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Item 2. Management’s Discussion and Analysis

2024-05-20 compared with 2023-11-20 · 272 added, 110 removed, 67 unchanged (85% of the section changed)

18 unchanged sentences

You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”).

We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law.

We believe that our assumptions are based upon reasonable data derived from and known about our business and operations.

No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to Vivakor, Inc., its wholly owned and majority-owned active subsidiaries, or joint ventures (collectively, the “Company”).

Although we believe that the expectations reflected

in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance.

urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC.

We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated

events or changes in the future operating results over time except as required by law.

We believe that our assumptions are based upon

reasonable data derived from and known about our business and operations.

No assurances are made that actual results of operations or

the results of our future activities will not differ materially from our assumptions.

As used in this Quarterly Report on Form 10-Q

and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to

Vivakor, Inc., its wholly owned and majority-owned active subsidiaries, or joint ventures (collectively, the “Company”).

Intercompany balances and transactions between consolidated entities are eliminated.

Vivakor has the following wholly and majority-owned subsidiaries:

Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, RPC Design and Manufacturing LLC (“RDM”), a Utah limited liability company, Vivaventures Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivasphere, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a Utah corporation.

Vivakor has the following wholly and

majority-owned subsidiaries:

Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas

limited liability company, RPC Design and Manufacturing LLC (“RDM”), a Utah limited liability company, Vivaventures

Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a

Utah corporation.

We have a 99.95% ownership interest in Vivaventures Energy Group, Inc., a Nevada Corporation;

the 0.05% minority interest in Vivaventures Energy Group, Inc.

the 0.05% minority

interest in Vivaventures Energy Group, Inc.

is held by a private investor unaffiliated with us.

We also have an approximate 49% ownership interest in Vivakor Middle East Limited Liability Company, a Qatar limited liability company.

Vivakor manages and consolidates RPC Design and Manufacturing LLC, which includes a noncontrolling interest investment from Vivaopportunity Fund, LLC, which is also managed by Vivaventures Management Company, Inc.

Vivakor has common officers with and consolidates Viva Wealth Fund I, LLC.

We also have an approximate 49%

ownership interest in Vivakor Middle East Limited Liability Company, a Qatar limited liability company.

Vivakor manages and

consolidates RPC Design and Manufacturing LLC, which includes a noncontrolling interest investment from Vivaopportunity Fund, LLC,

which is also managed by Vivaventures Management Company, Inc.

In accordance with ASC 810, as of October 1, 2023, we

deconsolidated Viva Wealth Fund I, LLC (VWFI), recognizing a gain on deconsolidation of $438,099 in the fourth quarter of fiscal

year 2023, and as of February 15, 2024 we deconsolidated Vivasphere, Inc.

(Vivasphere), recognizing a gain of $177,550 for the

three months ended March 31, 2024.

The assets, liabilities and equity related to VWFI and Vivasphere were removed from our

financial statements on their respective deconsolidation dates, resulting in the gains on deconsolidation.

Business Overview

8 unchanged sentences

We are currently focusing our soil remediation efforts on our project in Kuwait and our upcoming project in the Houston, Texas area.

Reclassifications

Certain reclassifications may have been made to prior years’ amounts to conform to the 2023 presentation.

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.

states and many countries issued policies intended to stop or slow the further 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.

We have experienced supply chain disruptions in building our Remediation Processing Centers (“RPC”) and completing certain refurbishment on our precious metal extraction machines.

These suspensions 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.

COVID-19 and the U.S.

response to the pandemic significantly affected the economy.

There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have in the long-term, 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.

Recent Developments

DIC Note Proceeds

In conjunction with our Services Agreement we signed with DIC on December 14, 2021, on June 20, 2023, we issued a 15% secured promissory note (the “Note”) due as described below, 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 (the “Principal Amount”).

We are using the proceeds of the Note to relocate, refurbish, and fully install our RPC to DIC’s location in Kuwait.

The installation of this RPC in Kuwait will allow us to perform under the Services Agreement.

During the nine months ended September 30, 2023 we received note proceeds of $1,220,651.

Maxus Proceeds

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 (see Note 8) for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement.

During the construction phase of this agreement, the Company controls the asset with construction costs funded by Maxus recorded as a liability.

As of September 30, 2023 the Company has recorded a $1,564,771 liability in accounts payable related to the construction related to this agreement that has been funded by Maxus.

Hiring Vice President, Operations and Construction

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.

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.

Patterson is entitled to other bonuses and benefits on par with our general employment policies.

Convertible Promissory Note

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.

Results of Operations for the Three and Nine Months ended September 30, 2023 and 2022

For the three months ended September 30, 2023 and 2022 we realized revenues of $16,313,406 and 11,765,975, respectively, representing an increase of $4,547,431 or 38.65%.

For the nine months ended September 30, 2023 and 2022 we realized revenues of $45,448,916 and $11,765,975, respectively, representing an increase of $33,682,941 or 286.27%.

The increase in revenue is primarily attributed to our oil and natural gas liquid sales which have been realized through the operations from SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

Loan and Security Agreement and Issuance of a Secured Promissory Note

On February 5, 2024, we issued a secured promissory note (the “Note”) due as described below, to Cedarview Opportunities Master Fund LP (the “Lender”), in the principal amount of $3,000,000 (the “Principal Amount”), in relation to a Loan and Security Agreement by and between the Company, its subsidiaries, and the Lender (the “Agreement”).

The Company will use the proceeds of the Note for general working capital purposes and to repay certain indebtedness.

The Company received the funds on February 6, 2024, minus a 3% origination fee.

To secure repayment of the Note, the Company issued the Lender a security interest in the assets of the Company and its subsidiaries.

The Company also issued an irrevocable letter to its transfer agent to reserve 3,000,000 shares of its common stock until the Note is repaid.

If the Company defaults on the repayment of the Note, then the transfer agent will transfer the shares to the Lender for the Lender to sell until the amounts due under the Note are repaid in full and return any remaining shares.

The Company will repay the amounts due under the Note as follows:

first three months are interest only payments, which the Company prepaid at Closing, and then twelve equal monthly installment payments of interest plus $250,000, which must be made on or before May 5, 2025 (the Maturity Date).

The Company paid a finder $70,000 in relation to obtaining the loan and issued the Lender 300,000 shares of its common stock, restricted in accordance with Rule 144, as additional consideration for the loan.

This summary is not a complete description of

all of the terms of the Agreement and the Note and is qualified in its entirety by reference to the full text of the Agreement and the

Note, which are filed as Exhibit 10.45 hereto, which are incorporated by reference into the Company’s Form 10-K for the year ended

December 31, 2023, filed with the SEC on April 17, 2024.

Merger Agreement with Empire

The Merger Agreement

On February 26, 2024 (the “Execution Date”), we (the “Parent”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Empire Energy Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Parent (“Merger Sub”), and Empire Diversified Energy, Inc., a Delaware corporation (“Empire” and collectively with the Parent and Merger Sub, the “Parties”).

Pursuant to the Merger Agreement, on the Closing Date, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into Empire (the “Merger”), with Empire surviving the Merger as a wholly owned subsidiary of the Parent (the “Surviving Company”).

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement.

As a result of the Merger, at Closing, all shares of Empire’s common stock, par value $0.00001 per share (the “Empire Common Stock”), on a fully diluted and as converted basis, shall be converted into and exchanged for the right to receive an aggregate of 67,200,000 shares (the “Consideration Shares”) of the Parent’s common stock, par value $0.001 per share (the “Parent Common Stock”), stipulated to be $1.00 per share of Parent Common Stock for an aggregate value equal to $67,200,000.

Representations and Warranties;

Pursuant to the Merger Agreement, the Parties made customary representations and warranties for transactions of this type;

provided , that the Parties agreed that each of the Parent and Empire shall deliver fully completed copies of their respective disclosure schedules as soon as reasonably practicable, but in no event later than 14 days following the Execution Date.

Both Parties shall have sixty (60) days from the Execution Date (the “Diligence Expiration Date”) to conduct due diligence review of the other Party, giving rise to the termination right by either Party until the Diligence Expiration Date.

Net Cash Minimum

Pursuant to the Merger Agreement, at the Closing, Empire is required to have a minimum of $2,500,000 of unrestricted net cash on its books (“Net Minimum Cash”), which Net Minimum Cash shall be available to the Parent following the Closing.

Registration Statement and Proxy

As promptly as practicable following the date the Net Minimum Cash is obtained pursuant to the Merger Agreement, but in no event after the later of the (i) 45 th day following the Execution Date and (ii) 10 th day following the date the Net Minimum Cash is obtained, so long as the Parent has received all necessary information from Empire, the Parent shall file with the U.S.

Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (the “Registration Statement”) relating to, among other things, the registration of the Consideration Shares issuable to the Empire Stockholders pursuant to the Merger Agreement, including the Proxy Statement portion thereof relating, among other things, to the approval of the Proposals (as defined below) to be voted on at the Parent Stockholders Meeting (as defined below).

Parent Stockholders Meeting

As promptly as practicable following the date on which the Registration Statement is declared effective by the SEC pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and after reasonable consultation with Empire, the Parent shall establish the record date, and duly call, give notice of, convene and hold a special meeting of the stockholders of the Parent (the “Parent Stockholders Meeting”) in accordance with Nevada law (and in any event within 10 Business Days after the date of effectiveness of the Registration Statement, unless otherwise required by applicable Laws).

At such Parent Stockholders Meeting, the Parent’s board of directors (the “Board”) is to recommend that the Parent Stockholders approve and adopt the following proposals (the “Proposals”):

(i) the Merger Agreement, the Merger, the Ancillary Agreements and the Transactions;

(ii) for purposes of complying with Nasdaq listing Rule 5635(a), (b) and (d), the issuance of the Consideration Shares to the Empire Stockholders as contemplated in the Merger Agreement;

(iii) the adjournment of such Parent Stockholders Meeting as permitted by Section 5.08 of the Merger Agreement;

and (iv) any other proposal or proposals that the Parent reasonably deems necessary or desirable to consummate the transactions contemplated by the Merger Agreement (collectively, the “Parent Board Recommendations”).

Board of Directors and Officers

Upon the Closing, (i) the number of members of the Board shall be fixed at seven, and (ii) the members of the Board shall be (A) James Ballengee, who shall serve as Chairman, (B) three (3) members to be chosen by Empire, (C) two (2) members to be chosen by the Parent, and (D) one (1) member to be chosen by both the Parent and Empire.

At least four (4) of the individuals identified in (B), (C), and (D) shall qualify as independent directors under the rules of the Nasdaq Stock Market LLC (“Nasdaq”).

If any individual identified in (B) of the foregoing clause (ii) is unable or unwilling to serve in such capacity, Empire may choose a successor but not less than five (5) days in advance of the Closing or such earlier period as may be required by disclosure requirements under applicable Law.

If any individual identified in (C) of the foregoing clause (ii) is unable or unwilling to serve in such capacity, the Parent may choose a successor but not less than five days in advance of the Closing or such earlier period as may be required by disclosure requirements under applicable Law.

From and after the Effective Time, James Ballengee shall continue to serve as the Parent’s Chief Executive Officer until the earlier of the Board’s appointment of a successor or Mr.

Ballengee’s death, resignation, termination or removal.

Conditions to Each Party’s Obligations to Consummate the Transactions

The respective obligation of each Party to effect, or cause to be effected, the Transactions, including the Merger, is subject to the satisfaction on or before the Closing Date of each of the following conditions, unless waived in writing by each of Parent and the Parent:

(a) the Parent Board Recommendations have been approved by the required Parent Stockholders at the Parent Stockholders Meeting;

(b) the Merger Agreement and the Merger shall have been duly adopted by the required Empire Stockholders;

(d) the Parties shall have received all approvals with any Governmental Authority necessary to consummate the Transactions, including, but not limited to, the expiration or termination of the waiting period under the HSR Act, if applicable;

(e) there shall not have been enacted, promulgated or made effective after the Execution Date any Law or Orders by a Governmental Authority of competent jurisdiction that enjoins or otherwise prohibits or makes illegal, or any Legal Action by any Governmental Authority seeking to enjoin or prohibit or make illegal, consummation of the Transactions and there shall not be in effect any injunction (whether temporary, preliminary or permanent) by any Governmental Authority of competent jurisdiction that enjoins or otherwise prohibits consummation of the Transactions;

(f) the Parent shall have obtained a Fairness Opinion concluding that the Merger and the related Transactions are fair to the Parent Stockholders from a financial point of view;

(g) the executed Lock-Up Agreement has been delivered to the Parent;

(h) the Lock-Up Extension has been delivered to Empire;

and (i) all of the Convertible Securities of Empire have been exercised, converted or exchanged for Empire Common Stock and the Parties shall have mutually agreed as to the treatment of warrants exercisable for shares of Empire Common Stock (the “Empire Warrants”) at Closing provided that if the Empire Warrants have been terminated or exercised into Empire Common Stock prior to the Closing, this condition shall have been deemed satisfied.

Conditions to Obligations of the Parent

The obligations of the Parent to effect, or cause to be effected, the Transactions, including the Merger, are subject to the satisfaction on or before the Closing Date of the following conditions, unless waived in writing by the Parent (subject to certain qualifications and exceptions as set forth in the Merger Agreement for each):

(A) the representations and warranties of Empire regarding the capitalization of Empire shall be true and correct as of the Closing as though made on such date;

(B) the representations and warranties of Empire set forth in Section 3.01 (Organization and Power), Section 3.04 (Corporate Authorizations), Section 3.06 (Capitalization) (other than subsections (a), and (b) and (g)), and Section 3.24 (Brokers) shall be true and correct in all material respects as of the Closing as though made on such date;

(C) the remaining representations and warranties of Empire contained in Article III shall be true and correct, in each case as of the Closing as though made on such date;

(D) each of the covenants of Empire to be performed as of or prior to the Closing shall have materially been performed;

(E) there shall not have been a Company Material Adverse Effect (as defined in the Merger Agreement);

(F) the Parent shall have received the Company Officer’s Certificate (as defined in the Merger Agreement);

(G) Empire shall have the Net Cash Minimum on hand;

and (H) the Parent shall have received each of the agreements, instruments and other document set forth in Section 1.11(b) of the Merger Agreement.

Conditions to Obligations of Empire

The obligations of Empire to effect, or cause to be effected, the Transactions, including the Merger, are subject to the satisfaction on or before the Closing Date of the following conditions, unless waived in writing by Empire (subject to certain qualifications and exceptions as set forth in the Merger Agreement for each):

(A) the representations and warranties of the Parent regarding the capitalization of the Parent shall be true and correct as of the Closing as though made on such date;

(B) the representations and warranties of the Parent set forth in in Section 4.01 (Organization and Power), Section 4.04 (Corporate Authorizations), Section 4.06 (Capitalization) (other than subsections (a) and (b) and (g)), Section 4.08 (Business Operations), Section 4.24 (Takeover Statutes), Section 5.22 (Opinion of Financial Advisor) and Section 4.28 (Brokers) shall be true and correct in all material respects as of the Closing as though made on such date;

(C) the remaining representations and warranties of the Parent contained in Article IV shall be true and correct, in each case as of the Closing as though made on such date;

(D) each of the covenants of the Parent to be performed as of or prior to the Closing shall have materially been performed;

(E) there shall not have been a Parent Material Adverse Effect (as defined in the Merger Agreement);

(F) Empire shall have received the Parent Officer’s Certificate (as defined in the Merger Agreement);

(G) the Parent Common Stock (i) shall be listed on Nasdaq and (ii) shall not have been suspended, as of the Closing Date, by the SEC or Nasdaq from trading on Nasdaq nor shall (x) the Parent have received any notice or communication from Nasdaq noting noncompliance with listing requirements or threatening suspension or delisting of the Parent Common Stock or (y) the Parent fails to meet any of the continued listing requirements applicable to it in order to be in compliance with all such listing and maintenance requirements;

(H) the transactions referenced in Section 6.03(f) of the Merger Agreement have been consummated or terminated;

and (I) Empire shall have received each of the agreements, instruments, and other documents set forth in Section 1.11(a) of the Merger Agreement.

Indemnification;

Pursuant to Article VIII of the Merger Agreement, and subject to the limitations set forth therein from the date that is twelve (12) months after the Closing, each Party agreed to indemnify and hold harmless the other party for any all Damages incurred or suffered as a result of (a) any inaccuracy in or breach of any representation or warranty or in any certificate or instrument delivered pursuant to the Merger Agreement and (b) any breach of any covenant or agreement of such Party as set forth in the Merger Agreement.

Section 8.04(a) of the Merger Agreement (i) limits Empire’s ability to assert claims for Damages against the Parent unless and until the aggregate amount of all such Damages exceeds $250,000 (the “Parent Threshold”) and (ii) caps Parent’s liability for any indemnification payments at $500,000 (the “Parent Cap”).

Section 8.04(b) of the Merger Agreement limits the Parent’s ability to assert claims for Damages against Empire unless and until the aggregate amount of all such Damages exceeds $250,000 (the “Empire Threshold”).

Notwithstanding anything in the Merger Agreement to the contrary, the Parent Threshold, the Parent Cap and the Empire Threshold shall not apply to Damages that arise from, relate to or are accrued, suffered or incurred as a result of claims relating to fraud or intentional misrepresentation.

Except for claims relating to fraud or intentional misrepresentation, the sole remedy of the Parent under the Merger Agreement shall be the Escrow Shares held pursuant to the Escrow Agreement (discussed below).

The Merger Agreement may be terminated and the transactions therein may be abandoned:

(A) by mutual written consent of the Parties;

(B) by the Parent or Empire (i) within sixty (60) days from the Execution Date as a result of the terminating Party’s due diligence review of the other Party, (ii) at any time before the Effective Time if the Closing has not occurred on or before the date that is nine (9) months from the Execution Date (the “Termination Date”), (iii) at any time before the Effective Time the Parent fails to obtain the vote required to pass the proposals presented at the Parent Stockholders Meeting, (iv) at any time before the Effective Time if Empire fails to obtain the vote required to pass the proposals presented at the special meeting of Empire’s stockholders as set forth in the Merger Agreement (the “Empire Stockholder Meeting”), or (v) at any time before the Effective Time if any Law or Order is enacted, issued, promulgated or entered by a Governmental Authority of competent jurisdiction (including Nasdaq) that permanently enjoins, or otherwise prohibits the consummation of the Transactions, and (in the case of any Order) such Order has become final and non-appealable;

(C) by Empire if, among other things, (i) there has been a Parent Adverse Recommendation Change (as defined in the Merger Agreement), (ii) if the Board recommends a Superior Proposal (as defined in the Merger Agreement) to the Parent Stockholders or if a tender offer, exchange offer, or other transaction for any outstanding shares of the Parent’s capital stock is commenced before obtaining the required vote at the Parent Stockholders Meeting and if the Board fails to recommend against any such Superior Proposal within ten (10) Business Days after commencement;

(iii) if there is a material breach of Section 5.05 of the Merger Agreement, (iv) if the Parent or any of its subsidiaries breach any of its representations, warranties, covenants or agreements in the Merger Agreement, subject to Parent’s ability to cure such breach within the timeframe set forth in the Merger Agreement, (v) if the obligations in Section 6.01 and 6.02 of the Merger Agreement have been satisfied and the Parent has failed to fulfill its respective obligations and consummate the Closing within three (3) Business Days following written notice that Empire is willing and able to consummate the Closing, (iv) the Parent fails to pass the proposals at the Parent Stockholders Meeting by the Termination Date solely due to the action or inaction of the Parent and such action or inaction constitutes a material breach of the Merger Agreement, or (vii) if Empire’s board of directors approves termination and Empire has concurrently with such termination entered into a definitive agreement, arrangement or understanding providing for the implementation of a Superior Proposal (Parent) (as defined in the Merger Agreement);

or (D) by the Parent if, among other things, (i) Empire breaches any of its representations, warranties, covenants or agreements contained in the Merger Agreement, subject to Empire’s ability to cure such breach within the timeframe set forth in the Merger Agreement, (ii) if the obligations in Section 6.01 and 6.02 of the Merger Agreement have been satisfied and Empire has failed to fulfill its respective obligations and consummate the Closing within three (3) Business Days following written notice that Empire is willing and able to consummate the Closing;

(iii) if Empire fails to pass the proposals presented at the Empire Stockholder Meeting by the Termination Date, or (iv) if the Board approves termination and the Parent has concurrently with such termination entered into a definitive agreement, arrangement or understanding providing for the implementation of a Superior Proposal (Parent) (as defined in the Merger Agreement).

Ancillary Agreements to Merger Agreement

Voting and Support Agreements

Within 30 days of the Execution Date, the Parent agreed to deliver the written agreement of certain directors and executive officers and certain Parent Stockholders holding at least 51% of the voting power of Parent Common Stock (the “Relevant Parent Insiders”), to enter into, in their capacity as stockholders, a voting and support agreement with the Parent, Empire and Merger Sub (the “Parent Voting and Support Agreement”), pursuant to which such Relevant Parent Insiders agree to vote in favor of the adoption of the Merger Agreement and the Transactions and to take (and refrain from taking) certain other actions in connection with the Transactions, including the Merger, in each case, on the terms set forth in the Parent Voting and Support Agreement.

Within 30 days of the Execution Date, Empire agreed to deliver the written agreement of certain directors, executive officers and certain Empire Stockholders holding at least 51% of the voting power of shares of Empire Common Stock (the “Relevant Empire Insiders”), to enter into, in their capacity as stockholders, a voting and support agreement with Empire, the Parent and Merger Sub (the “Empire Voting and Support Agreement”), pursuant to which the Relevant Empire Insiders agree to vote in favor of the adoption of the Merger Agreement and the Transactions and to take (and refrain from taking) certain other actions in connection with the Transactions, including the Merger, in each case, on the terms set forth in the Empire Voting and Support Agreement.

Lock-Up Agreements

As a condition to the Parent’s obligations to consummate the Transactions, at Closing, one or more Empire Stockholders representing, individually or collectively, such number of shares of Empire Common Stock that represent not less than 65% of the issued and outstanding shares of Empire Common Stock, in the aggregate, on a fully diluted and as-converted basis, shall enter into a lock-up agreement (the “Lock-Up Agreement”) whereby such Empire Stockholders agree to a lock-up of their respective Consideration Shares for a period of 12 months following the Closing.

As a condition to Empire’s obligations to consummate the Transactions, at or prior to Closing, the Parent shall cause the lock-up period contained in the lock-up agreement dated August 1, 2022 by and between the Parent and JBAH Holdings, LLC to be amended or extended to February 1, 2025 (the “Lock-Up Extension”).

Escrow Agreement and Escrow Shares

The Parties agreed to enter into an Escrow Agreement (the “Escrow Agreement”), pursuant to which certain of the Empire Stockholders (the “Indemnifying Empire Stockholders”) are to deposit with the Escrow Agent, at Closing, an aggregate of 5,040,000 Consideration Shares otherwise issuable to such Indemnifying Empire Stockholders (the “Escrow Shares”) as security for the obligations of the Parent, its members, shareholders, partners, managers, directors, officers, employees and agents, and its and their respective Affiliates (including, after the Closing, the Surviving Company), successors and permitted assigns (each, an “Indemnified Acquiror” and together, the “Indemnified Acquirors”).

The Escrow Agreement shall become effective on the Closing Date and terminate on the 12-month anniversary thereof (the “Escrow Termination Date”).

On the Escrow Termination Date, any Escrow Shares not previously released or distributed to cover the obligations of the Indemnified Acquirors as set forth in the Merger Agreement shall be released to the Indemnifying Empire Stockholders.

The foregoing descriptions of the Merger Agreement, the Parent Voting and Support Agreement, the Empire Voting and Support Agreement, the Lock-Up Agreement and the Escrow Agreement do not purport to be complete and are qualified their entirety by reference to the Merger Agreement, the form of Parent Voting and Support Agreement, the form of Empire Voting and Support Agreement, the form of Lock-Up Agreement and the form of Escrow Agreement attached to our Current Report on Form 8-K as Exhibits 2.1, 10.1, 10.2, 10.3 and 10.4, respectively, filed with the SEC on March 1, 2024.

Promissory Note

On December 5, 2023, the Company received a loan from an individual lender in the principal amount of one million dollars ($1,000,000) (the “Loan”) and, in connection therewith, the Company and agreed to issue 100,000 restricted shares of the Company’s common stock.

The Loan bears interest at the rate of 10% per annum, matures on December 31, 2024, has been personally guaranteed by James Ballengee, the Company’s Chief Executive Officer.

The lender is not a related party or affiliate of the Company.

The foregoing is only a brief description of the material terms of and does not purport to be a complete description of the rights and obligations of the parties to the agreements in connection with the Loan (the “Agreements”), and such description is qualified in its entirety by reference to the full text of the Agreements, which are attached hereto as Exhibits 10.56 and 10.57.

Agreement with Endeavor

Membership Interest Purchase Agreement

Effective March 21, 2024 (the “Execution Date”), Vivakor, Inc., (the “Company” or “Purchaser”) entered into a Membership Interest Purchase Agreement, a copy of which is filed herewith as Exhibit 2.3 (the “Endeavor MIPA”) and incorporated by reference herein, with Jorgan Development, LLC, a Louisiana limited liability company (“Jorgan”) and JBAH Holdings, LLC, a Texas limited liability company (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Endeavor Crude, LLC (f/k/a Meridian Transport, LLC), a Texas limited liability company (“Endeavor”), Equipment Transport, LLC, a Pennsylvania limited liability company (“ET”), Meridian Equipment Leasing, LLC, a Texas limited liability company (“MEL”), and Silver Fuels Processing, LLC, a Texas limited liability company (“SFP” and, together with Endeavor, ET, and MEL, the “Acquirees”) whereby, at closing, subject to the conditions set forth in the Endeavor MIPA, the Company will acquire all of the issued and outstanding membership interests in each of the Acquirees (the “Membership Interests”) making Endeavor, ET, MEL and SFP wholly owned subsidiaries of the Company.

The purchase price for the Membership Interests is $120 million (the “Purchase Price”), subject to post-closing adjustments, payable by the Company in a combination of Company common stock, $0.001 par value per share (“Common Stock”) and Company Series A Preferred Stock $0.001 par value per share (“Preferred Stock”).

The Preferred Stock will have the terms set forth in the Form of Series A Preferred Stock Certificate of Designations filed herewith as Exhibit 3.6 and incorporated by reference herein, including, but not limited to, the payment of a cumulative six percent (6%) annual dividend per share payable quarterly in arrears and conversion rights following the first anniversary of their issuance at a price of one dollar ($1) per share of Common Stock..

The Sellers are beneficially owned by James Ballengee, the Company’s chairman, chief executive officer and principal shareholder.

At a meeting held on March 20, 2024 the Company’s board of directors authorized and approved the Endeavor MIPA and the transactions contemplated thereby.

Ballengee recused himself from the vote.

Subject to satisfaction of all closing conditions, the acquisitions are anticipated to be completed within approximately 90 days of the Execution Date.

At closing of the acquisitions (“Closing”), the Company will issue to the Sellers, (i) a number of shares of Common Stock equal to an undivided nineteen and ninety-nine hundredths percent (19.99%) of all of the Company’s issued and outstanding Common Stock immediately prior to Closing, or lesser percentage, if such issuance would result, when taking into consideration the percentage of Common Stock owned by Sellers prior to such issuance, in Sellers owning in excess of 49.99% of the Common Stock issued and outstanding on a post-Closing basis, valued at $1.00 per share(the “Common Stock Consideration”), and (ii) a number of shares of Preferred Stock equal to the Purchase Price, less the value of the Common Stock Consideration (the “Preferred Stock Consideration”).

Sellers will enter into 18-month lock-up agreements, in the form filed herewith as Exhibit 10.53 and incorporated by reference herein, at Closing, with regard to the Common Stock Consideration and any Common Stock they receive during the lock-up period in connection with conversions of Preferred Stock or the payment of dividends on the Preferred Stock.

As set forth in the Endeavor MIPA, the Purchase Price is subject to a post-Closing working capital adjustment.

The Purchase Price is based, in part, on the assumption that the Net Working Capital (as such term is defined in the Endeavor MIPA) of the Acquirees, in the aggregate and as of Closing will be equal to One Hundred Fifty Thousand and No/100s Dollars ($150,000.00) (the “Target Working Capital Amount”).

If the aggregate net working capital of the Acquirees is lower than the Target Working Capital Amount (a “Working Capital Deficit”) then the Purchase Price will be decreased by an amount equal to the Working Capital Deficit.

If the aggregate net working capital of the Acquirees is higher than the Target Working Capital Amount (a “Working Capital Surplus”) then the Purchase Price will be increased by an amount equal to the Working Capital Surplus.

The amount of any Working Capital Deficit will be payable by Sellers to the Company in shares of Preferred Stock and the amount of any Working Capital Surplus will be payable by the Company to Sellers Company in shares of Preferred Stock.

A Net Working Capital Sample Calculation is filed herewith as Exhibit 10.54 and incorporated by reference herein.

As set forth in the Endeavor MIPA, the Purchase Price is also subject to a post-Closing earn-out adjustment.

If the EBITDA (as such term is defined in the Endeavor MIPA) of the Acquirees for the Company’s 2024 fiscal year (the “Actual Earnings”) is equal to or exceeds Twelve Million and No/100s.

Dollars ($12,000,000.00) (the “Earnings Target”), the positive difference between the Actual Earnings less the Earnings Target will be multiplied by ten (10) and the product thereof remitted to Sellers (the “Seller Earn-Out Payment”), up to a maximum not to exceed Forty-Nine Million and No/100s.

Dollars ($49,000,000.00).

The Seller Earn-Out Payment will be payable to Sellers in Preferred Stock no later than March 31, 2025, Conversely, if the Actual Earnings are less than the Earnings Target, the positive difference between the Earnings Target less the Actual Earnings will be multiplied by ten (10) and the product thereof remitted to the Company (the “Company Earn-Out Payment”), up to a maximum not to exceed Forty-Nine Million and No/100s.

Dollars ($49,000,000.00).

Based upon the foregoing, the Purchase Price, as adjusted for the earn-out, can be increased to as much as One Hundred Sixty-Nine Million and No/100s Dollars ($169,000,000.00) or can be reduced to as little as Seventy-One Million and No/100s.

Dollars ($71,000,000.00).

The Company Earn-Out Payment will be treated and accounted for as an immediate and automatic reduction in the Common Stock Consideration, and each Seller shall thereafter promptly transfer to the Company an amount of Common Stock equal to the Company Earn-Out Payment valued at the volume-weighted average price for the Purchaser Common Stock on the Nasdaq during the five (5) trading days immediately preceding the determination of the Company Earn-Out Payment.

The Company has agreed to file a registration statement for the resale of the shares of Common Stock comprising the Common Stock Consideration and the shares of Common Stock issuable upon conversion of the Preferred Stock or upon payments of dividends on the Preferred within 45 days of the closing under the Endeavor MIPA and to use its best efforts to have the registration statement declared effective as soon thereafter as is practical.

The Endeavor MIPA contains customary representations and warranties, pre- and post-closing covenants of each party and customary Closing condition.

The Closing conditions include, but are not limited to, (i) the Company’s receipt of a fairness opinion from a reputable financial advisor to the Company which concludes that the Purchase Price is fair to the stockholders of the Company.

(ii) delivery of all required governmental approvals, including approval and satisfaction of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;

(iii) fully executed copies of all consents required under any contract or agreement of the Company or Sellers, as applicable, in connection with the transactions contemplated by the Endeavor MIPA, and (iv) resignation letters of Acquirees’ officers, directors and managers, as applicable;

In conjunction with the Closing, the Shared Services Agreement dated August 1, 2022, by and among Endeavor, Silver Fuels Delhi LLC, a Louisiana limited liability company (“SFD”), and White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”), and the Company, will be terminated.

In conjunction with the Closing, the August 1, 2022 Master Netting Agreement among the Company, Sellers, Endeavor, SFD, WCCC and White Claw Crude, LLC, a Texas limited liability company, will be amended and restated, in the form filed as Exhibit 10.55 hereto (the “Netting Agreement”) and incorporated by reference herein, to add MEL, SFP and CPE Gathering Midcon, LLC, a Delaware limited liability company and wholly owned subsidiary of MEL (“CPE”), as parties and to update and ratify certain net-out obligations of the parties to the Netting Agreement and procedures for the same.

The Endeavor MIPA contains representations, warranties, covenants and other terms, provisions and conditions that the parties thereto made to each other as of specific dates.

The assertions embodied therein were made solely for purposes of the Endeavor MIPA and may be subject to important qualifications and limitations agreed to by the parties thereto in connection with negotiating their respective terms.

Moreover, they may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties thereto rather than establishing matters as facts.

For the foregoing reasons, no person should rely on such representations, warranties, covenants or other terms, provisions or conditions as statements of factual information at the time they were made or otherwise.

Unless required by applicable law, the Company undertakes no obligation to update such information.

The Sellers and Purchaser will bear their own expenses incurred in connection with the Endeavor MIPA and the transactions therein contemplated whether or not such transactions shall be consummated, including, without limitation, all broker’s fees and fees of their legal counsels, financial advisers and accountants.

Endeavor is an interstate crude oil carrier headquartered in Dallas, Texas and presently operates 132 tractors which are leased from Meridian.

Endeavor presently operates in Texas, Louisiana, Oklahoma, New Mexico, Colorado, and North Dakota.

ET is an active freight carrier which hauls produced water and other water products for the oil industry and operates primarily in Texas.

MEL owns various trucking equipment which it leases directly to Endeavor and/or Endeavor’s independent owner-operators.

CPE operates an approximate 40 mile oil gathering pipeline, and oil storage and logistics facility in Oklahoma.

SFP operates multiple truck pipeline injection stations located in multiple regions of Texas, New Mexico, and North Dakota.

Survival of Representations and Warranties

The representations and warranties, of Sellers contained in the Endeavor MIPA will survive for a period of twelve (12) months following the Closing, except for (i) the Fundamental Representations (as defined in the Endeavor MIPA) which will survive until the expiration of the applicable statute of limitations.

All covenants and agreements of the Sellers contained therein will survive the Closing indefinitely or for the period explicitly specified therein as will claims involving fraud, willful misconduct or intentional misrepresentation on the part of Sellers.

The representations and warranties, of Purchaser contained in the Endeavor MIPA will survive until Closing.

All covenants and agreements of the Purchaser contained therein will survive the Closing indefinitely or for the period explicitly specified therein as will claims involving fraud, willful misconduct or intentional misrepresentation on the part of Purchaser.

Indemnification

Subject to the provisions and limitations set forth in the Endeavor MIPA, from and after the date of Closing, each Seller, severally and not jointly, will indemnify and hold harmless Purchaser and its affiliates (the “Purchaser Indemnified Parties”) from and against any and all Damages (as defined in the Endeavor MIPA) suffered by Purchaser Indemnified Parties resulting from or arising out of (i) any inaccuracy or breach of any of the representations or warranties made by either Seller in the Endeavor MIPA or in any transaction document executed in connection therewith, (ii) any breach or nonfulfillment of any covenants or agreements made by either Seller in the ENDEAVOR MIPA or in any transaction document executed in connection therewith, (iii) any taxes owed by either Seller and any taxes owed by any of the Acquirees for or relating to the period prior to the Closing, (iv) any indebtedness or selling expenses not fully paid by either Seller on the date of Closing or not taken as a reduction to the Purchase Price at the Closing, save and except for indebtedness disclosed on the Endeavor MIPA Disclosure Schedules, (v) any fraud or willful misconduct or intentional misrepresentations or omissions by either Seller (each claim made by the Purchaser Indemnified Parties are hereafter referred to as a “Purchaser Claim”).

Except as set forth in the last sentence of this paragraph, Sellers will not have any liability for indemnification pursuant to the above for any individual Purchaser Claim under clause (i) of the preceding paragraph for which indemnification is provided thereunder unless the amount of all Purchaser Claims arising under clause (i) of the preceding paragraph exceeds fifty thousand dollars ($50,000) in the aggregate (the “Basket Amount”).

Once the amount of all Purchaser Claims arising under clause (i) of the preceding paragraph exceed the Basket Amount in the aggregate, Sellers will be severally and not jointly responsible for the full amount of Purchaser Claims with respect to clause (i) of the preceding paragraph including the Basket Amount.

Notwithstanding the foregoing, the maximum aggregate liability of Sellers for Purchaser Claims under clause (i) of the preceding paragraph, other than Fundamental Representation, and the accounts receivable representations set forth in Section 4.8 of the ENDEAVOR MIPA, will not exceed, in the aggregate, an amount equal to twenty percent (20%) of the Purchase Price.

Furthermore, the maximum aggregate liability of Sellers for Purchaser Claims under the preceding paragraph will not exceed, in the aggregate, an amount equal to the Purchase Price.

The limitations set forth in this paragraph do not apply to any Purchaser Claim related to clauses (iii) through (v) of the preceding paragraph.

Subject to the provisions and limitations set forth in the Endeavor MIPA, from and after the date of Closing, Purchaser will indemnify and hold harmless Sellers, and their respective affiliates (the “Seller Indemnified Parties”) from and against any and all Damages (as defined in the Endeavor MIPA) suffered by Seller Indemnified Parties resulting from or arising out of (i) any breach or nonfulfillment of any covenants or agreements made by Purchaser therein or any document executed in connection therewith, or (ii) any fraud or willful misconduct or intentional misrepresentations or omissions by Purchaser.

The ENDEAVOR MIPA may be terminated and the transactions contemplated thereby abandoned:

(A) by mutual written consent of the parties at any time prior to Closing;

(B) by Purchaser (i) at any time on or before the later of (a) sixty (60) days from the Execution Date or (b) ten (10) business days following Seller’s delivery to Purchaser of the 2023 audited financial statements of the Acquirees for any reason as a result of Purchaser’s ongoing due diligence review of the Acquirees or (ii) at any time prior to Closing, if Sellers materially breach any of their representations, warranties, covenants or agreements contained in the Endeavor MIPA, if such breach would give rise to the failure to satisfy the Closing conditions applicable to Sellers and such breach cannot be cured, or, if curable, has not been cured by the Sellers within fifteen (15) days after Sellers’ receipt of written notice of such breach from the Purchaser;

provided that Purchaser will not have the right to terminate the Endeavor MIPA if Purchaser is then in breach of any of its representations, warranties, covenants or agreements contained in the Endeavor MIPA that would result in the conditions precedent to Closing applicable to Purchaser not being satisfied;

or (C) by Sellers, at any time prior to Closing, if Purchaser materially breaches any of its representations, warranties, covenants or agreements contained in the Endeavor MIPA, if such breach would give rise to the failure to satisfy the Closing conditions applicable to Purchaser and such breach cannot be cured, or, if curable, has not been cured by Purchaser within fifteen (15) days after Purchaser’s receipt of written notice of such breach from the Sellers;

provided that Sellers will not have the right to terminate the Endeavor MIPA if Sellers are then in breach of any of their representations, warranties, covenants or agreements contained in the Endeavor MIPA that would result in the conditions precedent to Closing applicable to Sellers not being satisfied;

The foregoing descriptions of the Endeavor MIPA and the related Exhibits do not purport to be complete and are subject to, and qualified by, the full text of the Endeavor MIPA and the Exhibits, copies of which are filed as Exhibits 2.3, 3.6, 10.53, 10.54 and 10.55 hereto and incorporated herein by reference.

Results of Operations for the Three Months ended March 31, 2024 and 2023

For the three months ended March 31, 2024

and 2023 we realized revenues of $16,021,391 and $15,544,872, respectively, representing an increase of $476,519 or 3.07%.

in revenue is primarily attributed to an average monthly increase in sales for our oil and natural gas liquid sales.

Cost of Revenue

For the nine months ended September 30, 2023, our cost of revenues consisted primarily of costs associated with selling oil and natural gas liquid through the operations from our newly acquired businesses in SFD and WCCC, which were acquired through our business combination which closed on August 1, 2022.

For the three months ended September 30, 2023 and 2022 costs of revenue were $14,766,494 and $10,553,375, respectively, representing an increase of $4,213,119 or 39.92%.

For the nine months ended September 30, 2023 and 2022 costs of revenue were $41,174,082 and $10,553,375, respectively, representing an increase of $30,620,707 or 290.15%.

The increase in the cost of revenue is primarily attributed to the cost of goods sold for our oil and natural gas liquid products realized through the operations from our newly acquired businesses in SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

For the three months ended March 31, 2024, our cost of revenues consisted primarily of costs associated with selling oil and natural gas liquid through the operations from our business in SFD and WCCC.

For the three months ended March 31, 2024 and 2023 costs of revenue were $14,953,254 and $14,031,714, respectively, representing an increase of $921,540 or 6.57%.

The increase in the cost of revenue is primarily attributed to industry oil pricing increases in the cost of goods sold for our oil and natural gas liquid products.

Gross Profit and Gross Margin

For the three months ended September 30, 2023 and 2022 we realized gross profit of $1,546,912 and $1,212,600, respectively, representing an increase of $334,312 or 27.57%.

For the nine months ended September 30, 2023 and 2022 we realized gross profit of $4,274,834 and $1,212,600, respectively, representing an increase of $3,062,234 or 252.53%.

For the nine months ended September 30, 2023, the gross profit increased in proportion to the revenue and costs of revenue related to the purchase and sale of our oil and natural gas liquid products.

For the three months ended March 31, 2024 and 2023 we realized gross profit of $1,068,137 and $1,513,158, respectively, representing a decrease of $445,021 or 29.41%.

The gross profit decreased in proportion to the revenue and costs of revenue related to the purchase and sale of our oil and natural gas liquid products.

Operating Expenses

For the three months ended September 30, 2023 and 2022, we realized operating expenses of $2,292,026 and $3,543,526, which represents a decrease of $1,251,500, or 35.32%.

For the nine months ended September 30, 2023 and 2022, we realized operating expenses of $6,982,754 and $9,023,490, which represents a decrease of $2,040,736, or 22.62%.

The decrease in operating expenses is attributed to the net effect of the following:

For the nine months ended September 30, 2023 and 2022, we realized amortization and depreciation expense of $2,269,445 and $2,053,550, which represents an increase of $215,895 or 10.51%.

The increase in amortization and depreciation expense is primarily attributed to the amortization of our newly acquired contracts and depreciation from our newly acquired property, plant and equipment held by SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

For the nine months ended September 30, 2023 and 2022, we realized an aggregate decrease in sales and marketing expense and general and administrative expense of $2,256,631 or 32.38% due to the net effect of a decrease in stock compensation expense and marketing expenses in 2023.

For the nine months ended September 30, 2023 and 2022, we realized employee stock option expense of $1,260,476 and $2,185,615, which represents a decrease of $925,139, or a 42.33% decrease.

New management and board of director compensation agreements were entered into in June 2022, October 2022, and January 2023.

The new compensation agreements included stock option agreements for $2,096,247 for the nine months ended September 30, 2022 as a result of the previous executive management being significantly undercompensated prior to the underwritten public offering and uplist to Nasdaq in 2022.

In October 2022, our previous CEO resigned and the remainder of his stock options were forfeited.

For the nine months ended September 30, 2023 and 2022, non-qualified stock options for services were $467,409 and $1,172,500, which represents a decrease of $704,991 or 60.13% related to certain stock options with consultants that were forfeited or cancelled in 2022.

For the nine months ended September 30, 2023 and 2022, we realized marketing expense of $2,457 and $360,765, which represents a decrease of $358,308 or 99.32%, which such expenses related to the expenses associated with the uplist to Nasdaq in 2022.

For the three months ended March 31, 2024 and 2023, we realized operating expenses of $2,685,059 and $2,638,030, which represents an increase of $47,029, or 1.78%.

The increase in operating expenses is attributed to the net effect of increased amortization expense related to our leases and our transition in reducing consulting expense to hiring full-time employees.

Interest Expense

For the three months ended September 30, 2023 and 2022, we realized interest expense of $1,345,096 and $512,217, which represents an increase of $832,879, or 162.60%.

For the nine months ended September 30, 2023 and 2022, we realized interest expense of $3,814,253 and $627,163, which represents an increase of $3,187,090, or 508.18%.

The increase in interest expense is mainly attributable to the $28,664,284 in notes payable issued as consideration for our newly acquired entities, SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

The notes accrue interest of prime plus 3% on the outstanding balance of the notes.

Unrealized Gain or Loss on Marketable Securities

For the three months ended September 30, 2022, we reported an unrealized gain of $1,074,290.

For the three months ended September 30, 2023, we reported an unrealized loss of $661,101, which represents a decrease of $1,735,391, or 161.54%.

For the nine months ended September 30, 2022, we reported an unrealized gain of $661,101.

For the nine months ended September 30, 2023, we reported an unrealized loss of $991,652, which represents a decrease of $1,652,753, or 250.00%.

For the three months ended March 31, 2024 and 2023, we realized interest expense of $444,040 and $1,205,669, which represents a decrease of $761,629, or 63.17%.

The decrease in interest expense is mainly attributable to our amendment of our note issued as consideration in the MIPA approved by the shareholders on November 10, 2023.

As the amendment was accounted for as a troubled debt restructuring under ASC 470 – Debt (“ASC 470”) , the note was thus written down to the amount of the undiscounted future cash flows on the note to maturity, and therefore no interest expense is realized for the remainder of the note to maturity.

Unrealized Loss on Marketable Securities

For the three months ended March 31, 2024 and 2023, we reported an unrealized loss of $82,638 and $495,826.

Our marketable securities were considered to be traded on an active market and were accounted for at a fair value based on the quoted prices in the active markets resulting in aggregate unrealized gains or losses as noted above.

The following table sets forth the primary sources and uses of cash and cash equivalents for the nine months ended September 30, 2023 and 2022 as presented below:

September 30,

Gain on Deconsolidation of Subsidiary

In accordance with ASC 810, as of February 15, 2024, we deconsolidated

Vivasphere, Inc.

(Vivasphere), recognizing a gain on deconsolidation of $177,550.

The assets, liabilities, and equity related to Vivasphere

was removed from our financial statements (Note 1), resulting in a gain on deconsolidation.

The following table sets forth the primary sources and uses of cash and cash equivalents for the three months ended March 31, 2024 and 2023 as presented below:

Net cash used in operating activities

$ (1,829,679 )

$ (1,276,123 )

Net cash used in investing activities

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Liquidity and Capital Resources

We have historically suffered net losses and cumulative negative cash flows from operations and, as of September 30, 2023 and December 31, 2022, we had an accumulated deficit of approximately $62.1 million and $55.2 million.

As of September 30, 2023 and December 31, 2022, we had a working capital deficit of approximately $19 million and $3.77 million, respectively.

Subsequent to September 30, 2023 $10 million of the working capital deficit was paid with an issuance of common stock.

As of September 30, 2023 and December 31, 2022, we had cash and cash equivalents of $1,199,097 and $3,182,793, with $181,058 and $81,607 attributed to variable interest entities, respectively.

To date we have financed our operations primarily through debt financing, private equity offerings and our working interest agreements, although on February 14, 2022, 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 net proceeds of $6.2 million, after deducting underwriting discounts, commissions, and other offering expenses.

The Company’s Common Stock began trading on the Nasdaq Capital Market under the symbol “VIVK”.

For the nine months ended September 30, 2023 and 2022, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $7,391,089 and $7,716,919, and our depreciation and amortization of $2,269,445 and $2,053,550.

For the nine months ended September 30, 2023 and 2022, non-qualified stock option expense for services of none and $1,172,500, and stock-based compensation employees of $1,260,476 and $2,185,615 in lieu of using cash.

We also realized interest expense on loans and notes payable of $3,058,522 and $627,163, and an unrealized loss of $991,652 and an unrealized gain of $661,101 on marketable securities as described above.

For the nine months ended September 30, 2023 and 2022, our net cash used in investing activities was mainly attributed to our purchase of equipment of $3,841,589 and $1,807,140 related to the manufacturing of our RPCs and wash plant facilities.

Our net cash provided by our financing activities was mainly attributed to the net effect of the following events:

For the nine months ended September 30, 2023 and 2022, and we received proceeds of $4,499,958 and $3,177,622 related to the issuance of notes and other loans.

We also received proceeds of $6,240,000 from our February 14, 2022 underwritten public offering of 1,600,000 shares of common stock.

For the nine months ended September 30, 2023 and 2022, we paid down notes payable by $482,815 and $534,111 and made distributions to Viva Wealth Fund I, LLC unit holders of $1,020,564 and $593,087.

We have historically suffered net losses and cumulative negative cash flows from operations, and as of September 30, 2023, we had an accumulated deficit of approximately $62.1 million.

As of September 30, 2023 and December 31, 2022, we had a working capital deficit of approximately $19 million and $3.7 million, respectively.

Subsequent to September 30, 2023 $10 million of the working capital deficit was paid with an issuance of common stock.

As of September 30, 2023 we had cash of approximately $1.2 million.

In addition, we have obligations to pay approximately $14.4 million (of which approximately $10 million was satisfied through the issuance of our common stock under the terms of the debt subsequent to September 30, 2023) 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.

We have historically suffered net losses and cumulative negative cash flows from operations, and as of March 31, 2024, we had an accumulated deficit of approximately $67.8 million.

As of March 31, 2024 and 2023, we had a working capital deficit of approximately $37 million and $6.4 million, respectively.

As of March 31, 2024, we have current obligations to pay approximately $20.4 million of debt.

Of the $20.4 million, $15.3 million can be satisfied through the issuance of registered common stock under the terms of the debt.

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 it adequate working capital to finance our day-to-day operations for at least twelve months through November 2024.

Capitalized interest on construction in process was $735,919 and $499,537 for the nine months ended September 30, 2023 and 2022.

As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $767,273 and $744,307, respectively.

During the three months ended March 31,

2024, subject to available cash flows, we continued to develop our technologies, strategy to monetize our intellectual properties

and execute our business plan.

To date we have financed our operations primarily through debt financing, private and public equity

offerings and our working interest agreements.

For the fiscal year 2023 we raised approximately $3 million through debt financings

with individual investors, $2.2 million through a sale lease back agreement, and during the three months ended March 31, 2024,

we raised an additional $3 million through additional debt financing (Note 9).

The Company entered into merger and acquisition

agreements with anticipated closing dates in 2024.

Even though these merger and acquisition transactions are projected to close in

2024 and yield substantial cash flow that may provide adequate working capital to finance its day-to-day operations and current

obligations, these events were not considered probable as of March 31, 2024 because they have not closed as of the date of our

For the three months ended March 31, 2024

and 2023, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $1,910,543 and

$2,817,167, and our depreciation and amortization of $1,009,053 and $784,520.

For the three months ended March 31, 2024 and 2023,

stock-based compensation of $327,985 and none in lieu of using cash.

We also realized interest expense on loans and notes payable of $187,524

and $1,205,669, a decrease (increase) in accounts receivable of ($1,551,490) and $1,191,512, and an increase (decrease) in accounts payable

and accrued expenses of $426,581 and ($1,775,681).

For the three months ended March 31, 2024 and 2023, our net cash used in investing activities was mainly attributed to our purchase of equipment of $1,028,885 and $883,819 related to the manufacturing of our RPCs and our wash plant facilities.

Our net cash provided by our financing activities was mainly attributed to the net effect of the following events:

For the three months ended March 31, 2024

and 2023, and we received proceeds of $3,002,192 and $1,988,797 related to the issuance of notes and other loans.

For the three

months ended March 31, 2023 we also received proceeds from related party notes and loans of $345,000.

For the three months ended

March 31, 2024 and 2023, we paid down notes payable and lease liabilities by $120,662 and $367,727.

For the three months ended

March 31, 2023, we made distributions to Viva Wealth Fund I, LLC (which was deconsolidated later on October 1, 2023) unit

holders of $289,002.

Capitalized interest on construction in process was $318,447 and $237,998 for the three months ended March 31, 2024 and 2023.

There are no further existing firm obligations;

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Contractual Obligations

Our contractual obligations as of September 30, 2023 for finance lease liabilities are for the sale and leaseback of certain land, property, plant, and equipment that were acquired in the closing of our business combination, which acquired SFD and WCCC on August 1, 2022, which leases end in 2025 and 2026.

Finance lease obligations as of September 30, 2023 are as follows:

Our contractual obligations as of September 30, 2023 for operating lease liabilities are for office and warehouse space, which leases end in 2024 and 2025, and a land lease which ends in 2042.

Operating lease obligations as of September 30, 2023 are as follows:

Our contractual obligations as of March 31, 2024 for finance lease liabilities are for the sale and leaseback of certain land, property, plant, and equipment that were acquired in the closing of our business combination, which acquired SFD and WCCC on August 1, 2022, which leases end in 2025 and 2026.

Finance lease obligations as of March 31, 2024 are as follows:

Our contractual obligations as of March 31, 2024 for operating lease liabilities are for office and warehouse space, which leases end in 2024 and 2025, and a land lease which ends in 2042.

Operating lease obligations as of March 31, 2024 are as follows:

Interest Rate and Market Risk

13 unchanged sentences

Critical Accounting Policies & Use of Estimates

There have been no material changes to our critical accounting policies and the use of estimates from these disclosures reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on May 25, 2023.

There have been no material changes to our critical

accounting policies and the use of estimates from these disclosures reported in our Annual Report on Form 10-K for the fiscal year ended

December 31, 2023 filed with the SEC on April 17, 2024.

Quantitative and Qualitative Disclosures about Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis