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Item 2. Management’s Discussion and Analysis

2024-11-19 compared with 2024-08-16 · 144 added, 123 removed, 268 unchanged (50% of the section changed)

26 unchanged sentences

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;

4 unchanged sentences

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 for the year ended December 31, 2023, and as of February 15, 2024 we deconsolidated Vivasphere, Inc.

(Vivasphere), recognizing a gain of $177,550 for the six months ended June 30, 2024.

(Vivasphere), recognizing a gain of $177,550 for the six months ended September 30, 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.

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Currently, our efforts are primarily focused on operating crude oil gathering, storage and transportation facilities, as well as contaminated soil remediation services.

One of our facilities in Delhi, Louisiana sells crude oil in volumes up to 60,000 barrels per month under agreements with a large energy company.

A different facility owns a 120,000 barrel crude oil storage tank near Colorado City, Texas.

The storage tank is presently connected to the Lotus pipeline system and we plan to further connect the tank to major pipeline systems.

One of our facilities in Delhi, Louisiana sells crude under agreements with a large energy company.

A different facility owns crude oil storage tanks near Colorado City, Texas.

The storage tank is presently connected to the Lotus pipeline system and an extension to a major pipeline system is being constructed.

Our soil remediation services specialize in the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and other hydrocarbon-based substances utilizing our Remediation Processing Centers (RPCs).

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Finance Leases

On August 9, 2024, our subsidiary White Claw Colorado City, LLC (“WCCC”), entered into a supplement (“Supplement No.

4”) to an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”).

Under Supplement No.

4, Maxus agreed to finance approximately $2.1 million for the build-out of certain equipment and facilities related to a pipeline extension at our WCCC facility in Texas.

Once the relevant equipment is constructed Maxus will own the addition and we will lease these additions from Maxus under the terms of Supplement No.

Under the terms of the lease, we expect our lease payments to Maxus to be approximately $32,161 per month over four years, with an early buyout option or option at the end of the base term to purchase the wash plant equipment for approximately $374,702 or lease-end option to purchase the facilities for the fair market value.

We anticipate that the lease will commence in the first quarter of 2025.

On June 18, 2024, our subsidiary White Claw Colorado City, LLC (“WCCC”), entered into a supplement (“Supplement No.

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Under the terms of the lease, we expect our lease payments to Maxus to be approximately $58,595 per month over four years, with an early buyout option or option at the end of the base term to purchase the wash plant equipment for approximately $683,000, 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 2024.

We anticipate that the lease will commence in the first quarter of 2025.

As previously disclosed, on May 23, 2023, we entered into a supplement (“Supplement No.

2”) to the Master Agreement Maxus, under which Maxus funded approximately $2.2 million to finance the build-out of other Houston wash plant equipment additions, which such lease was anticipated to commence in the second quarter of 2024.

As of June 30, 2024, we anticipate that this lease will now commence in the fourth quarter of 2024.

As of September 30, 2024, we anticipate that this lease will now commence in the first quarter of 2025.

Under the terms of this lease, we expect our lease payments to Maxus under the supplement to be approximately $57,962 per month over four years, with an early buyout option of approximately $685,000 or lease-end option to purchase the facilities for the fair market value.

Promissory Note with Related Party

previously disclosed, on May 14, 2024, we issued a promissory note, to Ballengee Holdings, LLC, of which our Chief Executive Officer

is the beneficiary, in the principal amount of up to $1,500,000, for which loan advances will be made to the Company as requested.

As previously disclosed, on May 14, 2024, we issued a promissory note, to Ballengee Holdings, LLC, of which our Chief Executive Officer is the beneficiary, in the principal amount of up to $1,500,000, for which loan advances will be made to the Company as requested.

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

intent of the promissory note is to be short term in nature and be repaid in 30 days.

Any amounts that are not repaid in 30 days

will bear interest thereafter at a rate of 11% per annum.

Each advance matures after six months from the date the Company receives

On May 23, 2024, we issued a promissory note to Ballengee Holdings, LLC, of which our Chief Executive Officer is the

beneficial owner, which replaced and rescinded the above referenced note with James Ballengee effective back to May 14, 2024, under

the same terms such that all obligations under the notes are the responsibility of Ballengee Holdings, LLC and the prior note with

James Ballengee is no longer enforceable.

As of June 30, 2024, the balance of this note was $635,150.

The intent of the promissory note is to be short term in nature and be repaid in 30 days.

Any amounts that are not repaid in 30 days will bear interest thereafter at a rate of 11% per annum.

Each advance matures after six months from the date the Company receives the funds.

On May 23, 2024, we issued a promissory note to Ballengee Holdings, LLC, of which our Chief Executive Officer is the beneficial owner, which replaced and rescinded the above referenced note with James Ballengee effective back to May 14, 2024, under the same terms such that all obligations under the notes are the responsibility of Ballengee Holdings, LLC and the prior note with James Ballengee is no longer enforceable.

As of September 30, 2024, the principal and accrued interest balance of this note was $804,150 and $21,274.

Sales Contract with Related Party

During the third quarter of 2024, the Company entered into a Crude Petroleum Sales Agreement with White Claw Crude, LLC (“WC Crude”).

Both the WC Crude Crude Petroleum Sales Agreement and the existing WC Crude Crude Petroleum Supply Agreement(s) are cash net settled at market prices.

Director Appointment

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New Employment Agreement

On June 13, 2024, the Company entered into the New Employment Agreement with Mr.

with respect to the Company’s appointment of Mr.

On June 13, 2024, the Company entered into the New Employment Agreement with respect to the Company’s appointment of Mr.

Nelson as Chief Financial Officer.

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Executive Employment Agreement with Executive Vice President, General Counsel and Secretary

On June 26, 2024 (the “Effective Date”), Vivakor, Inc.

(the “Company”), pursuant to the approval of its Board of Directors (the “Board”), on the recommendation of the Compensation Committee of the Board entered into that certain Executive Employment Agreement with Patrick M.

On June 26, 2024 (the “Effective Date”), Vivakor, Inc., pursuant to the approval of its Board of Directors (the “Board”), on the recommendation of the Compensation Committee of the Board entered into that certain Executive Employment Agreement with Patrick M.

Knapp to join the Company as its Executive Vice President, General Counsel, & Secretary (the “Knapp Agreement”).

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with respect to the Knapp Agreement, as required under Section 5.02(iv) of the Merger Agreement.

New Executive Employment Agreement Vice President, Marketing

On August 22, 2024, we entered into a new executive employment agreement with our Vice President, Marketing.

Pursuant to the new employment agreement, our Vice President, Marketing will receive $200,000 annually (the “Base Salary”), which after the first annual anniversary the Base Salary may increase to $350,000 contingent upon the Company achieving net profitability of $500,000 of all commodity trades by the Vice President, Marketing.

In addition, the employment agreement provides for annual incentive cash and equity compensation of up to $440,000 based on certain performance goals as further set forth therein.

As an inducement to enter into the executive employment agreement, the Vice President, Marketing is entitled to receive a one-time signing grant of Company common stock equivalent in value to $150,000, which are priced per share based on the closing price on the day of such grant (calculated to be 71,090 shares based on the effective date of the executive employment agreement).

The signing bonus has not been issued and is due not later than thirty (30) calendar days after we file an amended Registration Statement on Form S-8 with the Securities and Exchange Commission registering shares under a Long-Term Incentive Plan (“LTIP”), and the shares will only vest as set forth in the LTIP.

Sale of Common Stock

On July 31, 2024, the Company entered into two stock purchase agreement under which the Company agreed to sell an aggregate of 1,300,000 shares of restricted common stock in exchange for $800,000.

On July 26, 2024, the Company entered into a stock purchase agreement under which the Company agreed to sell an aggregate of 67,568 shares of restricted common stock in exchange for $125,000.

On July 26, 2024, the Company entered into a stock purchase agreement under which the Company agreed to sell an aggregate of 1,600,000 shares of restricted common stock in exchange for $800,000.

On September 5, 2024, the Company entered into a stock purchase agreement under which the Company agreed to sell an aggregate of 1,000,000 shares of restricted common stock in exchange for $500,000.

Loan and Security Agreement and Issuance of a Secured Promissory Note

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

Through June 30, 2024, we have repaid $250,000 of principal due under the Note, as well as $220,000 in interest, and still owe $2,750,000 as of June 30, 2024.

Through September 30, 2024, we have repaid $250,000 of principal due under the Note, as well as $220,000 in interest, and still owe $2,750,000 as of September 30, 2024.

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 10.2 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.

On October 31, 2024, entered into a Loan and Security Agreement (the “Loan Agreement”) with the Lender.

Pursuant to the Loan Agreement, the Company issued a secured promissory note (the “Note”) in the principal amount of $3,670,160.77, and the Lenders agreed to provide such term loan to the Company (the “Term Loan”) with maturity on October 31, 2025.

On November 5 and 6, 2024, the Company received the net proceeds from the Term Loan less (i) a 3% origination fee, and (ii) repayment of $2,000,000 in outstanding principal, $68,009 in accrued interest, and a $242,991 prepayment fee pursuant to that certain Loan and Security Agreement dated February 5, 2024, by and between the Company, as borrower thereunder, certain of its Subsidiaries, as guarantors thereunder, and Lender and Agent (the “Previous Cedarview Loan”).

The amounts borrowed under the Loan Agreement will bear interest at a rate per annum of 22%.

As a result, the Company will be obligated to make 12 equal monthly payments of $343,506.42 beginning November 30, 2024.

In the event of any prepayment, the Company shall pay a prepayment premium in the amount of ten percent (10%) of the balance of the Term Loan outstanding prior to such prepayment.

Notwithstanding the foregoing, if and when the Company raises in the aggregate $10,000,000 or more from the sale of its equity in sales (other than in connection with any acquisition, merger, or like transaction), the Company shall immediately offer to prepay the entire outstanding balance of the Term Loan, which offer may be accepted or rejected by the Agent.

In connection with the Loan Agreement, and as additional consideration for the Lender agreeing to loan funds to the Company thereunder, the Company issued an irrevocable letter to its transfer agent (the “Transfer Agent”) to reserve 3,000,000 shares of the Company’s common stock (the “Collateral Securities”) until the Term Loan is repaid in full.

In the event the Term Loan is not paid in full by the Maturity Date, the Agent may instruct the Transfer Agent to issue the Collateral Securities to the Agent, which the Agent may then sell until such time the amounts due under the Term Loan are repaid in full, after which any shares of Collateral Securities remaining shall be returned to the Company.

As a result of the Term Loan, and the use of proceeds of the Term Loan, the Previous Cedarview Loan has been paid in full and the irrevocable letter to the transfer agent regarding the Previous Cedarview Loan has been withdrawn.

Exercise of Stock Option

On September 9, 2024, Al Dali International for Gen.

Trading & Cont.

(“DIC”), exercised its stock option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was originally issued as security to secure repayment of our June 20, 2023 secured promissory note with DIC.

Under the terms of the stock option, DIC used as consideration for the stock option, a reduction of principal and interest under its Note in the amount of $1,179,000.

We are currently analyzing the exercise of the stock option and related issuance of the shares to ensure they complied with the terms of our agreement with DIC.

If we determine the issuance is in line with our agreement with DIC, then any remaining portion of note is anticipated to be paid out of operations of the RPC per the terms of the note agreement as previously disclosed.

Issuance of a Convertible Promissory Notes

On July 5, 2024, the Company received a loan from Ballengee Holdings, LLC, whose beneficial owner is our Chief Executive Officer, in the principal amount of $500,000, and in connection therewith, we agreed to issue 21,552 ($50,000) restricted shares of the Company’s common stock, which is currently accrued in related party accounts payable in stock until the shares are issued.

The loan bears interest at the rate of 10% per annum.

The loan originally matured on December 31, 2024 and was amended on July 19, 2024 to mature on September 30, 2025.

The note allows the holder to convert the outstanding principal and interest due under the note into shares of our common stock at price equal to 90% of the average closing price of our common stock for the previous five (5) trading days prior to the conversion date, with a floor conversion price of $1.00 per share.

The lender may not convert amounts owed under the note if such conversion would cause him to own more than 4.99% of our common stock after giving effect to the issuance, which limitation may be raised to 9.99% upon from the lender.

As of September 30, 2024 the balance of principal and accrued interest was $500,000 and $11,957.

On July 8, 2024, we received a loan from a non-affiliated individual lender in the principal amount $350,000, and in connection therewith, the Company agreed to issue 15,982 ($35,000) restricted shares of the Company’s common stock.

As of September 30, 2024, these shares have not been issued and are accrued for accounts payable.

The loan bears interest at the rate of 10% per annum.

The loan originally matured on December 31, 2024 and was amended on July 19, 2024 to mature on September 30, 2025.

Merger Agreement with Empire

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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.

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Ballengee recused himself from the vote.

Subject to satisfaction of all closing conditions, the acquisitions are anticipated to be completed on or before September 30, 2024.

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 10.8 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 10.11 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 10.12 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;

On October 1, 2024, 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, a Texas limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company, Meridian Equipment Leasing, LLC, a Texas limited liability company, and Silver Fuels Processing, LLC, a Texas limited liability company (collectively, the “Endeavor Entities”) closed the transactions that were the subject of the previously-disclosed Membership Interest Purchase Agreement among them dated March 21, 2024, as amended (the “MIPA”) (the “Closing”).

In accordance with the terms of the MIPA, at the Closing, the Company acquired all of the issued and outstanding membership interests in each of the Endeavor Entities (the “Membership Interests”), making them wholly-owned subsidiaries of the Company.

The Endeavor Entities own and operate a combined fleet of more than 500 commercial tractors and trailers for the hauling of crude oil and produced water.

On a daily basis, the trucking fleet hauls approximately 60,000 barrels of crude oil, tank bottoms, and petroleum wastes, and approximately 30,000 barrels of produced water.

In addition, the Endeavor Entities own and operate a crude oil shuttle pipeline and exclusive connected blending and processing facility in Blaine County, Oklahoma.

The purchase price for the Membership Interests is $120 million (the “Purchase Price”), subject to post-closing adjustments, including assumed debt and an earn-out adjustment, 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 Series A Preferred Stock Certificate of Designations, including, but not limited to, liquidation preference over the Common Stock, the payment of a cumulative six percent (6%) annual dividend per share payable quarterly in arrears in shares of Common Stock (so long as such issuances of Common Stock would not result in the Sellers beneficially owning greater than 49.99% of the issued and outstanding Common Stock), and the Company having the right to convert the Preferred Stock at any time using the stated value of $1,000 per share of Preferred Stock and the conversion price of one dollar ($1) per share of Common Stock.

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

The Company is currently still calculating the reduction in the Purchase Price as a result of Endeavor Entities debt that the Company assumed at Closing.

As a result of the 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 a 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, with such shares of Common Stock 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 entered into 18-month lock-up agreements 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.

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 2.2, 3.2, 10.10, 10.11 and 10.12 hereto and incorporated herein by reference.

Results of Operations for the Three and Six Months ended June 30, 2024 and 2023

For the three months ended June 30, 2024 and 2023 we realized revenues of $16,181,122 and $13,590,638, respectively, representing an increase of $2,590,484 or 19.06%.

For the six months ended June 30, 2024 and 2023 we realized revenues of $32,202,513 and $29,135,510, respectively, representing an increase of $3,067,003 or 10.53%.

The increase in revenue is primarily attributed to an average increase in market prices for our oil and natural gas liquid products since June 30, 2023.

Results of Operations for the Three and nine months ended September 30, 2024 and 2023

For the three months ended September 30, 2024 and 2023 we realized revenues of $15,916,423 and $16,313,406, respectively, representing a decrease of $396,983 or 2.43%.

For the nine months ended September 30, 2024 and 2023 we realized revenues of $48,118,936 and $45,448,916, respectively, representing an increase of $2,670,020 or 5.87%.

The increase in revenue is primarily attributed to an average increase in crude oil product volumes purchased and sold for our oil and natural gas liquid products since September 30, 2023.

Cost of Revenue

For the three and six months ended June 30, 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 June 30, 2024 and 2023, costs of revenue were $15,070,308 and $12,375,874, respectively, representing an increase of $2,694,434 or 21.77%.

For the six months ended June 30, 2024 and 2023, costs of revenue were $30,023,562 and $26,407,588, respectively, representing an increase of $3,615,974 or 13.69%.

The increase in cost of revenues is primarily attributed to an average increase in market prices of for our oil and natural gas liquid inventory purchases since June 30, 2023.

For the three and nine months ended September 30, 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 September 30, 2024 and 2023, costs of revenue were $14,190,073 and $14,766,494, respectively, representing a decrease of $576,421 or 3.90%.

For the nine months ended September 30, 2024 and 2023, costs of revenue were $44,213,635 and $41,174,082, respectively, representing an increase of $3,039,553 or 7.38%.

The increase in cost of revenues is primarily attributed to an average increase in market prices and the Company increased its crude oil product volumes purchases for our oil and natural gas liquid inventory purchases since September 30, 2023.

Gross Profit and Gross Margin

For the three months ended June 30, 2024 and 2023 we realized gross profit of $1,110,814 and $1,214,764, respectively, representing a decrease of $103,950 or 8.56%.

For the six months ended June 30, 2024 and 2023 we realized gross profit of $2,178,951 and $2,727,922, respectively, representing a decrease of $548,971 or 20.12%.

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.

For the three months ended September 30, 2024 and 2023 we realized gross profit of $1,726,350 and $1,546,912, respectively, representing a decrease of $179,438 or 11,60%.

For the nine months ended September 30, 2024 and 2023 we realized gross profit of $3,905,301 and $4,274,834, respectively, representing a decrease of $369,533 or 8.64%.

The decrease in gross profit is related net effect of an average increase in market and transportation costs for oil purchases and an increase in crude oil product volumes purchased and sold of our oil and natural gas liquid products.

Operating Expenses

For the three months ended June 30, 2024 and 2023, we realized operating expenses of $3,963,228 and $2,052,698, which represents an increase of $1,910,530, or 93.07%.

For the six months ended June 30, 2024 and 2023, we realized operating expenses of $6,648,287 and $4,690,728, which represents an increase of $1,957,559, or 41.73%.

The increase in operating expenses is attributed to the net effect of increased stock compensation expense related to new or renewed executive employment and board of director agreements, which issued immediate and vesting stock awards of $591,501, amortization expense of approximately $545,086 related to lease accounting interest, and increased professional services of approximately $571,000 related to merger, acquisition, and corporate governance services.

For the three months ended September 30, 2024 and 2023, we realized operating expenses of $3,684,987 and $2,292,026, which represents an increase of $1,392,961, or 60.77%.

For the nine months ended September 30, 2024 and 2023, we realized operating expenses of $10,333,274 and $6,982,754, which represents an increase of $3,350,520, or 47.98%.

The increase in operating expenses is attributed to the net effect of new executive employment and board of director agreements, which increased employee compensation expense by approximately $1 million, including stock compensation expense related to new or renewed executive employment and board of director agreements, which issued immediate and vesting stock awards of approximately $650,000, amortization expense of approximately $800,000 related to lease accounting interest, and increased professional services of approximately $1 million related to merger, acquisition, and corporate governance services.

Interest Expense

For the three months ended June 30, 2024 and 2023, we realized total interest expense of $479,947 and $1,263,488, which represents a decrease of $783,541, or 97.41%.

For the six months ended June 30, 2024 and 2023, we realized interest expense of $923,987 and $2,469,157, which represents a decrease of $1,545,170, or 62.58%.

For the three months ended September 30, 2024 and 2023, we realized total interest expense of $641,244 and $1,345,096, which represents a decrease of $703,852, or 52.33%.

For the nine months ended September 30, 2024 and 2023, we realized interest expense of $1,565,231 and $3,814,253, which represents a decrease of $2,249,022, or 58.96%.

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.

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Unrealized Loss on Marketable Securities

For the three months ended June 30, 2024 and 2023, we reported an unrealized loss of none and an unrealized gain of $165,275, which represents a decrease of $165,275, or 100%.

For the six months ended June 30, 2024 and 2023, we reported an unrealized loss of $82,638 and $330,551, which represents an increase of $247,193, or 75.00%.

For the three months ended September 30, 2024 and 2023, we reported an unrealized gain of $826,377 and an unrealized loss of $661,101, which represents an increase of $1,487,478, or 225%.

For the nine months ended September 30, 2024 and 2023, we reported an unrealized gain of $743,739 and an unrealized loss of $991,652, which represents an increase of $1,735,391, or 175%.

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.

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

The assets, liabilities, and equity related to Vivapshere 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 six months ended June 30, 2024 and 2023 as presented below:

Net cash used in operating activities

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 nine months ended September 30, 2024 and 2023 as presented below:

September 30,

Net cash provided (used) in operating activities

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 June 30, 2024, we had an accumulated deficit of approximately $71.1 million.

As of June 30, 2024 and 2023, we had a working capital deficit of approximately $38 million and $34.9 million, respectively.

As of June 30, 2024, we have current obligations to pay approximately $20.74 million of debt.

We have historically suffered net losses and cumulative negative cash flows from operations, and as of September 30, 2024, we had an accumulated deficit of approximately $72.8 million.

As of September 30, 2024 and 2023, we had a working capital deficit of approximately $42.5 million and $19 million, respectively.

As of September 30, 2024, we had cash of approximately $687 thousand.

As of September 30, 2024, we have current obligations to pay approximately $24.8 million of debt.

Of the $24.8 million, $13.8 million can be satisfied through the issuance of registered common stock under the terms of the debt.

Approximately $13 million ($9.1 million of unearned revenue $3.9 million in accounts payable (Note 5)) is related to the sale leaseback of our Remediation Processing Unit A & B, wash plant facilities, and our White Claw Colorado City site pipeline extension.

Once construction is completed of these sites, of the $13 million approximately $7.1 million will be financed over eight years and $3.9 million (Note 7) will be financed over four years.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern

As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $94,970 and $744,307, respectively.

During the six months ended June 30, 2024, subject to available cash flows, we continued to develop our technologies, strategy to monetize our intellectual properties and execute our business plan.

As of September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $687,172 and $744,307, respectively.

During the nine months ended September 30, 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 six months ended June 30, 2024, we raised an additional $3.6 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 June 30, 2024 because they have not closed as of the date of our filing.

For the three months ended June 30, 2024 and 2023, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $5,243,781 and $4,739,198, and our depreciation and amortization of $1,997,473 and $1,452,387.

For the six months ended June 30, 2024 and 2023, stock-based compensation of $1,138,052 and none in lieu of using cash.

We also realized interest expense on loans and notes payable of $313,103 and $1,588,689, an increase in accounts receivable of $845,872 and $42,934, and as increase (decrease) in accounts payable and accrued expenses of $2,331,635 and $(111,556).

For the six months ended June 30, 2024 and 2023, our net cash used in investing activities was mainly attributed to our purchase of equipment of $2,176,798 and $2,025,303 related to the manufacturing of our RPCs and our wash plant facilities.

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.

During the nine months ended September 30, 2024, we raised an additional $4.7 million through debt financings and $1.4 million through the sale of common stock.

For the nine months ended September 30, 2024 and 2023, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $6,983,978 and $7,391,089, and our depreciation and amortization of $3,062,416 and $2,269,445.

For the nine months ended September 30, 2024 and 2023, stock-based compensation of $1,626,409 and $1,260,476 in lieu of using cash.

We also realized interest expense on loans and notes payable of $1,115,347 and $3,058,522, an (increase) decrease in accounts receivable of $1,753,918 and ($442,307), and as increase (decrease) in accounts payable and accrued expenses of $1,184,103 and ($929,360).

For the nine months ended September 30, 2024 and 2023, our net cash used in investing activities was mainly attributed to our purchase of equipment of $2,362,898 and $3,841,589 related to the manufacturing of our RPC, wash plant facilities, and a White Claw Colorado City site extension on our pipeline.

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

For the three months ended June 30, 2024 and 2023, and we received proceeds of $3,132,959 and $3,213,666 related to the issuance of notes and other loans.

For the six months ended June 30, 2024 and 2023 we also received proceeds from related party notes and loans of 635,150 and $771,000.

For the six months ended June 30, 2024 and 2023, we paid down notes payable and lease liabilities by $1,415,334 and $601,171.

For the three months ended June 30, 2023, we made distributions to Viva Wealth Fund I, LLC (which was deconsolidated later on October 1, 2023) unit holders of $606,236.

Capitalized interest on construction in process was $656,492 and $589,775 for the six months ended June 30, 2024 and 2023.

For the nine months ended September 30, 2024 and 2023, we received proceeds of $4,669,459 and $4,499,958 related to the issuance of notes and other loans of which$1,304,150 and $776,500 were from related parties.

For the nine months ended September 30, 2024 and 2023, we received proceeds from the sale of common stock of $1,425,000 and none.

For the nine months ended September 30, 2024 and 2023, we paid down notes payable and lease liabilities by $3,954,055 and $782,808, of which $2,150,537 and 482,815 were to related parties.

For the nine months ended September 30, 2023, we made distributions to Viva Wealth Fund I, LLC (which was deconsolidated later on October 1, 2023) unit holders of $1,020,564.

Capitalized interest on construction in process was $1,015,402 and $735,919 for the nine months ended September 30, 2024 and 2023.

There are no further existing firm obligations;

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Contractual Obligations

Our contractual obligations as of June 30, 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 June 30, 2024 are as follows:

Our contractual obligations as of June 30, 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 June 30, 2024 are as follows:

Our contractual obligations as of September 30, 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 September 30, 2024 are as follows:

On August 9, 2024, our subsidiary White Claw Colorado City, LLC (“WCCC”), entered into a supplement (“Supplement No.

4”) to an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”).

Under Supplement No.

4, Maxus agreed to finance approximately $2.1 million for the build-out of certain equipment and facilities related to a pipeline extension at our WCCC facility in Texas.

Once the relevant equipment is constructed Maxus will own the addition and we will lease these additions from Maxus under the terms of Supplement No.

We anticipate that the lease will commence in the first quarter of 2025.

On June 18, 2024, our subsidiary WCCC, entered into a supplement (“Supplement No.

3”) to an existing Master Agreement (the “Master Agreement”) with Maxus.

Under Supplement No.

3, Maxus agreed to finance approximately $1 million for the build-out of certain equipment and facilities related to the wash plant we are in the process of constructing on land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas.

Once the relevant equipment is constructed Maxus will own the equipment and we will lease these additions to our wash plant facility from Maxus under the terms of Supplement No.

Under the terms of the lease, we expect our lease payments to Maxus to be approximately $58,595 per month over four years, with an early buyout option or option at the end of the base term to purchase the wash plant equipment for approximately $683,000 or lease-end option to purchase the facilities for the fair market value.

We anticipate that the lease will commence in the first quarter of 2025.

On May 23, 2023 we entered into a supplement (“Supplement No.

As of September 30, 2024, we anticipate that this lease will now commence in the first quarter of 2025.

Because we were involved in the construction of the wash plant and the Texas pipeline extension, and were responsible for paying a portion of the construction costs, we evaluated the control criteria in ‘build to suit’ lease accounting guidance under GAAP ASC 842 (Leases) where the Company was deemed, for accounting purposes, to have control of the wash plant and pipeline extension during the construction period.

Accordingly, the Company recorded project construction costs incurred during the construction period for the wash plant and pipeline extension incurred by the landlord as a construction-in-process asset and a related financing obligation on our consolidated balance sheets.

The total of the projects’ construction costs have been capitalized and recorded to construction-in-process within ‘Property and equipment, net’.

The total $3.9 million of construction costs funded by Maxus have been recorded as a component of ‘Accounts payable and accrued expenses.

Our contractual obligations as of September 30, 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 September 30, 2024 are as follows:

Interest Rate and Market Risk

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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