road, Fort Worth, Texas 76108 (the “Licensee”). Licensor and Licensee each referred to herein as a “Party” and collectively as the “Parties.”

 

Recitals

 

Whereas, Licensor invested millions of dollars and years of manpower researching and developing an economical small-scale Gas-to-Liquids (“GTL”) unit (“GTL Unit”) that converts natural gas to clean synthetic fuels (the “GTL Technology”). The GTL Unit represents proprietary, confidential technological advancements owned by GWTI, which is currently in the process of commercializing, marketing, and deploying. The GTL Unit consists of two primary components; (a) syngas generation machine (the “G-ReformerTM”) that eliminates the need for expensive steam methane reformers to create syngas from natural gas, and (b) a Fischer–Tropsch (“F-T”) reactor that will convert the syngas to a range of liquid hydrocarbons without appreciable waxes being formed. GWTI’s G-ReformerTM and GTL Unit represent the culmination of years of research, design and experimentation and provide GWTI with a significant advantage over competitors. GWTI continues to make every reasonable effort to maintain the necessary confidentiality and secrecy to protect its investment of time, labor and capital;

 

Whereas, GWTI intends to commercialize, market, and deploy these patented and/or proprietary units for pipelines, stored natural gas facilities, and/or stranded natural gas fields with a focus on producing high-cetane rated synthetic fuels (liquid fuels derived from natural gas or synfuels) such as diesel and jet fuel. The G-ReformerTM can be licensed, leased and/or sold for tens of millions of dollars each and, collectively, the G-Reformer TM can significantly alter the oil and gas industry;

 

Whereas, Licensee is in the process of obtaining and/or already secured leasehold rights to a GTL plant and technology and real property consisting of approximately 5.26 acres, located at 7391 U.S. 59, Wharton, Texas, 77488 and being more particularly described as Lot 1, Block 1, Infra Technology Addition, Wharton County, Texas as shown by plat thereof recorded in slide 3115 of the Wharton County Plat Cabinet Records, together with all easements and appurtenances thereto, and all improvements thereon, including, without limitation, the Gas To Liquids Plant and natural gas processing equipment (hereinafter “Wharton Plant”); and,

 

Whereas, Licensee is desirous of securing, and Licensor is willing to grant to Licensee, a non-exclusive license to use or otherwise implement Licensor’s GTL Technology at the Wharton Plant and to make, sell, and offer for sale the products produced at the Wharton Plant via the GTL Technology.

 

Therefore, in consideration of the premises, mutual covenants, and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Licensor and Licensee, intending to be legally bound, agree as follows:

 

Definitions

 

1. “Effective Date” shall mean the date the last signature is affixed below.

 

2. “Confidential Information” means any and all technical and business information, whether in graphic, electronic, written or oral form, including but not limited to any ideas, techniques, drawings, schematics, plans, designs, descriptions, technical information, specifications, works of authorship, patent applications or other filings, intellectual property, trade secrets as defined by precedent in the State of Texas including any formulas, device or compilation of information utilized by GWTI, information gleaned from access to the G-ReformerTM model(s) and/or the GTL Units, Inventions, Greenway-Related Developments, know-how, processes, algorithms, software programs, software source documents, formulae related to GWTI’s current, future, and proposed technologies, products and/or services, the G-ReformerTM, the GTL Unit, F-T Catalysts, and/or Proprietary Information. Confidential Information also includes any of GWTI’s information and/or materials concerning research, assessments, experimental work, development, engineering, statistical information, accounting, economic and/or financial information, purchasing, components, materials, customer and/or vendor lists, suppliers, investors, employees, business and contractual relationships, business forecasts, sales and merchandising, marketing plans as well as GWTI’s financial plans and records, marketing plans, business strategies, pricing, pricing strategies, professional rates and relationships with third parties, client lists, present and proposed products, methodologies, techniques, know-how, computer software programs and descriptions of functions and features of software, source code, computer hardware designs, information regarding customers and suppliers, employees and affiliates, including all originals, copies, digests and summaries in any form as well as all other proprietary information that a third party who may benefit from access to and/or use of such information and/or in the oil & gas industry.

 

Page 1 of 8
 

 

3. “Development(s)” means Inventions, discoveries, designs, developments, methods, modifications, improvements, processes, algorithms, databases, computer programs, formulae, techniques, trade secrets, graphics or images, and audio or visual works and other works of authorship.

 

4. “F-T Catalyst(s)” means the catalysts used in the F-T Process to increase the rate of a chemical reaction resulting in the desired output of the GTL Unit.

 

5. “F-T Process” means the Fischer-Tropsch Process, either in the currently-known process or as modified through additional research, Inventions, which is a set of catalytic chemical reactions that change a mixture of carbon monoxide gas and hydrogen gas into hydrocarbons of various molecular weights according to the following equation: (2n+1) H2 + nCO → Cn H2n+2 + n H2O.

 

6. “G-ReformerTM” means the syngas generation equipment conceived of and created by GWTI that converts natural gas into syngas for use in the downstream F-T Process of the GTL Unit.

 

7. “GTL Unit” means the combination of equipment including the G-ReformerTM and a Fischer–Tropsch Process that will produce, without the need for expensive steam methane reformers, synthetic fuel(s) using the F-T Process.

 

8. “Improvement” means any alteration, revision, reformulation, modification or improvement of any type in and/or relating to (i) the Licensed Intellectual Property (including any formula, method, specifications or process), (ii) Invention, (iii) Development, (iv) G-ReformerTM and/or (v) GTL Unit.

 

9. “Intellectual Property” means any Inventions, intellectual property as that term is defined and/or used in U.S. federal patent cases, patents, trademarks, copyrights, Developments, Improvements, processes, methods, formulae, specifications, ideas, trade secrets, know how, discoveries or the like relating to any aspect of, or resulting from, the production of the G-ReformerTM, including any data, results, information and notes deriving from and relating thereto.

 

10. “Invention” means any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof.

 

11. “Licensed Intellectual Property” shall include:

 

(a) “Licensed Patents,” meaning the patents and applications for patent set forth on Schedule I, Part A attached hereto and all patents and patent applications claiming priority to or from such patents, including all continuation applications, continuation-in-part applications, divisional applications, reissue applications, and reexamination applications;

 

(b) GWTI’s Intellectual Property;

 

(c) “Licensed Marks,” meaning the trademarks and applications for trademark set forth on Schedule I, Part B; and

 

(d) “Licensed Know-How,” meaning any trade secret or other know-how necessary to make, have made, use, or otherwise implement Licensor’s GTL Technology or to sell import, export, or offer to sell products produced via the GTL Technology.

 

All other terms defined in this agreement elsewhere are incorporated herein by reference.

 

Page 2 of 8
 

 

License Grant & Conditions:

 

(A) License to Use Licensed Intellectual Property. Licensor grants to Licensee a royalty-free, non-exclusive, non-transferable license in, to, and under the Licensed Intellectual Property to use, or otherwise implement Licensor’s GTL Technology at the Wharton Plant, and/or to sell or offer to sell products (e.g., fuel, water, & heat energy) produced at the Wharton Plant via the GTL Technology in the United States. This License is intended for the life of the Wharton Plant operated by Licensee, unless extended or expanded in writing by agreement of the Parties. This License does not grant any additional expectations, interests, or rights to use or benefit – directly or indirectly – from the GTL Technology, Licensor’s GTL Unit, G-Reformer, and/or Licensed Intellectual Property at any location other than the Wharton Plant or for any other purpose not explicitly granted under the terms of this Agreement.

 

(B) The rights and licenses herby granted cannot be sub-licensed, conveyed, shared, transferred, or otherwise assigned unless agreed to beforehand in writing by the Licensor after vote by GWTI’s board of directors. Any permitted sub-licensees shall agree in writing before receiving any protected or confidential information and/or any of the Licensed Intellectual Property and to be bound by the terms and conditions of this License in the same manner and to the same extent as Licensee.

 

(C) It is the Parties’ mutual understanding and agreement that this license is expressly intended to facilitate the third-party certification of GWTI’s intellectual property, GTL Technology, GTL Unit, G-Reformer, or any related equipment or technology for purposes of demonstrating such as a commercially-viable technology for producing syngas from the G-Reformerand/or marketable fuel products from, through, and/or utilizing the GTL Technology and/or Licensed Intellectual Property (hereinafter the “Pending Certification”). As a material part of the consideration for entering into this License, Licensee shall take all commercially-reasonable steps necessary to enable and assist GWTI to obtain such third-party certification, including working with needed personnel to do so. Licensee shall permit, subject to the execution of any liability release required by Licensee, GWTI and its designees unfettered and full access to the Wharton Plant for any purpose as GWTI deems necessary, including but not limited to prospecting and demonstration.

 

(D) Licensor represents and warrants that, to the fullest extent commercially reasonable, it will provide any assistance, including provision of personnel, material, and data, necessary or beneficial for Licensee’s utilization of the GTL Technology at the Wharton Plant, including but not limited to equipment set-up, integration, implementation, and trouble-shooting.

 

(E) To the extent that the Licensed Intellectual Property is subject to any governmental, quasi-governmental, industry, or other certifications, registrations, or approvals (collectively “Certifications”), to the extent any such Certifications are assignable or transferable to, or may be otherwise used by, Licensee in connection with the utilization of the GTL Technology by Licensee, Licensor shall use commercially reasonable efforts to assign or transfer such Certifications to Licensee or secure the right for Licensee to use such Certifications, at Licensee’s cost and expense.

 

(F) Once the Pending Certification is achieved, the Parties may discuss the extension of this License and/or any other terms that are mutually agreed upon.

 

No Other Grant of Rights

 

1. This license does not convey or otherwise bestow upon Licensee the authority, power, and/or rights to market and/or negotiate the assignment, conveyance, lease, sale and/or use of the Licensed Intellectual Property, GTL Technology, GTL Unit, G-ReformerTM, or any related equipment or technology. In the absence of a separate written agreement between the Parties extending such rights to OPM, GWTI will remain solely responsible for such marketing and/or sales.

 

2. GWTI shall have the sole right to develop, market, license and/or patent any Invention and/or Development resulting from the operation of the Wharton Plant using, in whole or part, the Licensed Intellectual Property, GTL Technology, GTL Unit, G-ReformerTM, or any related equipment or technology.

 

Page 3 of 8
 

 

3. Except as expressly provided in this Agreement, nothing in this Agreement shall be construed to confer any ownership interest, license or other rights upon Licensee by implication, estoppel or otherwise as to any technology, Licensed Intellectual Property, products or materials of GWTI or any other entity, regardless of whether such technology, intellectual property rights, products or materials are dominant, subordinate or otherwise related to any patent rights.

 

Confidentiality and Protecting Licensed Intellectual Property

 

(A) Enforcement and Protection of Licensed Intellectual Property. The Parties agree they have a mutual interest in protecting the Licensed Intellectual Property and Confidential Information relating to GTL Technology, GTL Unit, G-ReformerTM, or any related equipment or technology, and have a mutual interest in maintaining the validity and enforceability of such materials by challenging any unauthorized infringement of the Licensed Intellectual Property. Licensee will cooperate fully with Licensor at all times with respect to the maintenance, enforcement and protection of Licensed Intellectual Property. Licensee shall cooperate with GWTI and its attorneys in connection with any litigation or other proceeding related to the validity, infringement, or protection of Licensed Intellectual Property and Confidential Information relating to GTL Technology, GTL Unit, G-ReformerTM, or any related equipment or technology. Licensee’s cooperation shall include, without limitation, providing assistance to GWTI’s counsel, experts, and consultants, and providing truthful testimony in hearing, pretrial, and trial proceedings.

 

(B) In the event that Licensee shall learn of any perceived infringement or misappropriation of any of the Licensed Intellectual Property by any third party, Licensee shall immediately notify Licensor of such perceived infringement and take all commercially-reasonable steps necessary to protect against the further disclosure, infringement and/or misappropriation of Licensed Intellectual Property and Confidential Information relating to GTL Technology, GTL Unit, G-ReformerTM, or any related equipment or technology.

 

  (i) OPM shall have the right to bring suit on behalf of GWTI to prevent infringement or other unauthorized use of the Licensed Intellectual Property, at its sole and absolute expense and discretion. OPM shall have no right to enforce, or receive any awards, monies, or settlement amounts resulting from the enforcement of, the Licensed Intellectual Property.
     
  (ii) In any suit brought by GWTI against a third party to protect or enforce any aspect of the Licensed Intellectual Property, OPM shall, at the request of GWTI and at its expense, cooperate in all respects and, to the extent possible, have its employees testify and make available relevant records, papers, information, samples, specimens and the like.

 

Patent Marking

 

Licensee agrees that each and every product which incorporates subject matter claimed in any patent included in the Licensed Intellectual Property shall be conspicuously marked, by tag, label, text, or otherwise to conform with 35 U.S.C. § 287(a).

 

Representations & Warranties:

 

Licensor represents and warrants that it is the sole and exclusive owner of, or has the right to license, the Licensed Intellectual Property.

 

Page 4 of 8
 

 

Default; Remedies; Termination

 

(A) Default; Termination. Notwithstanding the grant of the license hereby, a Party may terminate this License by giving written notice to the other Party of such termination in the event of a material breach of this License by the other Party (subject to the that Party’s right to cure within thirty (30) days after receipt of such notice) or upon the occurrence of one or more events of default described herein. In the event that GWTI provides such written notice, the Parties agree that this License is suspended immediately until such time as the dispute arising from the material breach or event of default has been adjudicated or otherwise resolved by the Parties through a mutually-agreeable settlement. As used in this License, an event of default permitting a Party to terminate this License includes but is not limited to the following:

 

(i) Any meritorious attempt by any creditor or other party to seize, garnish, foreclose, remove or otherwise exert control over the Licensed Intellectual Property, G-ReformerTM, GTL Unit and/or any other equipment or material belonging to GWTI located at the Wharton Plant;

 

(ii) Licensee becomes insolvent or makes an assignment for the benefit of any creditor, is unable to pay any obligations to others as they mature, or if any petition is filed by or against Licensee under any provision of any state or federal law or statute alleging that Licensee is insolvent or unable to pay debts as they mature or under any provision of the United States Bankruptcy Code;

 

(iii) Licensee (1) dissolves or terminates its existence, (2) discontinues its operations, (3) applies for or consents to the appointment of a receiver, trustee, custodian or liquidator of it or of all or a substantial part of its property, (4) generally fails to pay its debts as they come due in the ordinary course of business, or (5) commences, or files an answer admitting the material allegations of or consent to, or defaults in a petition filed against it in, any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeks or has an order for relief entered with respect to it under the United States Bankruptcy Code, or seeks reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other similar relief with respect to it or its debt;

 

(iv) A receiver, conservator, liquidator, custodian or trustee of Licensee is appointed by the order or decree of any court or agency or supervisory authority having jurisdiction, and such decree or order remains in effect for more than thirty (30) days; or any of the property of Licensee is sequestered by court order and such order remains in effect for more than thirty (30) days; or a petition is filed or a proceeding is commenced against Licensee under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and is not dismissed within thirty (30) days after such filing;

 

(v) The levy or execution of any attachment, execution or other process against any material part of the equipment or material belonging to GWTI located at the Wharton Plant that is not timely and completely stayed by appropriate proceedings and/or bonding requirements;

 

(vi) Licensee conceals, removes, or permits to be concealed or removed, any part of GWTI’s property, the Licensed Intellectual Property, G-ReformerTM, GTL Unit and/or any other equipment or material belonging to GWTI located at the Wharton Plant; or make any transfer of such property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or suffer or permit, while insolvent, any creditor to obtain a Lien upon any of its respective property through legal proceedings or distraint or other process which is not vacated within thirty (30) days from the date thereof; or

 

(vii) The addition of a new member of OPM Green Energy, LLC (as described in Article III of its Limited Liability Agreement) without the consents or approvals required thereunder.

 

(viii) The distribution of this License to the Licensor in connection with the dissolution of the Licensee.

 

(B) GWTI’s Property. In the event of any default by Licensee and/or any type of legal or equitable action by any creditor of Licensee and/or its officers, directors, or members, it is expressly understood and agreed that GWTI’s Licensed Intellectual Property, GTL Technology, GTL Unit, G-ReformerTM, or any related equipment or technology (collectively “GWTI’s Property”) – whether located at the Wharton Plant or elsewhere – are not assets of Licensee and may not be liened, encumbered, pledged, or otherwise assigned to or for the benefit of any creditor or other party. Licensee shall take all steps necessary to prevent any other party from exerting control over, moving, and/or gaining access to GWTI’s Property, and in the event of any default by Licensee, Licensor shall have the absolute right to take possession of and, if deemed necessary by Licensor, remove GWTI’s Property.

 

Page 5 of 8
 

 

(C) Preservation of GWTI’s Property. Following the occurrence of a material breach or an event of default, in addition to the rights and remedies set forth herein, Licensor: (a) may at any time take such steps as Licensor deems necessary to protect Licensor’s interest in and to preserve GWTI’s Property, including the hiring of such security guards or the placing of other security protection measures as Licensor may deem appropriate; (b) may employ and maintain at any of Licensee’s premises a custodian who shall have full authority to do all acts necessary to protect Licensor’s interests in GWTI’s Property; (c) may lease warehouse facilities to which Licensor may move all or part of GWTI’s Property; (d) may use Licensee’s owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing GWTI’s Property; and (e) shall have, and is hereby granted, a right of ingress and egress to the places where GWTI’s Property is located, and may proceed over and through Licensee’s owned or leased property. Licensee shall cooperate fully with all of Licensor’s efforts to preserve GWTI’s Property and will take such actions to preserve GWTI’s Property as Licensor may direct. All of Licensor’s expenses of preserving GWTI’s Property, including any expenses relating to the bonding of a custodian, shall be added to the Licensee’s obligations under the terms of this Agreement.

 

Assignment and Sale of Licensed Intellectual Property

 

No term or provision herein shall be construed to limit the Licensor’s rights to sell, assign, license, or otherwise convey all or substantially all rights in and to one or more of the Licensed Intellectual Property (cumulatively, “sell”) at any time.

 

Miscellaneous

 

1) Governing Law: This License shall be governed by and construed in accordance with the laws of the State of Texas without regard to choice-of-law principles.

 

2) Notices: All notices hereunder shall be in writing, and shall be given personally, by facsimile, certified mail or by overnight courier to the address set forth herein or at such other addresses as may be given from time to time in accordance with the terms of this notice provision.

 

3) Modifications: This License shall not be changed, modified, or amended except in writing and signed by both Parties.

 

4) Participation in Drafting. Each of the Parties hereto has jointly participated in the negotiation and drafting of this Agreement. In the event an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the Parties hereto and no presumptions or burdens of proof shall arise favoring any Party by virtue of the authorship of any provisions of this Agreement.

 

5) Confidentiality: The terms and conditions of this License (but not its existence) are confidential information and neither Party shall disclose such terms and conditions to third parties without the prior written consent of the other Party.

 

6) Severability; Waiver: If any provision of this License (or any portion thereof) is determined to be invalid or unenforceable, the remaining provisions of this License shall not be affected thereby and shall be binding upon the Parties and shall be enforceable, as though said invalid or unenforceable provision (or portion thereof) were not contained in this License. The failure by either Party to insist upon strict performance of any of the provisions contained in this License shall in no way constitute a waiver of its rights as set forth in this License, at law or in equity, or a waiver of any other provisions or subsequent default by the other party in the performance of or compliance with any of the terms and conditions set forth in this License.

 

7) Headings: The headings of this License are intended solely for convenience of reference and shall be given no effect in the interpretation or construction of this License.

 

8) Counterparts: This License may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this License delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this License.

 

Page 6 of 8
 

 

9) Attorney’s Fees. Each Party shall bear all of the attorneys’ fees of its own counsel and its own court costs in connection with the Lawsuit and this Agreement.

 

10) Entire Agreement and Successors in Interest. This Agreement contains the entire agreement between the Parties with regard to matters set forth herein, and shall be binding upon and inure to the benefit of the executors, administrators, successors in interest and assigns of each. All prior negotiations, representations, agreements and understandings are superseded hereby. No agreements altering or supplementing the terms hereof may be made except by means of a written document signed by the duly authorized representatives of the parties.

 

11) Severability & Savings Clause. If any provision of this Agreement is determined by any court or governmental authority to be unenforceable, the Parties intend that this Agreement be enforced as if the unenforceable provisions were not present and that any partially valid and enforceable provisions be enforced to the extent that they are enforceable. If the removal of the provisions rendered the Agreement invalid, unenforceable or void materially alters the obligations of either party in such manner as to cause serious financial hardship to a Party, or cause a Party to act in violation of its articles or bylaws, the Party so affected shall have the right to terminate this Agreement upon sixty (60) days prior written notice to the other party. The affected Party shall make all reasonable efforts, if requested by the other party, to negotiate amendments to this Agreement that will abrogate the undesirable effects of such statute, regulation, or judicial decision. Further, should any provisions within this Agreement ever be reformed or rewritten by judicial body, such provisions as so rewritten shall be binding upon the Parties.

 

12) Duplicate Originals. It is understood and agreed this Agreement is being executed in a number of identical counterparts, each of which shall be deemed as an original for all purposes.

 

13) Parties Bound & Assignment of Agreement. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and upon their respective successors in interest of any kind whatsoever. This Agreement shall not be assignable by University but may be assigned to an entity wholly owned or owned substantially by GWTI or affiliated with GWTI.

 

{Signatures on the Following Page}

 

Page 7 of 8
 

 

Agreed to by and between the Parties as evidence by the signatures below:

 

  Licensor:
   
  Greenway Technologies, Inc.,
     
  By: /s/ Kent Harer
  Name: Kent Harer
  Title: President (Acting)
  Date: August 24, 2019

 

  Licensee:
   
  OPM Green Energy, LLC
     
  By: /s/ Kevin Jones
  Name: Kevin Jones
  Title: Manager
  Date: August 24, 2019

 

Page 8 of 8
 

 

SCHEDULE I

 

LICENSED INTELLECTUAL PROPERTY

 

PART A: LICENSED PATENTS:

 

TITLE   COUNTRY   STATUS   SER. NO.   PATENT NO.   ISSUED
NATURAL GAS TO LIQUID FUELS   US   Issued   13/769,079  

8,574,501

  Nov. 5, 2013
NATURAL GAS TO LIQUID FUELS   US   Issued   14/070,845   8,795,597   Aug. 5, 2014

 

PART B: LICENSED MARKS:

 

MARK   COUNTRY   STATUS   SER. No   REG. NO.   REGISTERED
G-REFORMER   US   Pending   87500045   N/A   N/A

 

[Schedule I to Intellectual Property License]
 

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Kent Harer, certify that:

 

1. I have reviewed this Form 10-Q of Greenway Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 19, 2019

 

  /s/ Kent Harer
  Kent Harer, President

 

 
 

 

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Ransom Jones, certify that:

 

1. I have reviewed this Form 10-Q of Greenway Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 19, 2019

 

  /s/ Ransom Jones
  Ransom Jones, Chief Financial Officer
  and Principal Accounting Officer

 

 
 

 

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the accompanying Quarterly Report on Form 10-Q of Greenway Technologies, Inc. for the fiscal quarter ending September 30, 2019, I, Kent Harer, President of Greenway Technologies, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

 

1. Such Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2019, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in such Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2019, fairly presents, in all material respects, the financial condition and results of operations of Greenway Technologies, Inc.

 

Date: November 19, 2019

 

  /s/ Kent Harer
  Kent Harer, President

 

 
 

 

Exhibit 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the accompanying Quarterly Report on Form 10-Q of Greenway Technologies, Inc. for the quarter ending September 30, 2019, I, Ransom Jones, Chief Financial Officer of Greenway Technologies, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

 

1. Such Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2019, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in such Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2019, fairly presents, in all material respects, the financial condition and results of operations of Greenway Technologies, Inc.

 

Date November 19, 2019

 

  /s/ Ransom Jones
  Ransom Jones, Chief Financial Officer
   and Principal Accounting Officer