The accompanying notes are an integral
part of these condensed financial statements
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Nature of Operations
Greenway Technologies, Inc. ("GTI"
or the "Company") was organized on March 13, 2002 under the laws of the State of Texas as Dynalyst Manufacturing Corporation. On
August 18, 2009, in connection with a merger with Universal Media Corporation, a privately held Nevada company, the Company changed
its name to Universal Media Corporation ("Universal Media"). The company changed its name to UMED Holdings,
Inc. on March 23, 2011 and to Greenway Technologies, Inc. on June 23, 2017.
The Company’s mission is to operate
as a holding company through the acquisition of businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid
management that will not have to be replaced in the near future (2) the ability to grow with steady growth to follow and (3) an
emphasis on emerging core industry markets, such as energy and metals. It is the Company's intention to add experienced
personnel and select strategic partners to manage and operate the acquired business units.
In September 2010, the Company acquired
1,440 acres of placer mining claims on Bureau of Land Management land in Mohave County, Arizona. See discussion in Note 3.
Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position
of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources
for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.
In August 2012, the Company acquired
100% of Greenway Innovative Energy, Inc., which two owns patents and trade secrets for a proprietary process and related technology
to convert natural gas into synthesis gas (syngas). Syngas is an important intermediate gas used by industry in the production
of ammonia, methane, liquid fuels, and other downstream products. The company’s unique process is called Fractional Thernal
Oxidation™ (FTO). When combined with Greenway’s proprietary Fisher-Tropsch system, Greenway offers a new economical,
relatively small scale (125 to 2,500 bbls/day) method of converting natural-gas-to-liquid (GTL) not previously achievable.
NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN
UNCERTAINTIES
Principles of Consolidation
The accompanying condensed consolidated
financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant inter-company
accounts and transactions were eliminated in consolidation.
Basis of Presentation
The accompanying unaudited interim
condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations
S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of
the results that may be expected for the year ending December 31, 2017. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31,
2016.
The accompanying condensed
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
|
Going Concern Uncertainties
The accompanying condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, the
Company sustained a loss of approximately $6.3 million for the six-month period ended June 30, 2017 and has a working capital deficiency
of approximately $1.7 million and an accumulated deficit of approximately $21 million at June 30, 2017. The ability of the Company
to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the
Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable
it to continue as a going concern for the next twelve months.
The company is in discussions with several oil and gas companies
and other organizations regarding joint venture funding for its first gas-to-liquid (GTL) plant using the company’s unique
GTL system. Should an agreement be made, the joint venture relationship will provide funding at a level of $20 to $50 million with
an ongoing profit-sharing arrangement between the Company and the partner organizations and/or individuals with an economic profile
previously not achievable in the GTL industry segment. While there are no assurances that financing for the first GTL plant will
be obtained on acceptable terms and in a timely manner, the failure to obtain the necessary working capital may cause the Company
to move in one or more alternative directions to shepherd this revolutionary GTL system into production. Several alternative paths
are under development in conjunction with the joint venture/profit sharing approach.
The accompanying condensed consolidated
financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company
have to curtail operations or be unable to continue in existence.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A summary of significant accounting
policies applied in the presentation of the condensed consolidated financial statements are as follows:
Property & 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 are recorded
as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the estimated useful life
of the assets as follows.
Impairment of Long-Lived Assets
The Company assesses the impairment
of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance
with ASC Topic 360, "Property, Plant and Equipment." An asset or asset group is considered impaired if its
carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate. If an
asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds its fair value. If estimated fair value is less than the book value, the asset is written down
to the estimated fair value and an impairment loss is recognized.
Revenue Recognition
The Company has not, to date, generated
significant revenues. The Company plans to recognize revenue in accordance with Accounting Standards Codification subtopic
605-10, Revenue Recognition ("ASC 605-10") which requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable;
and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding
the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related
sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification
subtopic 605-25,
Multiple-Element Arraignments
("ASC 605-25"). ASC 605-25 addresses accounting for arrangements
that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing
605-25 on the Company's financial position and results of operations was not significant.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during the reported period. Actual results could
differ materially from the estimates.
Cash and Cash Equivalents
The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be cash equivalents. There were no cash equivalents
at June 30, 2017 or December 31, 2016.
Income Taxes
The Company accounts for income taxes
in accordance with FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and
assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using
enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results
from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely
than not that some or all deferred tax assets will not be realized.
The Company has adopted the provisions
of FASB ASC 740-10-05
Accounting for Uncertainty in Income Taxes
. The ASC clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and
transition. Open tax years, subject to IRS examination include 2013 – 2016.
Net Loss Per Share, basic and diluted
Basic loss per share has been computed
by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period.
Shares issuable upon the exercise of warrants (314,733) have been excluded as a common stock equivalent in the diluted loss per
share because their effect is 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 discussion regarding
convertible notes payable and a warrant agreement.
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 broad levels as follows:
Level 1 – Valuation based on unadjusted
quoted market prices in active markets for identical assets or liabilities.
Level 2 – Valuation based on,
observable inputs (other than level one prices), quoted market prices for similar assets such as at the measurement date; quoted
prices in the market that are not active; or other inputs that are observable, either directly or indirectly.
Level 3 – Valuation based on unobservable
inputs that are supported by little or no market activity, therefore requiring management's best estimate of what market participants
would use as fair value.
Original Issue Discount
For certain convertible debt issued,
the Company provides the debt holder with an original issue discount ("OID"). An OID is the difference between
the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the total amount payable.
The OID is amortized into interest expense pro-rata over the term of the Note.
In instances where the determination
of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair
value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation of the Company's notes
recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual
prices.
The carrying amounts of financial assets
and liabilities, such as cash and cash equivalents, receivables, accounts payable, notes payable and other payables, approximate
their fair values because of the short maturity of these instruments.
The following table represents the Company's
assets and liabilities by level measured at fair value on a recurring basis at June 30, 2017:
Description
|
|
Level 1
|
|
|
Level 2
|
|
Level 3
|
|
Derivative Liabilities
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
71,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following assets and liabilities are measured on
the balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their
valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:
The change in the notes payable at fair
value for the six-month period ended June 30, 2017 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Change
|
|
|
|
|
|
Fair
|
|
|
January 1,
2017
|
|
in
Fair
Value
|
|
New
Convertible
Notes
|
|
Conversions
|
|
Value
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
$
|
56,057
|
|
|
$
|
15,702
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
71,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 financial statements.
Stock Based Compensation
The Company follows Accounting Standards
Codification subtopic 718-10,
Compensation
("ASC 718-10") which requires that all share-based payments to both
employees and non-employees be recognized in the income statement based on their fair values.
At June 30, 2017, the Company did not
have any issued or outstanding stock options.
Concentration and Credit Risk
Financial instruments and related items,
which potentially subject the Company to concentrations of credit risk, consist primarily of cash. The Company places its cash
with high credit quality institutions. At times, such deposits may be in excess of the FDIC insurance limit.
Research and Development
The Company accounts for research and
development costs in accordance with Accounting Standards Codification subtopic 730-10,
Research and Development
("ASC
730-10"). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal
research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted
work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored
research and development costs related to both present and future products are expensed in the period incurred. The Company
incurred research and development expenses of $337,932 and $259,671 during the six months ended June 30, 2017 and 2016, respectively.
Issuance of Common Stock
The issuance of common stock for other than cash is recorded
by the Company at market values.
Impact of New Accounting Standards
Management does not believe that any other recently issued,
but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated
financial statements.
NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT
|
|
Range of Lives
in Years
|
|
June 30,
2017
|
|
December 31, 2016
|
Equipment
|
|
|
5
|
|
|
$
|
2,032
|
|
|
$
|
2,032
|
|
Furniture and fixtures
|
|
|
5
|
|
|
|
1,983
|
|
|
|
1,983
|
|
|
|
|
|
|
|
|
4,015
|
|
|
|
4,015
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(3,865
|
)
|
|
|
(3,666
|
)
|
|
|
|
|
|
|
$
|
150
|
|
|
$
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the period ended
|
|
|
|
|
|
$
|
198
|
|
|
|
|
|
NOTE 5 – TERM NOTES PAYABLE
Term notes payable consisted of the following at
June 30, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Unsecured note payable dated March 8, 2016 to an individual
|
|
|
|
|
|
|
at 5.0% interest, payable upon the Company's availability of cash
|
|
$
|
8,500
|
|
|
$
|
13,500
|
|
|
|
|
|
|
|
|
|
|
NOTE 6 – CONVERTIBLE PROMISSORY NOTE
May 2016 Convertible Note
On May 4, 2016, the Company issued a
$224,000 convertible promissory note bearing interest at 10.0% per annum to an accredited investor, payable beginning November
10, 2016, in monthly installments of $44,800 plus accrued interest and a cash premium equal to 10.0% of the installment amount. The
convertible promissory note was paid on March 4, 2017. The holder had the right under certain circumstances to convert the
note into common stock of the Company at a conversion price equal to 70% of the average of the 3 lowest volume weighted average
trading prices during the 20-day period ending on the latest complete trading day prior to the conversion date.
The Company evaluated the terms of the
convertible note in accordance with ASC 815-40, Contracts in Entity's Own Equity, and concluded that the Convertible Note resulted
in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature
since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. The
discount related to the beneficial conversion feature on the note was valued at $224,000 based on the Black Scholes Model. The
discount related to the beneficial conversion feature ($51,829) was amortized over the term of the debt (10 months). For
the six months ended June 30, 2017, the Company recognized interest expense of $9,327 related to the amortization of the discount.
In connection with the issuance of the
$224,000 note, the Company recorded debt issue cost and discount as follows:
●
|
$20,000 original issue discount and $4,000 debt issue cost, which was amortized over 10 months, with amortization of $3,600 for six months ended June 30, 2017.
|
·
|
The convertible promissory note was paid in full on March 10, 2017 reducing the embedded derivative for the 2016 beneficial conversion right to zero at June 30, 2017.
|
September 2014 Convertible Note
In connection with the issuance of a
$158,000 convertible promissory note in 2014, the Company issued warrants to purchase shares of common stock.
|
●
|
Warrants – recorded at fair value ($79,537) upon issuance, and marked -to-market on the balance sheet at $71,759 as of June 30, 2017 and $20,820 as of December 31, 2016, which was computed as follows;
|
|
|
Commitment Date
|
|
Expected dividends
|
|
|
0%
|
|
Expected volatility
|
|
|
188%
|
|
Expected term: conversion feature
|
|
2.25 years
|
|
Risk free interest rate
|
|
|
0.62%
|
|
NOTE 7 – ACCRUED EXPENSES
Accrued expenses consisted of the following at June 30, 2017
and December 31, 2016;
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Accrued consulting fees
|
|
$
|
249,500
|
|
|
$
|
249,500
|
|
Accrued interest expense
|
|
|
524
|
|
|
|
1,022
|
|
Total accrued expenses
|
|
$
|
250,024
|
|
|
$
|
250,522
|
|
NOTE 8– CAPITAL STRUCTURE
The Company is authorized to issue 300,000,000
shares of class A common stock with a par value of $.0001 per share and 20,000,000 shares of class B common 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.
Common A Stock
At June 30, 2017, there were 275,432,123
shares of class A common stock issued and outstanding.
During the three-month period ended
June 30, 2017, the Company issued 4,859,585 shares of restricted common stock to 31 individuals through private placements for
cash of $924,500 at average price of $0.19 per share.
During the three-month period ended
June 30, 2017, the Company issued 1,541,666 shares of restricted common stock for consulting services of $327,500 at average price
of $0.21 per share.
The issuance of these shares was exempt
from the registration requirements of the Securities Act of 1933 under Section 4 (2) thereof.
Class B Common
At June 30, 2017, there were
126,938 shares of class B common stock issued and outstanding. Each class B share is convertible, at the option of the class
B shareholder, into one share of class A common stock.
Stock options, warrants and
other rights
At June 30, 2017, the Company has not adopted any employee
stock option plans.
On October 1, 2015, the Company issued 4,000,000 warrants
for legal work. The warrants are exercisable at $.20 per share for a period of five years from the date of issue. The Company valued
the warrants as of December 31, 2015 at $386,549 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility
rate of 189%, expected conversion term of 4.75 years and risk-free interest rate of 1.75%.
On February 3, 2017, the Company issued 6,000,000 warrants
(4,000,000 at $.35 for two years and 2,000,000 at $.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 787%, expected conversion term of 2 and 3 years and risk-free interest rate of
1.75%.
NOTE 9 - RELATED PARTY TRANSACTIONS
Shareholders have made advances to the Company in the amounts
of $0 and $124,414 during the six months ended June 30, 2017 and 2016, respectively. The shareholders have elected to
convert advances of $0 and $51,500 to shares of common stock at market value ($.08 per share) and received repayments of $59,690
and $23,087 during the six months ended June 30, 2017 and 2016, respectively.
NOTE 10 – INCOME TAXES
At June 30, 2017 and December 31, 2016,
the Company had approximately $2.3 million and $1.9 million, respectively, of net operating losses ("NOL") carry forwards
for federal and state income tax purposes. These losses are available for future years and expire through 2033. Utilization
of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue
Code Section 382.
The provision for income taxes for continuing operations
consists of the following components for the six months ended June 30, 2017 and the year ended December 31, 2016:
|
2017
|
|
2016
|
|
|
|
|
|
|
Current
|
|
$
|
0
|
|
|
$
|
0
|
|
Deferred
|
|
|
0
|
|
|
|
0
|
|
Total tax provision
|
|
$
|
0
|
|
|
$
|
0
|
|
A comparison of the provision for income tax expense at the
federal statutory rate of 34% for the six months ended June 30, 2017 and the year ended December 31, 2016 the Company's effective
rate is as follows:
|
|
2017
|
|
2016
|
|
|
|
|
|
Federal statutory rate
|
|
|
(34.0
|
)%
|
|
|
(34.0)
|
%
|
State tax, net of federal benefit
|
|
|
(0.0
|
)
|
|
|
(0.0
|
)
|
Permanent differences and other including surtax exemption
|
|
|
0.0
|
|
|
|
0.0
|
|
Valuation allowance
|
|
|
34.0
|
|
|
|
34.0
|
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The net deferred tax assets and liabilities included in the
financial statements consist of the following amounts at June 30, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
Deferred tax assets
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
6,602,936
|
|
|
$
|
5,602,576
|
|
Deferred compensation
|
|
|
2,444,698
|
|
|
|
2,570,198
|
|
Stock based compensation
|
|
|
10,486,062
|
|
|
|
5,165,124
|
|
Other
|
|
|
1,217,990
|
|
|
|
1,138,307
|
|
Total
|
|
|
20,751,686
|
|
|
|
14,476,205
|
|
Less valuation allowance
|
|
|
(20,751,686
|
)
|
|
|
(14,476,205
|
)
|
Deferred tax asset
|
|
|
0
|
|
|
|
0
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
0
|
|
|
$
|
0
|
|
Net long-term deferred tax asset
|
|
$
|
0
|
|
|
$
|
0
|
|
The change in the valuation allowance was $6,275,481 and
$2,018,074 for the six months ended June 30, 2017 and the year ended December 31, 2016, respectively. The Company has recorded
a 100% valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and
other income subsequent to the change in ownership, which amounted to $20,751,686 and $14,476,205 at June 30, 2017 and December
31, 2016, respectively.
The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, historical taxable income including available
net operating loss carry forwards to offset taxable income, and projected future taxable income in making this assessment.
NOTE 11 – COMMITMENTS
Employment Agreements
In May 2011, the Company entered into
employment agreements with its chief executive officer, president and chief financial officer. The Agreements were for
a term of 5 years (ending on May, 31, 2016). During the six months ended June 30, 2016 the Company accrued a total
of $150,000 as management fees in accordance with the terms of these agreements.
In August 2012, the Company entered
into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of 5 years
with compensation of $90,000 per year. In June of 2014, the president's employment agreement was amended to increase his annual
pay to $180,000. On April 30, 2015, accrual on the Greenway chairman of the board agreement was ceased due to his absence
from the company for more than a year. During the six months ended June 30, 2017 and 2016, the Company accrued $90,000, respectively
for the president.
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. During the six months ended June 30,
2017 and 2016, the Company expensed $17,948 and $19,052, respectively, in, rent expense.
The Company has a minimum commitment
for 2017 of approximately $11,160 in annual maintenance fees for its BLM mining lease, which are due September 1, 2017. Once
the Company enters the production phase, royalties owed to the BLM are equal to 10% of production.
Legal
On April 22, 2016, the Company filed
suit in District Court, Dallas County, Texas against Mamaki of Hawaii, Inc. ("Mamaki"), Hawaiian Beverages, Inc.("HBI"),
Curtis Borman and Lee Jenison for breach of Stock Purchase Agreement dated October 29, 2015, wherein the Company sold its shares
in Mamaki of Hawaii, Inc. to Hawaiian Beverages, Inc. for $700,000 (along with the assumption of certain debt). The Defendants
failed to make payments of $150,000 each on November 30, 2015, December 28, 2015 and January 27, 2016. Mamaki has notified the
Company that it is in the process of acquiring the funds to pay what it owes the Company. The Company has agreed to not pursue
the lawsuit at this time to give Mamaki time to acquire the funds.
NOTE 12 – SUBSEQUENT EVENTS
Subsequent to June 30, 2017, the Company sold 52,631 shares
of class A restricted common stock to 2 individuals for $5,263 ($0.10 per share).