Vivakor, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS VIVAKOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2022 2021 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 6,524,956 $ 1,293,767 Cash and cash equivalents attributed to variable interest entity 322,268 199,952 Accounts Receivable, less allowances of $ 33,000 and $ 33,000 , respectively 845 845 Marketable securities 3,470,784 2,231,218 Inventories 222,000 192,000 Precious metal concentrate 1,166,709 1,166,709 Other assets 75,663 73,245 Total current assets 11,783,225 5,157,736 Other investments 4,000 4,000 Notes receivable 1,190,614 1,194,235 Property and equipment, net 25,383,533 24,692,111 Rights of use assets- operating leases 795,107 663,291 License agreement, net 2,328,274 2,370,835 Intellectual property, net 13,332,270 13,662,037 Total assets $ 54,817,023 $ 47,744,245 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,155,372 $ 2,023,985 Operating lease liabilities, current 270,452 287,769 Loans and notes payable, current 806,109 1,511,447 Loans and notes payable, current attributed to variable interest entity 1,852,540 3,416,379 Long-term debt, current 5,198 3,256 Total current liabilities 5,089,671 7,242,836 Operating lease liabilities, long term 581,039 434,109 Loans and notes payable, long term 834,951 1,185,970 Long-term debt 6,619,293 6,171,298 Deferred income tax liabilities 5,156,899 5,156,899 Total liabilities 18,281,853 20,191,112 Stockholders' equity: Convertible, preferred stock, $ .001 par value; 3,400,000 shares authorized; (1) Series A- 66,667 issued and outstanding (1) – 67 Common stock, $ .001 par value; 41,666,667 shares authorized; 15,038,619 and 12,330,859 were issued and outstanding as of March 31, 2022 and December 31, 2021 (1) 15,039 12,331 Additional paid-in capital 66,200,971 58,279,590 Treasury stock, at cost ( 20,000 ) ( 20,000 ) Accumulated deficit ( 36,332,242 ) ( 35,731,359 ) Total Vivakor, Inc. stockholders' equity 29,863,768 22,540,629 Noncontrolling interest 6,671,402 5,012,504 Total stockholders' equity 36,535,170 27,553,133 Total liabilities and stockholders’ equity $ 54,817,023 $ 47,744,245 (1) Share and per share amounts have been retroactively adjusted to reflect the one-for-thirty reverse stock split effective February 14, 2022. See Note 1 – Organization and Basis of Presentation for additional information See accompanying notes to consolidated financial statements 4 VIVAKOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March, 31 2022 2021 Revenues $ – $ 95,000 Cost of revenues – 91,920 Gross profit – 3,080 Operating expenses: Sales and marketing 191,339 702,528 General and administrative 1,312,807 1,073,845 Amortization and depreciation 375,218 363,279 Total operating expenses 1,879,364 2,139,652 Loss from operations ( 1,879,364 ) ( 2,136,572 ) Other income: Unrealized gain on marketable securities 1,239,566 12,683,444 Interest income 6,378 1,243 Interest expense ( 91,965 ) ( 154,021 ) Other income 150 1,294 Total other income 1,154,129 12,531,960 Loss before provision for income taxes ( 725,235 ) 10,395,388 Provision for income taxes ( 800 ) ( 1,020,388 ) Consolidated net income (loss) ( 726,035 ) 9,375,000 Less: Net loss attributable to noncontrolling interests ( 125,152 ) ( 141,841 ) Net income (loss) attributable to Vivakor, Inc. $ ( 600,883 ) $ 9,516,841 Basic and diluted net loss per share (1) $ ( 0.04 ) $ 0.84 Diluted net income per share (1) $ ( 0.04 ) $ 0.73 Basic weighted average common shares outstanding (1) 13,730,159 11,310,144 Effect of dilutive securities (1) – 1,793,361 Diluted weighted average common shares outstanding (1) 13,730,159 13,103,505 (1) Share and per share amounts have been retroactively adjusted to reflect the one-for-thirty reverse stock split effective February 14, 2022. See Note 1 Organization and Basis of Presentation for additional information See accompanying notes to consolidated financial statements 5 VIVAKOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIT) Series A Preferred Stock Common Stock Additional Paid-in Treasury Accumulated Non-controlling Total Stockholders’ Shares Amount Shares Amount Capital Stock Deficit Interest Equity December 31, 2021 (1) 66,667 $ 67 12,330,859 $ 12,331 $ 58,279,590 $ ( 20,000 ) $ ( 35,731,359 ) $ 5,012,504 $ 27,553,133 Common Stock issued for a reduction of liabilities – – 272,156 273 1,144,719 – – – 1,144,992 Conversion of Series A Preferred Stock to Common Stock ( 66,667 ) ( 67 ) 833,333 833 ( 766 ) – – – – Common Stock issued for cash – – 1,600,000 1,600 6,238,400 – – – 6,240,000 Common stock issued for fractional shares from reverse stock split – – 2,271 2 – – – – 2 Stock options issued for services – – – – 427,500 – – – 427,500 Stock based compensation – – – – 111,528 – – – 111,528 Distributions by noncontrolling interest – – – – – – – ( 135,950 ) ( 135,950 ) Issuance of noncontrolling interest for a reduction of debt – – – – – – – 1,920,000 1,920,000 Net loss – – – – – – ( 600,883 ) ( 125,152 ) ( 726,035 ) March 31, 2022 (unaudited) – $ – 15,038,619 $ 15,039 $ 66,200,971 $ ( 20,000 ) $ ( 36,332,242 ) $ 6,671,402 $ 36,535,170 Series A Preferred Stock Common Stock Additional Paid-in Treasury Accumulated Non-controlling Total Stockholders’ Shares Amount Shares Amount Capital Stock Deficit Interest Equity December 31, 2020 (1) 66,667 $ 67 11,255,967 $ 11,256 $ 45,623,146 $ ( 20,000 ) $ ( 30,204,992 ) $ 1,279,089 $ 16,688,566 Common Stock issued for services (1) – – 33,667 34 437,966 – – – 438,000 Common Stock issued for a reduction of liabilities (1) – – 3,333 3 35,997 – – – 36,000 Common Stock issued for the purchase of a license (1) – – 16,667 17 224,983 – – – 225,000 Conversion of temporary equity Series B and B-1 Preferred Stock to Common Stock (1) – – 11,635 12 82,253 – – – 82,265 Stock options issued for services – – – – 302,500 – – – 302,500 Stock based compensation – – – – 111,528 – – – 111,528 Net income (loss) – – – – – – 9,516,841 ( 141,841 ) 9,375,000 March 31, 2021 (unaudited) 66,667 $ 67 11,321,269 $ 11,322 $ 46,818,373 $ ( 20,000 ) $ ( 20,688,151 ) $ 1,137,248 $ 27,258,859 (1) Share and per share amounts have been retroactively adjusted to reflect the one-for-thirty reverse stock split effective February 14, 2022. See Note 1 – Organization and Basis of Presentation for additional information See accompanying notes to consolidated financial statements 6 VIVAKOR, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended March 31, 2022 2021 OPERATING ACTIVITIES: Consolidated net loss $ ( 726,035 ) $ 9,375,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 375,218 363,279 Common stock options issued for services 427,500 302,500 Common stock issued for services – 438,000 Unrealized gain (loss)- marketable securities ( 1,239,566 ) ( 12,683,444 ) Deferred income taxes – 1,019,588 Stock-based compensation 111,528 111,527 Changes in operating assets and liabilities: Accounts receivable – ( 92,265 ) Inventory ( 30,000 ) – Other assets ( 2,418 ) 13,807 Accounts payable 131,389 ( 291,412 ) Accrued interest on notes receivable ( 6,379 ) ( 1,243 ) Accrued interest on notes payable 91,965 154,021 Net cash used in operating activities ( 866,798 ) ( 1,290,642 ) INVESTING ACTIVITIES: Issuance of notes receivable 10,000 – Payment on costs of patents – ( 4,960 ) Purchase of a technology license – ( 25,000 ) Purchase of equipment ( 206,298 ) ( 427,374 ) Net cash used in investing activities ( 196,298 ) ( 457,334 ) FINANCING ACTIVITIES: Proceeds from loans and notes payable 427,496 3,250,774 Proceeds from sale of common stock 6,240,000 – Payment of notes payable ( 114,945 ) ( 1,464 ) Distributions to noncontrolling interest ( 135,950 ) – Net cash provided by financing activities 6,416,601 3,249,310 Net increase (decrease) in cash and cash equivalents 5,353,505 1,501,334 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,493,719 398,904 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,847,224 $ 1,900,238 SUPPLEMENTAL CASHFLOW INFORMATION: Cash paid during the year for: Interest $ 113,975 $ – Income taxes $ – $ – Noncash transactions : Conversion of Series A, B, B-1, and C-1 Preferred Stock to Common Stock $ 1,200,000 $ 82,265 Common stock issued for a reduction in liabilities $ 1,144,992 $ 36,000 Noncontrolling interest issued for a reduction in liabilities $ 1,920,000 $ – Preferred stock Series C-1 issued for a reduction in liabilities $ – $ 64,950 Common stock issued for the purchase of a license $ – $ 225,000 Capitalized interest on construction in process $ 488,014 $ 393,869 See accompanying notes to consolidated financial statements 7 VIVAKOR, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation On February 14, 2022, we effected a 1-for-30 reverse split of our outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State which was effective at the commencement of trading of our Common Stock. No fractional shares of the Company’s common stock will be issued as a result of the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share. All issued and outstanding common stock, preferred stock, and per share amounts in the consolidated financial statements and footnotes included herein have been retroactively adjusted to reflect this reverse stock split for all periods presented. COVID-19 On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease. COVID-19 and the U.S. response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions, Utah has resumed operations in full. Kuwait has allowed for the Company to obtain site personnel visas to recommence operations. These suspensions have had a negative impact on our business and there can be no guaranty that we will not need to suspend operations again in the future as a result of the pandemic. Interim Financial Information The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2021. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022. 8 Principles of Consolidation The Company follows ASC 810-10-15 guidance with respect to accounting for Variable Interest Entities (“VIE”). A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions of the entity’s expected residual returns. For the three months ended March 31, 2022 and year ended December 31, 2021 the following entities are considered to be a VIE and are consolidated in our consolidated financial statements: Viva Wealth Fund I, LLC and RPC Design and Manufacturing, LLC. For the three months ended March 31, 2022 and year ended December 31, 2021 the following entities were considered to be a VIE, but were not consolidated in our consolidated financial statements due to a lack of the power criterion or the losses/benefits criterion: Vivaventures UTS I, LLC, Vivaventures Royalty II, LLC, Vivaopportunity Fund, LLC, and International Metals Exchange, LLC. For the three months ended March 31, 2022 and year ended December 31, 2021 the unaudited financial information for the unconsolidated VIEs is as follows: Vivaventures UTSI, LLC held assets of $ 3,750,312 and $ 3,753,296 (where the primary asset represents a receivable from the Company), and liabilities of $ 46,011 and $ 12,608 . Vivaventures Royalty II, LLC held assets of $ 2,833,954 and $ 2,648,810 (where the primary asset represents a receivable from the Company), and liabilities of $ 1,821 and $ 300 . Vivaopportunity Fund LLC held assets of $ 2,119,916 and $ 2,119,961 (where the primary asset represents a noncontrolling interest in units of a consolidated entity of the Company) and no liabilities. International Metals Exchange, LLC held assets of $ 30,387 and $ 30,461 and liabilities of $ 1,900 . RPC Design and Manufacturing, LLC: As of March 31, 2022 and year ended December 31, 2021, investors in RDM have a noncontrolling interest of $ 538,684 and $ 629,694 , respectively. As of March 31, 2022 and December 31, 2021, the cash and cash equivalents of this VIE are not restricted and can be used to settle the obligations of the reporting entity. As of March 31, 2022 and December 31, 2021 this VIE has an outstanding note payable to the reporting entity in the amount of $ 382,330 and $ 354,566 , which is eliminated upon consolidation. We have the primary risk (expense) exposure in financing and operating the assets and are responsible for 100% of the operation, maintenance and any unfunded capital expenditures, which ultimately could be 100% of a custom machine, and the decisions related to those expenditures including budgeting, financing and dispatch of power. Based on all these facts, it was determined that we are the primary beneficiary of RDM. Therefore, RDM has been consolidated by the Company. Any intercompany revenue and expense associated with RDM and its license agreement with the Company has been eliminated in consolidation. Viva Wealth Fund I, LLC: As of March 31, 2022 and December 31, 2021, the cash and cash equivalents of this VIE are restricted solely for the use of proceeds of the VWFI offering (to manufacture RPCs) and cannot be used to settle the obligations of the reporting entity. As of March 31, 2022 and December 31, 2021, the Company has cash attributed to variable interest entities of $ 322,268 and $ 199,952 . As of March 31, 2022, VWFI has reached $6,250,000 in funding and has released the funding for construction of RPC Series A. VWFI has commenced fundraising for RPC Series B. In the event that VWFI does not raise at least $6,250,000 for these RPC Series by the offering termination date (which date has been extended until November 13, 2022), then the convertible notes and/or units would convert into Vivakor common stock where the minimum conversion price will be the greater of $13.50 or a 10% discount to market per share or in the event of a public offering, 200% of the per share price of the Company common stock sold in the underwritten offering, which was closed on February 14, 2022 at $5.00 per share. As of April 28, 2022, VWFI has raised approximately $2,870,000 for RPC Series B. VWFI unit holders may also sell their units to the Company for their principal investment amount on the 3 rd , 4 th , and 5 th anniversary of the offering termination date, which if this option were exercised, the Company may elect to pay the amount in either cash or common stock. The Company also has the option to purchase any LLC units where the members did not exercise their conversion option under the same terms and pricing for cash or common stock. VWFI has entered into a license agreement with the Company indicating that VWFI will pay the Company a license fee of $1,000,000 per series of equipment manufactured with the Company’s proprietary technology. All of the operations of VWFI relate to private placement offering to fund and manufacture proprietary equipment for the Company, as intended in VWFI’s design and organization by the Company, so that the Company controls VWFI in its business purpose, use of proceeds, and selling and leasing of its equipment solely to the Company. Creditors of VWFI have no recourse to the general credit of the Company. We have the primary risk (expense) exposure in financing and operating the assets and are responsible for 100% of the operation, and any unfunded capital expenditures, and the expense to the unit holders in conversion to common stock if series of equipment cannot be fully funded, which ultimately could be 100% of any custom machine. We are responsible for the decisions related to the expenditures of VWFI proceeds including budgeting, financing and dispatch of power surrounding the series of equipment. Based on all these facts, it was determined that we are the primary beneficiary of VWFI. Therefore, VWFI has been consolidated by the Company. 9 Long Lived Assets The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the three months ended March 31, 2022 or for the year ended December 31, 2021, as the Company was still in the early phases of our business plan and operating losses were expected in our early phases . On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease. Our Kuwait operations were suspended to comply with the social distancing measures implemented in Kuwait, but has since allowed for the Company to obtain site personnel visas to recommence operations. Our Utah operations were temporarily suspended from March through May 2020, but have since resumed in full. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future. Intangible Assets : We account for intangible assets in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). Intangible asset amounts represent the acquisition date fair values of identifiable intangible assets acquired. The fair values of the intangible assets were determined by using the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflected a weighted average cost of capital based on our industry, capital structure and risk premiums including those reflected in the current market capitalization. Definite-lived intangible assets are amortized over their useful lives, which have historically ranged from 10 to 20 years. The carrying amounts of our definite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that the entity may be unable to recover the asset’s carrying amount. We assess our intangible assets in accordance with ASC 360 “ Property, Plant, and Equipment ” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We have evaluated our intangible assets and found that certain losses and a delay in our business plan may have constituted a triggering event for our intangible assets. We performed an analysis and assessed that there to be no impairment for the three months ended March 31, 2022 or for the year ended December 31, 2021. Advertising Expense Advertising costs are expensed as incurred. The Company did not incur advertising expense for the three months ended March 31, 2022 and 2021. 10 Net Income/Loss Per Share Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of March 31, 2022 and 2021 include the following: convertible notes payable convertible into approximately 14,560 and 176,317 shares of common stock, convertible Series A preferred stock convertible into none and 666,667 shares of common stock (due to the event of a public offering of the Company’s common stock in February 2022 this will convert to 833,333 shares), convertible Series B preferred stock convertible into approximately none and 213,583 shares of common stock, convertible Series B-1 preferred stock convertible into approximately none and 459,426 shares of common stock, convertible Series C-1 preferred stock convertible into approximately none and 260,702 shares of common stock, stock options granted to employees of 183,333 and 16,667 shares of common stock. Stock options granted to Board members or consultants of 466,667 shares of common stock were granted as of March 31, 2022. There were also warrants issued and outstanding to EF Hutton of 80,000 shares of common stock as of March 31, 2022. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes, effective interest rates related to long-term debt, marketable securities, cost basis and equity method investments, lease assets and liabilities, equity method investments, valuation of stock used to acquire assets, and derivatives. While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Fair Value of Financial Instruments The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. 11 The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the consolidated balance sheets for marketable securities are classified as Level 1 assets due to observable quoted prices for identical assets in active markets. The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their estimated fair market values based on the short-term maturity of these instruments. T he recorded values of notes payable approximate their current fair values because of their nature, rates, and respective maturity dates or durations. Note 2. Liquidity We have historically suffered net losses and cumulative negative cash flows from operations, and as of March 31, 2022, we had an accumulated deficit of approximately $ 36.3 million. As of March 31, 2022 we had cash of $ 6,847,224 . The Company closed an underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share, for aggregate gross proceeds of $ 8 million, prior to deducting underwriting discounts, commissions, and other offering expenses. Prior to the offering, we financed our operations primarily through debt financing, private equity offerings our working interest agreements. We believe we have other liquid assets that may be used to assist in financing the operations of the Company if needed, including marketable securities in Scepter, which hold a fair value $ 3,470,784 as of March 31, 2022 and have been deposited for trading. We believe the liquid assets from the Company’s available for sale investments and funding provided from subsequent fundraising activities of the Company give it adequate working capital to finance our day-to-day operations for at least twelve months through April 2023. Note 3. Marketable Securities As of December 31, 2020, the Company owned 3,309,758 shares of common stock in Odyssey Group International, Inc. (“Odyssey”) ticker: ODYY, OTC Markets. In December 2021 we sold such shares of Odyssey in a private transaction for a purchase price of $ 860,491 , with $10,000 cash delivered at signing and a note issued in favor of Vivakor in the amount of $850,491, reflecting the market price at that time. The Company accounted for such securities based on the quoted price from the OTC Markets where the stock is traded, which resulted in the Company recording an unrealized gain of $ 2,089,667 on these marketable securities for the three months ended March 31, 2021. In 2019 the Company had an investment of $ 800,000 or 800,000,000 shares of common stock, or a diluted 23% equity holding in Scepter Holdings, Inc. (“Scepter”), ticker: BRZL, OTC Markets. In the fourth quarter of 2020, the Company was diluted to a 19% equity holding in Scepter, and was no longer deemed to have significant influence and ceased to be an equity investment, and as the stock is traded on an active market, the Company has classified the investment as marketable securities with the change in unrealized gains and losses on the investment included in the statement of operations for the three months ended March 31, 2022 and 2021. In August 2021 we converted $ 81,768 of our note receivable with Scepter into 26,376,882 shares of Scepter common stock pursuant to the terms of the note at $0.0031 per share. On the date of the conversion, the Scepter price per share on OTC Markets was $0.0062 per share, which resulted in a $ 87,044 gain on the disposition of the note receivable. The Company accounted for such securities based on the quoted price from the OTC Markets where the stock is traded, which resulted in the Company recording an unrealized gain on marketable securities of $ 1,239,566 and $ 10,593,777 for the three months ended March 31, 2022 and 2021. As of March 31, 2022 and December 31, 2021, the Company’s Chief Executive Officer has an immediate family member who sits on the board of directors of Scepter Holdings, Inc. As of March 31, 2022 and December 31, 2021 our Scepter marketable securities were valued at $ 3,470,784 and $ 2,231,218 . As of March 31, 2022 and December 31, 2021, marketable securities were $ 3,470,784 and $ 2,231,218 . For the three months ended March 31, 2022 and 2021, the Company recorded a total unrealized gain of $ 1,239,566 and $ 12,683,444 on marketable securities in the statement of operations. 12 Note 4. Inventories As of March 31, 2022, inventories consist primarily of raw materials (including tar-sand stockpiles) and finished goods (which includes Fenix iron). The tar-sand stockpiles consist of 10,000 tons of tar sand stockpile and are anticipated to be used for our extraction remediation units. The stockpiles were acquired on when the Company entered into a land lease agreement for located in Vernal, Utah. Under the terms of the lease agreement, we are required to pay $3 per ton of oil sands processed. As a condition of the lease, we were required to provide $ 30,000 toward initial tonnage of oil sands to be processed at a cost of approximately $3.00 per ton. The nano Fenix Iron are finished goods that have a 20-year shelf life and were acquired at cost for $ 192,000 . As of December 31, 2021, inventories consist primarily of the Fenix Iron. Inventories are valued at the lower of cost or market (net realizable value). Note 5. Property and Equipment The following table sets forth the components of the Company’s property and equipment at March 31, 2022 and December 31, 2021: Schedule of property and equipment, net March 31, 2022 December 31, 2021 Gross Carrying Amount Accumulated Depreciation Net Book Value Gross Carrying Amount Accumulated Depreciation Net Book Value Office furniture and equipment $ 14,998 $ 4,478 $ 10,520 $ 14,998 $ 4,000 $ 10,998 Vehicles 48,248 28,719 19,529 48,248 26,306 21,942 Precious metal extraction machine- 1 ton 2,280,000 228,000 2,052,000 2,280,000 228,000 2,052,000 Precious metal extraction machine- 10 ton 5,320,000 532,000 4,788,000 5,320,000 532,000 4,788,000 Construction in process: Bioreactors 1,440,000 – 1,440,000 1,440,000 – 1,440,000 Nanosponge/Cavitation device 22,103 – 22,103 22,103 – 22,103 Remediation Processing Unit 1 6,513,497 – 6,513,497 6,249,082 – 6,249,082 Remediation Processing Unit 2 5,364,075 – 5,364,075 5,201,098 – 5,201,098 Remediation Processing Unit System A 2,682,972 – 2,682,972 2,561,467 – 2,561,467 Remediation Processing Unit System B 2,490,837 – 2,490,837 2,345,421 – 2,345,421 Total fixed assets $ 26,176,730 $ 793,197 $ 25,383,533 $ 25,482,417 $ 790,306 $ 24,692,111 For the year ended December 31, 2021 the Company paid $ 64,950 with 5,413 shares of Series C-1 Preferred Stock for equipment, which has been valued based on similar cash purchases of the Series C-1 Preferred Stock at approximately $12.00 per share. For the three months ended March 31, 2022 and 2021 depreciation expense was $ 2,890 . For the three months ended March 31, 2022 and 2021 capitalized interest to equipment from debt financing was $ 488,014 and $ 393,869 . Equipment that is currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into service. Equipment that is temporarily not in service is not depreciated until placed into service. 13 Note 6. Loans and Notes Payable Loans and Notes payable (including accrued interest) consist of the following: Schedule of loans and notes payable March 31, December 31, 2022 2021 Various promissory notes and convertible notes $ 50,960 $ 50,960 Novus Capital Group LLC Note 387,223 378,854 Triple T Notes 362,106 353,330 National Buick GMC 18,470 19,440 Various Convertible Bridge Notes (a) – 1,075,813 Blue Ridge Bank 410,200 410,200 Small Business Administration 321,456 318,175 JP Morgan Chase Bank 90,645 90,645 Various Promissory Notes (b) 1,852,540 3,416,379 Total Notes Payable $ 3,493,600 $ 6,113,796 Loans and notes payable, current $ 806,109 $ 1,511,447 Loans and notes payable, current attributed to variable interest entity 1,852,540 3,416,379 Loans and notes payable, long term $ 834,951 $ 1,185,970 _____________ Schedule of maturities of loans and notes payable 2022 $ 2,542,663 2023 415,102 2024 52,996 2025 52,996 2026 52,996 Thereafter 376,847 Total $ 3,493,600 (a) In 2021 and 2020 the Company entered into various convertible promissory notes as follows: Throughout 2021 and 2020 the Company entered into convertible promissory notes with an aggregate principal of $ 415,000 . The notes accrue interest at 10 % per annum and have a maturity of the earlier of 12 months or the consummation of the Company listing its Common Stock on a senior stock exchange. The notes are convertible at the Company’s option into shares of the Company’s common stock at a price equal to 80% of the opening price of the Company’s common stock on the national exchange or the offering price paid by the investors in the financing in connection with the uplist, whichever is lower, or (ii) repaid in cash in an amount equal to the indebtedness being repaid plus a premium payment equal to 15% of the amount being repaid. If an event of default has occurred and the Company does not convert the amounts due under the Note into the Company’s common stock, then the Company will have the option to convert the outstanding indebtedness into shares of the Company’s common stock at a price equal to 80% of the weighted average trading price of the Company’s common stock on the OTC Markets, or be repaid in cash in an amount equal to all principal and interest due under the Note. All of these notes were converted to common stock as of March 31, 2022. 14 On October 13, 2020, the Company entered into a convertible promissory note in an amount of $280,500 having an interest rate of 12% per annum. The note bears a 10% Original Issue Discount. The loan shall mature in 1 year and may be convertible at the lower of $12.00 or 80% of the lowest median daily traded price over ten trading days prior to conversion, but in the event of a Qualified Uplist the note may be converted at a 30% discount to market. The Company also issued 3,333 restricted shares with no registration rights in conjunction with this note, which was recorded as a debt discount in the amount of $44,000, which is amortized to interest expense over the term of the agreements using the effective interest method. On March 28, 2021 the parties amended this agreement to state that in no event shall the conversion price be lower than $3.00 per share. In October 2021 the parties agreed to extend the maturity of this loan to April 13, 2022 in exchange for an increase in principal owed of $30,000. This note has been converted to common stock as of March 31, 2022. On February 4, 2021, the Company entered into a convertible promissory note in an amount of $277,778 having an interest rate of 12% per annum. The note bears a 10% Original Issue Discount. The loan shall mature in 1 year and may be convertible at the lower of $12.00 or 80% of the lowest median daily traded price over ten trading days prior to conversion, but in the event of a Qualified Uplist the note may be converted at a 30% discount to market. The Company also issued 3,333 restricted shares with no registration rights in conjunction with this note, which was recorded as a debt discount in the amount of $36,000, which is amortized to interest expense over the term of the agreements using the effective interest method. On March 28, 2021 the parties amended this agreement to state that in no event shall the conversion price be lower than $3.00 per share. In February 2022 the parties agreed to extend the maturity of this loan to August 8, 2022 in exchange for an increase in principal owed of $25,000. This note has been converted to common stock as of March 31, 2022. (b) Viva Wealth Fund I, LLC is offering up to $25,000,000 in convertible notes in a private offering . As of March 31, 2022, VWFI has raised $8,990,000 and converted $7,480,000 of this debt to VWFI LLC units. A convertible note will automatically convert into the LLC units at the earlier of (i) the date that the Equipment is placed into quality control and testing or (ii) six months from the date of investment. The convertible notes will accrue interest at 12% per annum and are paid quarterly. At the maturity date, remaining interest will be paid, at which time no further interest payments will accrue. Upon the offering termination date, all units accepted for any series of equipment will automatically convert to Vivakor common stock if the Company has not accepted subscriptions for at least $6,250,000 for a series of equipment. The conversion price of the automatic stock conversion will be the the greater of $13.50 or a 10% discount to market per share or in the event of a public offering, 200% of the per share price of the Company common stock sold in an underwritten offering, which was closed on February 14, 2022 at $5.00 per share. The termination date of the offering has been extended until November 13, 2022 in the sole discretion of the Company. As of April 28, 2021 VWFI has reached $6,250,000 in funding and has released the funding for construction of RPC Series A. VWFI has commenced fundraising for RPC Series B and has raised approximately $2,870,000 to manufacture RPC Series B. Subsequent to March 31, 2022 an additional $130,000 of this debt has been converted into units of the LLC. Note 7. Commitments Leases Commencing on September 15, 2019, the Company entered into a five-year lease with Jamboree Center 1 & 2 LLC covering approximately 6,961 square feet of office space in Irvine, CA. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $ 21,927 , Year 2 $ 22,832 , Year 3 $ 23,737 , Year 4 $ 24,712 , Year 5 $ 25,686 . As a condition of the lease, we were required to provide a $ 51,992 security deposit. On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $ 1,950 , Year 2 $ 2,028 , Year 3 $ 2,110 . As a condition of the lease, we were required to provide a $ 2,418 security deposit. On March 28, 2022, the Company entered into a lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 is comprised of April to May 2022 $ 867 , June 2022 to March 2023 $ 3,550 , Year 2 $ 3,657 , Year 3 $ 3,766 . As a condition of the lease, we were required to provide a $ 3,766 security deposit. 15 The right-of-use asset for operating leases as of March 31, 2022 and December 31, 2021 was $ 795,107 and $ 663,291 . Rent expense for the three months ended March 31, 2022 and 2021 was $ 99,968 and $ 73,329 . The following table reconciles the undiscounted cash flows for the leases as of March 31, 2022 to the operating lease liability recorded on the balance sheet: Schedule of lessee operating lease liability 2022 $ 266,370 2023 370,902 2024 304,892 2025 16,135 Total undiscounted lease payments 958,299 Less: Imputed interest 106,807 Present value of lease payments $ 851,492 Operating lease liabilities, current $ 270,452 Operating lease liabilities, long-term $ 581,039 Weighted-average remaining lease term 2.60 Weighted-average discount rate 7.0 % The discount rate is the Company’s incremental borrowing rate, or the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on an assessment of the Company’s borrowings the incremental borrowing rate was determined to be 7%. Note 8. Long-term Debt Long-term debt consists of the following: Schedule Of Long-Term Debt March 31, December 31, 2022 2021 Principal $ 2,196,233 $ 2,196,233 Accrued interest 4,651,360 4,205,144 Debt discount ( 223,102 ) ( 226,823 ) Total long term debt $ 6,624,491 $ 6,174,554 Long term debt, current $ 5,198 $ 3,256 Long term debt $ 6,619,293 $ 6,171,298 16 The following table sets forth the estimated payment schedule of long-term debt as of March 31, 2022: Schedule of long-term debt maturities 2022 $ 3,256 2023 8,685 2024 11,572 2025 15,420 2026 20,548 Thereafter 2,136,752 Total $ 2,196,233 Note 9. Temporary Equity The following table shows all changes to temporary equity during for the three months ended March 31, 2021. Schedule of temporary equity Convertible Preferred Stock Series B Series B-1 Series C-1 Shares Amount Shares Amount Shares Amount December 31, 2020 216,916 $ 1,301,500 467,728 $ 3,507,981 255,289 $ 4,550,977 Series C-1 Issue for a reduction in stock payables – – – – 5,414 64,950 Conversion of Series B and B-1 Preferred Stock to Common Stock ( 3,333 ) ( 20,000 ) ( 8,302 ) ( 62,265 ) – – March 31, 2021 213,583 $ 1,281,500 459,426 $ 3,445,716 260,703 $ 4,615,927 During the year ended December 31, 2021, all shares of Series B, B-1, and C-1 Preferred Stock were converted to common stock. Note 10. Share-Based Compensation & Warrants Options Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures. As of March 31, 2022 and December 31, 2021, the Company has granted stock-based compensation to employees, including a 16,667 share stock award, which was issued in 2018 and vests at the end of four years, and a 166,667 stock options that was issued in 2020 and cliff vests at the end of five years. For the three months ended March 31, 2022 and 2021, stock-based compensation was $ 111,528 . In 2020, the Company also granted non-statutory stock options, including 133,333 stock options to the Board of Directors, which vests over 1 year, and a 333,334 stock option to a consultant, which vests over 4 years. Non-statutory stock-based compensation was $ 427,500 and $ 302,500 for the three months ended March 31, 2022 and 2021. In 2022, the Company closed on its underwritten public offering in which the Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC ("EF Hutton"), a 45-day option to purchase up to an additional 240,000 shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments, if any. These options were not exercised and expired. 17 There were no other options granted during the three months ended March 31, 2022 and 2021, respectively. The assumptions used in the Black-Scholes option pricing model to determine the fair value of the options on the date of issuance are as follows: Schedule of warrant assumptions December 31, 2020 through March 31, 2022 Risk-free interest rate 0.24 - 0.38 % Expected dividend yield None Expected life of warrants 0.12 - 10 years Expected volatility rate 186 - 273 % The following table summarizes all stock option activity of the Company for the three months ended March 31, 2022 and 2021: Schedule of option activity Weighted Weighted Average Average Remaining Number Exercise Contractual of Shares Price Life (Years) Outstanding, December 31, 2021 650,000 $ 12.00 7.53 Granted 240,000 5.00 0.12 Exercised – – – Forfeited ( 240,000 ) 5.00 0.12 Outstanding, March 31, 2022 650,000 $ 12.00 7.28 Exercisable, December 31, 2021 180,000 $ 12.00 7.01 Exercisable, March 31, 2022 215,833 $ 12.00 6.68 Outstanding, December 31, 2020 650,000 $ 12.00 6.41 Outstanding, March 31, 2021 650,000 $ 12.00 6.16 Exercisable, December 31, 2020 47,083 $ 12.00 3.38 Exercisable, March 31, 2021 80,833 $ 12.00 4.32 As of March 31, 2022 and December 31, 2021, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock. 18 Warrants As of March 31, 2022 and December 31, 2021, the Company had 80,000 and no warrants outstanding. On February 14, 2022, the Company closed on its underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share. In addition, the Company has issued the underwriter, EF Hutton, 5-year warrants to purchase 80,000 shares of common stock at an exercise price equal $ 5.75 . The impact of these warrants has no effect on stockholder’s equity, as they are considered equity-like instruments, and are considered a direct expense of the offering. Note 11. Income Tax The Company calculates its quarterly tax provision pursuant to the guidelines in ASC 740 Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year ordinary income. In calculating the effective tax rate, permanent differences between financial reporting and taxable income are factored into the calculation, and temporary differences are not. The estimated annual effective tax rate represents the Company’s estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision. The Company recorded a provision for income taxes of $ 800 and $ 1,020,388 for the three months ended March 31, 2022 and 2021, respectively. The Company is projecting a (0.04)% effective tax rate for the year ending December 31, 2022, which is primarily the result of projected provision from book loss incurred for the year offset by additional valuation allowance on the net operating losses. The Company’s effective tax rate for 2021 was 9.18 % which was the result of the benefit of book income for the year. As of December 31, 2021, the Company had estimated federal and state net operating loss (NOL) carryforwards of approximately $ 14.3 million. Federal NOL carryforwards begin to expire in 2028. Note 12. Subsequent Events The Company has evaluated subsequent events through the date the financial statements were available to issue. On April 1, 2022, the Company entered into a lease agreement for approximately 2,000 square feet of office and warehouse space located in Houston, Texas. Commencing on April 1, 2022, the Company entered into a month-to-month lease with JVS Holdings, Inc. The lease may be terminated at any time or for any reason with a 30-day written notice to terminate. The lease requires a monthly lease payment of $2,000 as long as the Company remains in the space. On April 1, 2022 the Company amended a note payable with a principal balance of $334,775 to extend the note’s maturity date to April 1, 2023, with monthly payments of approximately $29,432 until paid in full. On April 26, 2022, the Company entered into a 10-year contract with Hot Oil Transport, LLC, a supplier of asphalt materials. The quantity of product purchased pursuant to the agreement shall be 1,000 tons of product per week, or the entirety of any lesser amount that may be produced by the Company during any given week. Buyer shall also have the first right of refusal to purchase all or any portion of additional product that may be produced by the Company within the state of Utah. Subject to the Company’s right to continue operating at the current plant site in Vernal, the agreement shall automatically renew for two successive 10-year terms unless either party terminates the agreement by written notice to the other party not less than three months prior to the expiration of the initial term or any renewal term. Subsequent to March 31, 2022, VWFI has raised $130,000 in conjunction with the $25,000,000 private placement offering to sell convertible promissory notes, which convert to VWFI LLC units, to accredited investors to raise funds to manufacture equipment that manufacture RPC Series B. Subsequent to March 31, 2022, VWFI has also converted $315,000 of convertible debt into VWFI LLC units. 19