Item 1. Financial Statements
ITEM 1.
FINANCIAL STATEMENTS
VIVAKOR,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
June 30,
December 31,
2023
2022
(Unaudited)
ASSETS
Current
assets:
Cash
and cash equivalents
$
2,431,927
$
3,101,186
Cash
and cash equivalents attributed to variable interest entity
206,044
81,607
Accounts
receivable
3,456,451
2,615,354
Accounts
receivable- related party
150,189
948,352
Prepaid
expenses
125,714
31,523
Marketable
securities
1,322,203
1,652,754
Inventories
49,519
47,180
Other
assets
867,506
700,298
Total
current assets
8,609,553
9,178,254
Other
investments
4,000
4,000
Property
and equipment, net
25,155,883
22,578,876
Right
of use assets- operating leases
1,709,966
1,880,056
License
agreements, net
1,711,738
1,772,153
Intellectual
property, net
24,742,053
28,251,053
Goodwill
14,984,768
12,678,108
Total
assets
$
76,917,961
$
76,342,500
LIABILITIES
AND STOCKHOLDERS’ EQUITY
Current
liabilities:
Accounts
payable and accrued expenses
$
4,866,327
$
3,242,667
Accounts
payable and accrued expenses- related parties
3,742,083
4,142,978
Accrued
compensation
2,207,564
1,302,890
Operating
lease liabilities, current
535,121
471,991
Finance
lease liabilities, current
963,900
963,900
Loans
and notes payable, current
905,848
542,374
Loans
and notes payable, current- related parties
359,241
342,830
Loans
and notes payable, current attributed to variable interest entity
1,970,000
1,325,000
Loans
and notes payable, current attributed to variable interest entity- related parties
1,351,845
599,500
Long-term
debt (working interest royalty programs), current
13,341
9,363
Total
current liabilities
16,915,270
12,943,493
Operating
lease liabilities, long term
1,268,790
1,457,483
Finance
lease liabilities, long term
2,103,463
2,298,960
Loans
and notes payable, long term
900,404
406,246
Loans
and notes payable, long term- related parties
27,590,686
27,977,704
Loans
and notes payable attributed to variable interest entity- related party
300,000
300,000
Long-term
debt (working interest royalty programs)
4,321,212
3,897,553
Total
liabilities
53,399,825
49,281,439
Stockholders’
equity:
Convertible
preferred stock, $ 0.001 par value; 3,400,000 shares authorized, none outstanding (1)
-
-
Common
stock, $ 0.001
par value; 41,666,667
shares authorized; 18,064,838
were issued and outstanding as of June 30, 2023 and December 31, 2022, respectively (1)
18,065
18,065
Additional
paid-in capital
74,493,672
74,026,163
Treasury
stock, at cost
( 20,000
)
( 20,000
)
Accumulated
deficit
( 59,549,046
)
( 55,169,781
)
Total
Vivakor, Inc. stockholders’ equity
14,942,691
18,854,447
Noncontrolling
interest
8,575,445
8,206,614
Total
stockholders’ equity
23,518,136
27,061,061
Total
liabilities and stockholders’ equity
$
76,917,961
$
76,342,500
(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
1
VIVAKOR,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three
Months Ended
Six
Months Ended
June, 30
June, 30
2023
2022
2023
2022
Revenues
Product
revenue - third parties
$
11,570,742
$
-
$
22,765,208
$
-
Product
revenue - related party
2,019,896
-
6,370,302
-
Total
revenues
13,590,638
-
29,135,510
-
Cost
of revenues
12,375,874
-
26,407,588
-
Gross
profit
1,214,764
-
2,727,922
-
Operating
expenses:
Sales
and marketing
628
119,252
1,217
310,591
General
and administrative
1,384,203
2,922,753
3,237,124
4,235,560
Amortization
and depreciation
667,867
558,595
1,452,387
933,813
Total
operating expenses
2,052,698
3,600,600
4,690,728
5,479,964
Loss
from operations
( 837,934
)
( 3,600,600
)
( 1,962,806
)
( 5,479,964
)
Other
income (expense):
Unrealized
gain (loss) on marketable securities
165,275
( 1,652,755
)
( 330,551
)
( 413,189
)
Gain
on disposition of asset
-
2,456
-
2,456
Interest
income
-
6,083
-
12,461
Interest
expense
( 459,079
)
( 22,981
)
( 910,373
)
( 114,946
)
Interest
expense- related parties
( 804,409
)
-
( 1,558,784
)
-
Other
income
14,116
39,934
24,116
40,084
Total
other income (expense)
( 1,084,097
)
( 1,627,263
)
( 2,775,592
)
( 473,134
)
Loss
before provision for income taxes
( 1,922,031
)
( 5,227,863
)
( 4,738,398
)
( 5,953,098
)
Provision
for income taxes
-
-
( 800
)
( 800
)
Consolidated
net loss
( 1,922,031
)
( 5,227,863
)
( 4,739,198
)
( 5,953,898
)
Less:
Net loss attributable to noncontrolling interests
( 77,358
)
( 322,546
)
( 359,933
)
( 447,698
)
Net
loss attributable to Vivakor, Inc.
$
( 1,844,673
)
$
( 4,905,317
)
$
( 4,379,265
)
$
( 5,506,200
)
Basic
and diluted net loss per share (1)
$
( 0.10
)
$
( 0.33
)
$
( 0.24
)
$
( 0.38
)
Basic
weighted average common shares outstanding (1)
18,064,838
15,038,619
18,064,838
14,388,004
(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
2
VIVAKOR,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Series
A
Preferred Stock
Common
Stock
Additional
Paid-in
Treasury
Accumulated
Non-controlling
Total
Stockholders’
Shares
Amount
Shares
Amount
Capital
Stock
Deficit
Interest
Equity
March
31, 2023 (unaudited)
-
$
-
18,064,838
$
18,065
$
74,026,163
$
( 20,000
)
$
( 57,704,373
)
$
8,345,037
$
24,664,892
Distributions
to noncontrolling interest
-
-
-
-
-
-
-
( 317,234
)
( 317,234
)
Issuance
of noncontrolling interest for a reduction of debt
-
-
-
-
-
-
-
625,000
625,000
Non-qualified
stock options issued with debt
-
-
-
-
467,509
-
-
-
467,509
Net
loss
-
-
-
-
-
-
( 1,844,673
)
( 77,358
)
( 1,922,031
)
June
30, 2023 (unaudited)
-
$
-
18,064,838
$
18,065
$
74,493,672
$
( 20,000
)
$
( 59,549,046
)
$
8,575,445
$
23,518,136
Series
A
Preferred Stock
Common
Stock
Additional
Paid-in
Treasury
Accumulated
Non-controlling
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Capital
Stock
Deficit
Interest
(Deficit)
December
31, 2022
-
$
-
18,064,838
$
18,065
$
74,026,163
$
( 20,000
)
$
( 55,169,781
)
$
8,206,614
$
27,061,061
Distributions
to noncontrolling interest
-
-
-
-
-
-
-
( 606,236
)
( 606,236
)
Issuance
of noncontrolling interest for a reduction of debt
-
-
-
-
-
-
-
1,335,000
1,335,000
Non-qualified
stock options issued with debt
-
-
-
-
467,509
-
-
-
467,509
Net
loss
-
-
-
-
-
-
( 4,379,265
)
( 359,933
)
( 4,739,198
)
June
30, 2023 (unaudited)
-
$
-
18,064,838
$
18,065
$
74,493,672
$
( 20,000
)
$
( 59,549,046
)
$
8,575,445
$
23,518,136
Series
A
Preferred Stock
Common
Stock
Additional
Paid-in
Treasury
Accumulated
Non-controlling
Total
Stockholders’
Shares
Amount
Shares
Amount
Capital
Stock
Deficit
Interest
Equity
March
31, 2022 (unaudited)
-
$
-
15,038,619
$
15,039
$
66,200,971
$
( 20,000
)
$
( 36,332,242
)
$
6,671,402
$
36,535,170
Stock
options issued for services
-
-
-
-
427,500
-
-
-
427,500
Stock
based compensation
-
-
-
-
1,229,175
-
-
-
1,229,175
Distributions
to noncontrolling interest
-
-
-
-
-
-
-
( 207,939
)
( 207,939
)
Issuance
of noncontrolling interest for a reduction of debt
-
-
-
-
-
-
-
1,105,000
1,105,000
Net
loss
-
-
-
-
-
-
( 4,905,317
)
( 322,546
)
( 5,227,863
)
June
30, 2022 (unaudited)
-
$
-
15,038,619
$
15,039
$
67,857,646
$
( 20,000
)
$
( 41,237,559
)
$
7,245,917
$
33,861,043
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
-
-
-
-
855,000
-
-
-
855,000
Stock
based compensation
-
-
-
-
1,340,703
-
-
-
1,340,703
Distributions
to noncontrolling interest
-
-
-
-
-
-
-
( 343,889
)
( 343,889
)
Issuance
of noncontrolling interest for a reduction of debt
-
-
-
-
-
-
-
3,025,000
3,025,000
Net
loss
-
-
-
-
-
-
( 5,506,200
)
( 447,698
)
( 5,953,898
)
June
30, 2022 (unaudited)
-
$
-
15,038,619
$
15,039
$
67,857,646
$
( 20,000
)
$
( 41,237,559
)
$
7,245,917
$
33,861,043
(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
3
VIVAKOR,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six
Months Ended
June
30,
2023
2022
OPERATING
ACTIVITIES:
Consolidated
net loss
$
( 4,739,198
)
$
( 5,953,898
)
Adjustments
to reconcile net income to net cash used in operating activities:
Depreciation
and amortization
1,452,387
933,813
Forgiveness
of accounts payable
( 24,116
)
-
Non-qualified
stock options issued to third party
-
855,000
Stock-based
compensation
-
1,340,703
Unrealized
loss- marketable securities
330,551
413,189
Changes
in operating assets and liabilities:
Accounts
receivable
( 42,934
)
-
Prepaid
expenses
( 94,191
)
-
Inventory
( 2,339
)
( 30,000
)
Other
assets
( 167,208
)
( 164,177
)
Right
of use assets- finance leases
523,878
-
Right
of use assets- operating leases
153,664
58,259
Operating
lease liabilities
( 164,405
)
( 58,259
)
Accounts
payable and accrued expenses
( 111,556
)
( 303,452
)
Interest
on notes receivable
-
( 12,461
)
Interest
on notes payable
1,588,689
114,946
Net
cash used in operating activities
( 1,296,778
)
( 2,806,337
)
INVESTING
ACTIVITIES:
Proceeds
from notes receivable
-
55,953
Payment
on costs of patents
-
( 2,456
)
Proceeds
from disposal of equipment
-
6,000
Purchase
of equipment
( 2,025,303
)
( 1,129,515
)
Net
cash used in investing activities
( 2,025,303
)
( 1,070,018
)
FINANCING
ACTIVITIES:
Payment on finance lease liabilities
( 195,497
)
-
Payment
of long-term debt
-
-
Proceeds
from loans and notes payable
3,213,666
1,666,261
Proceeds
from loans and notes payable- related party
771,000
302,000
Proceeds
from sale of common stock
-
6,240,000
Payment
of notes payable
-
( 277,145
)
Payment
of notes payable- related party
( 405,674
)
-
Distributions
to noncontrolling interest
( 606,236
)
( 343,889
)
Net
cash provided by financing activities
2,777,259
7,587,227
Net
increase (decrease) in cash and cash equivalents
( 544,822
)
3,710,872
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
3,182,793
1,493,719
CASH
AND CASH EQUIVALENTS, END OF PERIOD
$
2,637,971
$
5,204,591
SUPPLEMENTAL
CASHFLOW INFORMATION:
Cash
paid during the year for:
Interest
$
1,458,418
$
223,639
Income
taxes
$
-
$
-
Noncash
transactions :
Conversion
of Series A, B, B-1, and C-1 Preferred Stock to Common Stock
$
-
$
1,200,000
Common
stock issued for a reduction in liabilities
$
-
$
1,144,992
Noncontrolling
interest issued for a reduction in liabilities
$
1,335,000
$
3,025,000
Capitalized
interest on construction in process
$
589,775
$
256,235
Accounts
payable on purchase of equipment
$
560,109
$
-
Non-qualified stock options issued with debt
$
467,509
$
-
See
accompanying notes to consolidated financial statements
4
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 were 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 had 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 issued policies intended to stop or slow the spread of
the disease.
In
March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have
since resumed site preparations for operations. Additionally, we continue to experience supply chain disruptions related to building
our Remediation Processing Centers (“RPC”), completing certain refurbishment, and in relation to our other operations.
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, 2022. 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 June 30, 2023 are not necessarily indicative of the results expected for the full year
ending December 31, 2023.
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.
During the six months ended June 30, 2023, the Company entered into an agreement to move the Vernal RPC plant to Kuwait to service
the contract with DIC for a scaled up RPC, as the Vernal plant was not producing product toward the off-take agreement, which further
delayed scaled operations. The Company evaluated these events and determined that there is no trigger event, and therefore there was
no impairment incurred during the six months ended June 30, 2023. There can be no assurance 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.
5
Intangible
Assets and Goodwill :
We
account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC
350”). 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 performed an analysis and assessed no triggering event has occurred, and no impairment
for the three months ended June 30, 2023.
Revenue
Recognition
In
August 2022, we acquired Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, from which approximately 99 % of the Company’s
revenue is derived. For the six months ended June 30, 2023, our sales consist of storage services and the sale of crude oil or like
products. For the six months ended June 30, 2023, disaggregated revenue by customer type was as follows: $ 22,694,272 in crude oil
sales and $ 5,105,021 in product related to natural gas liquids sales.
Related
Party Revenues
We
sell crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these
contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC. These contracts were entered
into in the normal course of our business. Our revenue from related parties for the six months ended June 30, 2023 was $ 6,370,302 .
Major
Customers and Concentration of Credit Risk
The
Company has two major customers, which account for approximately 100 % of the balance of accounts receivable as of June 30, 2023
and December 31, 2022.
Advertising
Expense
Advertising
costs are expensed as incurred. The Company did no t incur advertising expense for the six months ended June 30, 2023 and 2022.
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 June 30, 2023 and December 31, 2022 include the following: convertible notes payable convertible into approximately 14,560
shares of common stock, stock options granted to current or previous employees of 1,421,760 shares of common stock, stock options granted
to Board members or consultants of 395,139 shares of common stock. The Company issued 1,000,000 of free standing stock options to a third
party in a bundled transaction with debt during the six months ended June 30, 2023. The Company also has a warrant outstanding
to purchase 80,000 shares of common stock as of June 30, 2023.
6
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 investments, lease assets and liabilities, valuation of stock used to acquire assets, derivatives, and fair values of the
intangible assets and goodwill related to business combinations.
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.
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. The recorded values of notes payable approximate their current fair values because of their nature, rates, and respective
maturity dates or durations.
7
Note
2. Liquidity
We
have historically suffered net losses and cumulative negative cash flows from operations, and as of June 30, 2023, we had an
accumulated deficit of approximately 59,549,046 $59.5 million. As of June 30, 2023 and December 31, 2022, we had a working
capital deficit of approximately $ 8.3 million and $ 3.7 million, respectively. As of June 30, 2023 we had cash of approximately
$ 2.6 million. In addition, we have obligations to pay approximately $15.4 million (of which approximately $13.2 million can be
satisfied through the issuance of our common stock under the terms of the debt) of debt in cash within one year of the issuance of these financial statements. Our
CEO has also committed to provide credit support through December 2024, as necessary, for an amount up to $8 million to provide
the Company sufficient cash resources, if required, to execute its plans for the next twelve months. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern. We believe the liquid assets and CEO commitment
give us adequate working capital to finance our day-to-day operations for at least twelve months through
August 2024.
The
Company has prepared the consolidated financial statements on a going concern basis. If the Company encounters unforeseen circumstances
that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Management
cannot provide any assurance that the Company will raise additional capital if needed.
Note
3. Accounts Receivable
As
of June 30, 2023 and December 31, 2022 trade accounts receivable of $ 150,189 and $ 948,352 are with a vendor of which our CEO is a beneficiary.
Note
4. Property and Equipment
The
following table sets forth the components of the Company’s property and equipment at June 30, 2023 and December 31, 2022:
Schedule of property and equipment, net
June 30,
2023
December 31,
2022
Gross
Carrying
Amount
Accumulated
Depreciation
Net
Book
Value
Gross
Carrying
Amount
Accumulated
Depreciation
Net
Book
Value
Office
furniture
$
14,998
$
6,868
$
8,130
$
14,998
$
5,912
$
9,086
Vehicles
36,432
29,753
6,679
36,432
26,110
10,322
Equipment
942,880
365,558
577,322
942,880
295,855
647,025
Property
17,000
-
17,000
17,000
-
17,000
Finance
lease- Right of use assets
3,579,544
873,131
2,706,413
3,579,544
349,253
3,230,291
Construction
in process:
Wash
Plant Facilities
1,489,935
-
1,489,935
199,800
-
199,800
Cavitation
device
44,603
-
44,603
44,603
-
44,603
Remediation
Processing Unit 1
4,483,288
-
4,483,288
4,396,753
-
4,396,753
Remediation
Processing Unit 2
7,384,250
-
7,384,250
6,285,547
-
6,285,547
Remediation
Processing Unit System A
4,194,577
-
4,194,577
3,893,051
-
3,893,051
Remediation
Processing Unit System B
4,243,686
-
4,243,686
3,845,398
-
3,845,398
Total
fixed assets
$
26,431,193
$
1,275,310
$
25,155,883
$
23,256,006
$
677,130
$
22,578,876
8
For
the six months ended June 30, 2023 and 2022 depreciation expense was $ 74,302 and $ 195,387 . For the six months ended June 30,
2023 and 2022 capitalized interest to equipment from debt financing was $ 589,775 and $ 256,235 . 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.
The
operations surrounding our precious metals extraction services were temporarily suspended until 2022, although due to these suspended
activities and a shift in 2022 of the Company’s focus to the oil and gas industry, we realized an impairment loss of $ 6,269,998
surrounding the extraction machinery for the year ended December 31, 2022.
As
of December 31, 2022 we continued to pursue a test facility or third party reactor for our nano catalyst technology that facilitates
chemical manufacturing, with a focus on the production of ammonia, which includes our bioreactor equipment .
The Company received quotes for testing or building our own test facilities with new partners for this venture. After taking into
consideration this new information, we noted that the newly requested capital expenditure to test and scale the business triggered an
impairment loss of assets related to our ammonia synthesis assets, including our bioreactors. The impairment loss related to our bioreactors
was $ 1,440,000 for the year ended December 31, 2022.
There
was no impairment loss during the six months ended June 30, 2023.
Note
5. Intellectual Property, Net and Goodwill
The
following table sets forth the components of the Company’s intellectual property at June 30, 2023 and December 31, 2022:
Schedule of components of intellectual property
June 30,
2023
December 31,
2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Extraction
Technology patents
$
113,430
$
15,569
$
97,861
$
113,430
$
12,233
$
101,197
Extraction
Technology
16,385,157
6,895,420
9,489,737
16,385,157
6,485,791
9,899,366
Acquired
crude oil contracts
19,095,420
1,858,846
17,236,574
19,095,420
844,930
18,250,490
Total
Intellectual property
$
35,594,007
$
8,769,835
$
26,824,172
$
35,594,007
$
7,342,954
$
28,251,053
The
changes in the carrying amount of goodwill are as follows:
Schedule of goodwill
Goodwill
January 1,
2021
$
-
Acquisition
14,984,768
June 30, 2023
$
14,984,768
There
were no changes in goodwill for the six months ended June 30, 2023.
On
August 1, 2022, the Company closed a Membership Interest Purchase Agreement, (the “MIPA”), with Jorgan Development,
LLC, and JBAH Holdings, LLC, as the equity holders of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”)
and White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) whereby, the Company acquired all of the issued
and outstanding membership interests in each of SFD and WCCC making SFD and WCCC wholly owned subsidiaries of the Company. The purchase
price for the Membership Interests is approximately $ 32.9 million, after post-closing adjustments.
Management
hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and
goodwill. Based on the valuation study, the fair values of goodwill and the acquired contracts were $ 14,984,768 and $ 16,788,760 on August 1,
2022.
Amortization
expense for the six months ended June 30, 2023 and 2022 was $ 1,202,340 and $ 738,426 .
9
Note
6. Accounts Payable and Accrued Expenses
Accounts
payable and accrued expenses consist of the following:
Schedule of accounts payable and accrued expenses
June 30,
2023
December 31,
2022
Accounts
payable
$
2,625,745
$
910,002
Office
access deposits
235
235
Unearned
revenue
-
20,936
Accrued
interest (various notes and loans payable)
133,835
349,497
Accrued
interest (working interest royalty programs)
1,551,676
1,437,711
Accrued
tax penalties and interest
554,836
524,286
Accounts
payable and accrued expenses
$
4,866,327
$
3,242,667
June 30,
2023
December 31,
2022
Accounts
payable- related parties
$
3,254,625
$
4,112,300
Accrued
interest (notes payable)- related parties
487,458
30,678
Accounts
payable and accrued expenses
$
3,742,083
$
4,142,978
Accrued
compensation
$
2,207,564
$
1,302,890
As
of June 30, 2023 and December 31, 2022, our accounts payable are primarily made up of trade
payables for the purchase of crude oil . Trade accounts payables in the amount of $ 2,999,734
and $ 4,000,681 is with a vendor who our CEO is a beneficiary of. As of June 30, 2023 and December 31, 2022, $ 234,478 and $ 37,685
of accounts payable related to services rendered, which are not trade payables, with a vendor of which our CEO is a beneficiary. $ 20,413
of accounts payable related to services rendered, which are not trade payables, are with a vendor where our Chief Financial Officer sits
on the board of the directors and is an officer.
In
March 2023, the Compensation Committee reviewed the Company’s 2022 results, including, but not limited to, the progress of
the Company’s historic business and certain acquisitions completed by the Company during 2022, and approved discretionary bonuses,
which have been accrued as of December 31, 2022, for the Chief Financial Officer, and an acquisition consultant, in the amounts
of $ 505,467 (included in accrued compensation) and $ 421,222 (included in accounts payable), respectively.
As of June 30, 2023, accrued compensation to
current employees includes $ 725,747 due to our Chief Executive Officer, with $ 51,774 in accrued vacation that may be payable in cash
or stock if unused, with the remainder only payable in shares of our common stock, and $ 744,216 due to our Chief Financial Officer, with
$ 46,443 in accrued sick and vacation that may be payable in cash if unused, and the remainder paid in cash.
Note
7. Loans and Notes Payable
Loans
and notes payable and their maturities consist of the following:
Schedule of loans and notes payable
June 30,
2023
December 31,
2022
Various
promissory notes and convertible notes
$
50,960
$
50,960
Novus
Capital Group LLC Note (a)
171,554
171,554
National
Buick GMC
12,610
16,006
Blue
Ridge Bank (b)
410,200
410,200
Small
Business Administration
299,900
299,900
Al
Dali International for Gen. Trading & Cont. Co. (c)
861,028
-
Various
variable interest promissory notes (d)
1,970,000
1,325,000
Total
Notes Payable
$
3,776,252
$
2,273,620
Loans
and notes payable, current
$
905,848
$
542,374
Loans
and notes payable, current attributed to variable interest entity
1,970,000
1,325,000
Loans
and notes payable, long term
$
900,404
$
406,246
10
Schedule of loans and notes payable related parties
June 30,
2023
December 31,
2022
Various
variable interest promissory notes - related parties (d)
$
1,651,845
$
899,500
Jorgan
Development, LLC
27,590,686
27,977,704
Triple
T Notes
359,241
342,830
Total
Notes Payable- related parties
$
29,601,772
$
29,220,034
Loans
and notes payable, current- related parties
$
359,241
$
342,830
Loans
and notes payable, current attributed to variable interest entity- related parties
1,351,845
599,500
Loans
and notes payable attributed to variable interest entity- related parties
300,000
300,000
Loans
and notes payable, long term- related parties
$
27,590,686
$
27,977,704
The following table sets forth the estimated payment schedule of long-term
debt (net of debt discount) as of June 30, 2023:
Schedule of maturities of loans and notes payable
2023
$ 4,227,693
2024
14,432,940
2025
14,451,369
2026
33,640
2027
17,232
Thereafter
215,150
Total
$ 33,378,024
(a)
In
2017, the Company acquired assets, including patents, in the amount of $4,931,380 in which the Company also agreed to assume the
encumbering debt on asset in the amount of $334,775. The debt currently accrues interest at 10% per annum. In November 2021,
the lender agreed to extend the maturity of the note to April 1, 2022. On April 1, 2022, the lender agreed to extend the
maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter
until the note is fully paid. As of the date of this report, we are currently renegotiating the terms of this debt.
(b)
In May 2020 and in January 2021, the Company entered into two
Paycheck Protection Program (“PPP”) loan agreements for $205,100 each with Blue Ridge Bank, subject to the Small Business
Administration’s (“SBA”) Paycheck Protection Program. We have applied for forgiveness under the CARES Act, however we
currently believe a substantial portion of the loans may not be forgiven. The Company is working with the loan service agency to obtain
forgiveness and any unforgiven amounts of the loans will be repaid in cash.
(c)
On
June 20, 2023, we issued a 15% secured promissory note due to Al Dali International
for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”),
in the principal amount of up to $1,950,000. As security to secure repayment of the Note,
we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price
of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method. We also granted DIC a security interest in our Trial Remediation Processing
Center (“RPC”) that is currently on-site at the DIC facility in Kuwait. We will
repay the amounts due under the note from the operations of the RPC. In order to repay the
amounts due under the note, DIC will deduct $12 per ton of material we process from the amounts
due to us until all amounts due under the note have been repaid.
(d)
The
balance of these various promissory notes are related to the special purchase vehicle, Viva Wealth Fund I, LLC (VWFI) of which the
balance primarily related to an offering up to $25,000,000 in convertible notes in a private offering, which was closed on June 30,
2023. During the six months ended June 30, 2023, an additional $1,980,000 has been raised in relation this offering, and $1,335,000
of this debt has been converted into units of the LLC. VWFI has also entered into various master revolving notes outside of the offering:
an additional $765,000, was raised from a related party as of June 30, 2023, which accrues 6% interest per annum, has a maturity
date of October 11, 2023, where no payments are made prior to the maturity date unless at the option of the fund. For the six
months ended June 30, 2023, we made a cash payment of $12,655 on the principal of the revolving note.
Note
8. Commitments and Contingencies
Finance
Leases
We
acquired Silver Fuels Delhi, LLC (SFD) and White Claw Colorado City, LLC (WCCC) in a business combination in August 2022, in which
we acquired certain finance leases contracts and liabilities as described below:
On
March 17, 2020, the SFD entered into two sale and leaseback transactions with Maxus Capital Group, LLC (“Maxus”). The
first transaction involved the Company assigning twelve storage tanks and other equipment and the second transaction involved the Company
assigning the remaining property at the oil gathering facility with the exception of land, to Maxus Future minimum lease payments for
each of the next three years under the Maxus lease obligations is as follows: 2023 $ 246,072 , 2024 $ 492,144 , and 2025 $ 123,036 .
11
On
December 28, 2021, the WCCC entered into a sale and leaseback transaction with Maxus, where WCCC assigned the crude oil, natural
gas liquids, condensate, and liquid hydrocarbon receipt, throughput, processing, gathering, and delivery terminal, commonly known as
the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus. Future minimum lease payments
for each of the next four years under the Maxus lease obligation are as follows: 2023 $ 235,878 , 2024 $ 471,756 , 2025 $ 471,756 , and 2026
$ 471,756 .
On May 23, 2023, our subsidiary White Claw
Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital
Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located
on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million
to finance the build-out of the Houston location in the form of a finance lease for the wash plant, and we will lease the wash plant
facility financed by Maxus under WCCC’s supplement to the Master Agreement. We expect our lease payments to Maxus under the supplement
to be approximately $57,962 per month over 4 years, with an early buyout option of approximately $685,000 or lease-end option to purchase
the facilities for the fair market value. We anticipate that the lease will commence in the fourth quarter of 2023 at which time the
final amount funded and lease payments will be determined.
The
following table reconciles the undiscounted cash flows for the finance leases as of June 30, 2023 to the finance lease liability
recorded on the balance sheet:
Schedule of financing lease liability
2023
$
481,950
2024
963,900
2025
594,792
2026
471,756
Total
undiscounted lease payments
2,512,398
Less:
Imputed interest
1,198,035
Present
value of lease payments
1,314,363
Add:
carrying value of lease obligation at end of lease term
1,753,000
Total
finance lease obligations
$
3,067,363
Finance
lease liabilities, current
$
963,900
Finance
lease liabilities, long-term
$
2,103,463
Weighted-average
discount rate
18.00
%
Weighted-average
remaining lease term (months)
34.80
Operating
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.
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
December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”)
with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease
is for an initial term of 126 months and may be extended for an additional 120 months at our discretion. Our monthly rent is $0 for the
first three months and then at month 4 it is approximately $7,000 (based on a 50% reduction) and increases to approximately $13,000 in
month 7 and then increases annually up to approximately $16,000 per month by the end of the initial term. We plan to place one or more
of our RPC machines on the property, as well as store certain equipment.
12
On June 26, 2023, our subsidiary VivaVentures
Remediation Corp., entered into a five year RPC Equipment Lease Agreement with Viva Wealth Fund I, LLC (“VWF”), under which
VivaVentures Remediation Corp. agreed to lease the Remediation Processing Center (“RPC”) owned by VWF. VWF previously raised
approximately $13.7 million and used the funds to have our subsidiary, RPC Design and Manufacturing, LLC, build an RPC, which we are
now leasing from VWF in exchange for 25% of the gross proceeds from the RPC’s oil extraction production services, with a minimum
$400,000 annual payment beginning nine months after the RPC is fully operational as defined in the RPC Equipment Lease Agreement. We
anticipate that the RPC will be fully operational in the fourth quarter of 2023 at which time the minimum annual lease payment of $400,000
and could increase to an amount equal to 25% of the gross proceeds from the RPC’s oil extraction production services.
The
following table reconciles the undiscounted cash flows for the leases as of June 30, 2023 to the operating lease liability recorded
on the balance sheet:
Schedule of lessee operating lease liability
2023
$
264,315
2024
435,906
2025
162,545
2026
136,975
2027
153,089
Thereafter
2,896,552
Total
undiscounted lease payments
4,049,382
Less:
Imputed interest
2,245,471
Present
value of lease payments
$
1,803,911
Operating
lease liabilities, current
$
535,121
Operating
lease liabilities, long-term
$
1,268,790
Weighted-average
remaining lease term
211.57
Weighted-average
discount rate
10.05
%
Note
9. 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.
The
Company has granted stock-based compensation to employees, including the issuance of 1,872,918
employee stock options granted in June 2022
that were to vest over a period of two years, for which 451,158
of these options were cancelled with the resignation
without cause in October 2022 of our prior Chief Executive Officer. For the six months ended June 30, 2023 and 2022, employee
stock-based compensation was none
and $ 1,340,703 .
On October 24, 2022, the previous Compensation Committee resolved to increase their compensation including the issuance of 100,000
stock options per independent board member, exercisable at $2.50 per share, vesting immediately. Non-statutory or independent Board of
Director stock-based compensation was none
and $ 855,000
for the six months ended June 30, 2023 and
2022. 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. On June 20, 2023, we issued a 15 % secured promissory note due to Al Dali International for Gen. Trading & Cont.
Co., a company organized under the laws of Kuwait (“DIC”). As security to secure repayment of the Note, we issued DIC an
option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which
was recorded as a debt discount in the amount of $ 467,509 , which is amortized to interest expense over the term of the agreement
using the effective interest method.
There
were no other options granted during the three months ended June 30, 2023 and 2022, 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 assumptions
December 31,
2021
through
June 30,
2023
Risk-free
interest rate
0.24
- 5.23 %
Expected
dividend yield
None
Expected
life
2.1
- 10 years
Expected
volatility rate
142
- 273 %
13
The
following table summarizes all stock option activity of the Company for the three months ended June 30, 2023 and 2022:
Schedule of option activity
Number
of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Outstanding,
December 31, 2022
1,833,566
$
2.59
6.47
Granted
1,000,000
1.18
2.00
Exercised
-
-
-
Forfeited
( 16,667
)
12.00
-
Outstanding,
June 30, 2023
2,816,899
$
2.03
4.58
Outstanding,
December 31, 2021
650,000
$
12.00
7.53
Granted
2,112,919
2.24
6.60
Exercised
( 16,667
)
11.1
-
Forfeited
( 240,000
)
5.00
-
Outstanding,
June 30, 2022
2,506,252
$
4.53
7.39
Exercisable,
December 31, 2022
1,526,869
$
2.65
5.94
Exercisable,
June 30, 2023
2,526,869
$
2.07
4.08
Exercisable,
December 31, 2021
180,000
$
12.00
7.01
Exercisable,
June 30, 2022
890,168
$
4.74
7.48
As
of June 30, 2023 and 2022, 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.
Warrants
As
of June 30, 2023 and 2022, the Company had 80,000 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, a 5-year warrant to purchase 80,000 shares of common stock at an exercise price equal $ 5.75 and were valued
with a fair market value of $374,000. 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
10. 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 for the six months ended June 30, 2023 and 2022, respectively. The Company
is projecting a 0.01 % effective tax rate for the year ending December 31, 2023, 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 2022 was 18.69 % which was the result of the benefit of book income for the year.
As
of December 31, 2022, the Company had estimated federal and state net operating loss (NOL) carryforwards of approximately $ 23.7
million. Federal NOL carryforwards begin to expire in 2028.
14
Note
11. Related Party Transactions
As
of June 30, 2023, VWFI has paid $ 2,266,964 to Dzign Pro Enterprises, LLC (Dzign Pro) for engineering services related to our RPCs,
site planning, and infrastructure, which entity shares a common executive with VWFI. As of June 30, 2023, VWFI also entered into
a master revolving note payable to Dzign Pro in the amount of $ 300,000 , which accrues 5% interest per annum, has a maturity date of July 14,
2024, where no payments are made prior to the maturity date unless at the option of the fund. VWFI also entered into a master revolving
note payable to Van Tran Family LP, which is an affiliate of WealthSpace, LLC, the VWFI Fund Manager, in the amount of $1,351,845, which
accrues 6% interest per annum, has a maturity date of October 11, 2023, where no payments are made prior to the maturity date unless
at the option of the fund. For the six months ended June 30, 2023, we made cash payments of $ 50,000 on the Van Tran Family LP revolving
note.
On
June 15, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Jorgan Development, LLC,
(“Jorgan”) and JBAH Holdings, LLC, (“JBAH” and, together with Jorgan, the “Sellers”), as the equity
holders of Silver Fuels Delhi, LLC (“SFD”) and White Claw Colorado City, LLC (“WCCC”) whereby, at closing, which
occurred on August 1, 2022, we acquired all of the issued and outstanding membership interests in each of SFD and WCCC (the “Membership
Interests”), making SFD and WCCC our wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately
$32.9 million paid for by us with a combination of shares of our common stock, amount equal to 19.99% of the number of issued and outstanding
shares of our common stock immediately prior to issuance, and secured three-year promissory notes issued by us in favor of the Sellers
(the “Notes”). As of June 30, 2023 we have accrued interest of approximately $ 452,283 and for the six months ended June 30,
2023, we made cash payments of $ 1,705,590 on the Notes.
In
the business combination of acquiring WCCC we also acquired WCCC’s Oil Storage Agreement with White Claw Crude, LLC (“WC
Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject
to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal
operated by WCCC. WC Crude is required to pay $150,000 per month even if the storage space is not used. The agreement expires on December 31,
2031. For the six months ended June 30, 2023 we have received tank storage revenue related to this contract of approximately $900,000.
In
the business combination of acquiring SFD, we acquired an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”),
under which WC Crude supplies volumes of Crude Petroleum to SFD, which provides for the delivery to SFD a minimum of 1,000 sourced barrels
per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the
oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event
that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price
over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires
on December 31, 2031. For the six months ended June 30, 2023, we have made crude oil purchases from WC Crude of $ 15,931,252 .
In addition, SFD renewed a sales agreement in April 2023 with WC Crude to sell a natural gas liquid product to WC Crude. For the three months ended March 2023, SFD sold
the NGL stream at cost to WC Crude. On April 1, 2023 sold the NGL stream at a profit to WC Crude. We produced and sold natural gas liquids and crude oil to WC Crude in the amount of $ 6,428,026 for the six months
ended June 30, 2023.
In
the business combination of acquiring SFD and WCCC we also entered into a Shared Services Agreement with Endeavor Crude, LLC (“Endeavor”),
who shares a beneficiary, James Ballengee (the Company’s CEO), with Jorgan and JBAH. Under this agreement, we have the right, but
not the obligation to use Endeavor for consulting services. For the six months ended June 30, 2023, Endeavor rendered services in
the amount of $156,845.
We
have an existing note payable issued to Triple T, which is owned by Dr. Khalid Bin Jabor Al Thani, the 51% majority-owner of Vivakor
Middle East LLC. The note is interest free, has no fixed maturity date and will be repaid from revenues generated by Vivakor Middle East
LLC. As of June 30, 2023 the balance owed was $ 359,241 . In March 2023 the parties agreed to extend the maturity date of the
loan to March 10, 2024.
15
Note
12. Subsequent Events
On
July 25, 2023, a non-affiliated investor loaned us $ 500,000 under the terms of a 10 % Convertible Promissory Note dated July 6,
2023 (the “Investor Note”). Under the terms of the Investor Note, the loan is at a 10% per annum interest rate, matures two
years from the date of issuance , and is convertible into shares of our common stock at $2.50 per share, unless such conversion would
cause the investor to own more than 4.9% of our outstanding common stock.
On
July 1, 2023, we hired Leslie D. Patterson to be our Vice President, Operations & Construction. In this position, Mr. Patterson
is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment
Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $ 150,000 in annual salary, shares of our common
stock equal to $ 25,000 annually, and a one-time bonus of shares of our common stock equal to $ 125,000 , payable on the one year anniversary
of his employment. Mr. Patterson is entitled to other bonuses and benefits on par with our general employment policies.
16
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.