Vivakor, Inc 10-K for FY2024
Vivakor, Inc. (VIVK)
About this 10-K
Vivakor, Inc filed this 10-K on April 15, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $89.81M
- up 51.4% from $59.32M a year earlier
- Net loss
- $26.35M
- compared with a net loss of $10.84M a year earlier
- Diluted EPS
- -$0.76
- compared with -$0.56 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the Fiscal Year Ended
or
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| (Address of principal executive office) | (Zip code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The (Nasdaq Capital Market) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
The aggregate market value of the 29,135,547 voting common stock held by non-affiliates of the registrant as of June 30, 2024 was $
As of April 14, 2025, there were shares of registrant’s common stock outstanding.
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that present our current expectations or forecasts of future events. These statements do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under the sections entitled “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this Annual Report on Form 10-K generally. In particular, these include statements relating to future actions, prospective products, market acceptance, future performance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies such as legal proceedings and financial results.
Examples of forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, our expectations regarding our business strategy, business prospects, operating results, operating expenses, working capital, liquidity and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products and services, the cost, terms and availability of components, pricing levels, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us, which in turn are based on currently available information. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.
Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:
| ● | changes in the market acceptance of our products and services; | |
| ● | increased levels of competition; | |
| ● | changes in political, economic or regulatory conditions generally and in the markets in which we operate; | |
| ● | our relationships with our key customers; | |
| ● | adverse conditions in the industries in which our customers operate; | |
| ● | our ability to retain and attract senior management and other key employees; | |
| ● | our ability to quickly and effectively respond to new technological developments; | |
| ● | our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and | |
| ● | other risks, including those described in the “Risk Factors” discussion of this Annual Report on Form 10-K. |
We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this Annual Report on Form 10-K are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.
In this Annual Report on Form 10-K, unless the context otherwise requires, all references to “the Company,” “we,” “our”, “us” and “Vivakor” refer to Vivakor, Inc., a Nevada corporation.
ii
PART I
Item 1 - Business
General
We operate in two main business segments: (i) transportation logistics services and (ii) terminaling and storage facility products and services related to oil and gas production.
Our transportation and facilities services primarily consist of trucking crude oil and produced water and transportation and terminaling services of crude oil via the Omega Gathering Pipeline. Our trucking services are centered in the Permian and Eagle Ford Basins, which are the most active regions for oil and natural gas exploration and development in the United States.1 On average, each new oil well in the Permian Basin produces approximately 1,300 barrels of crude oil or more per day.2 Those same wells produce approximately 10,000 barrels or more of produced water per day3, historically considered a waste product. We utilize one of the largest combined oil and produced water trucking fleet in the United States to transport those products to a fully-integrated network of facilities where we blend various grades of crude oil grades of crude oil, and reuse or dispose of produced water. Access to immediate, flexible, scalable transportation is a vital component of oil and natural gas exploration and development, as is the efficient takeaway, treatment, reuse, and/or disposal of commodities associated with oil and gas production. Transportation and terminaling of crude oil is also conducted utilizing our Omega Gathering Pipeline, which is an approximately forty-five (45) mile integrated crude oil gathering and pipeline in Blaine County, Oklahoma, in the heart of the STACK play. The line is tied into the Cushing, Oklahoma storage hub via the Plains STACK Pipeline. We also own and operate fifteen (15) crude oil pipeline injection truck stations, primarily centered in the Permian Basin.
Our terminaling and storage product and services primary consist of two operational major crude oil terminaling facilities. One is located in Colorado City, Texas, and the other facility is located in Delhi, Louisiana. Both facilities are located at the junction of several major interstate pipelines, receive various grades of crude oil from our customers, and their operations should give our marketing division a key competitive advantage in sales of resulting blends in critical markets once that business is developed. These crude oil terminals are industrial facilities that serve as hubs for the storage, handling and distribution of crude oil and petroleum products.
In addition to our two operating business segments, we plan to perform remediation services utilizing our remediation processing centers (“RPCs”) at some point in the future. We are currently constructing a full-capacity RPC at the San Jacinto River & Rail Park in Harris County, Texas. Once complete, we anticipate the strategically located facility to be capable of processing oilfield solid wastes into economic byproducts such as condensate, propane, and butane. This RPC will feature an adjacent, complimentary truck wash facility from which we expect to derive additional revenue. Last year we moved our other full-capacity RPC to Kuwait, where we are currently in negotiations with the Kuwaiti Oil Company to potentially use the RPC to clean sands contaminated with oil, primarily from oil wells destroyed during the Persian Gulf War.
Our website is www.vivakor.com.
Principal Services
Our Transportation Assets
Through the Endeavor Entities (as defined herein), we 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, our trucking fleet hauls approximately 50,000 barrels of crude oil, tank bottoms, and petroleum wastes, and approximately 31,000 barrels of produced water. In addition, we own and operate a crude oil pipeline and exclusive connected blending and processing facility in Blaine County, Oklahoma. Our oilfield trucking fleet is one of the largest in America, and though we are predominantly located in the Permian and Eagle Ford Basins, we have a presence in most major oil-producing basins. We principally operate in locales with significant petroleum reserves and continuous drilling activity undertaken by high-quality, well-capitalized producers, such as Marathon Oil Company, ConocoPhillips, Phillips 66, BP, Civitas, and others. Our customers consist of a mix of major producers, petroleum marketers, and refiners. We have strategically organized our transportation business around “anchor” station and terminal assets, and utilize multiple entities with federal motor carrier licenses, governmental certificates and approvals to haul hazardous and non-hazardous oilfield commodities, dealership licenses, captive insurance, and fixed-fee maintenance & repair contracts to capture economics generally unavailable to our smaller peers.
| 1 | See: https://www.resilience.org/stories/2024-07-03/the-status-of-u-s-oil-production-2024-update-everything-shines-by-dimming | |
| 2 | See: https://www.eia.gov/petroleum/drilling/ | |
| 3 | See: https://www.aogr.com/magazine/frac-facts/permian-embraces-produced-water-recycling |
1
In addition to crude oil hauling, we own and operate one of the largest produced water trucking fleets in America. Produced water naturally exists in underground formations and is brought to the surface during crude oil and natural gas production throughout the entire life of an oil or natural gas well. When a well is initially brought online, vast quantities of produced water must be reliably transported away in order for these wells to remain in production. The takeaway, recycling, and disposal of produced water require both integrated, flexible logistics and access to disposal wells where volumes of water can be injected and sequestered or facilities where it can be treated and sold for beneficial reuse.
In order to more efficiently manage our respective businesses, we, together with Pilot Water Solutions, LLC (“Pilot”), an affiliate of Berkshire Hathaway-backed portfolio company Pilot Travel Centers LLC, entered into an agreement establishing an Area of Mutual Interest within twenty-five (25) miles of certain of Pilot’s saltwater disposal wells (“SWDs”). In connection therewith, we mutually solicit and work with producers to transport and dispose of produced water at Pilot’s SWDs. This arrangement not only provides “anchor assets” around which our produced water fleet may more reliably obtain freight from premier producers, which we expect to result in additional produced water freight volumes in the Permian and Eagle Ford Basins, but also additional transportation freight revenue for us derived from other Pilot relationships. In 2024, the Endeavor Entities hauled approximately 4.64 million barrels of produced water to Pilot’s SWDs for our shared customers with Pilot.
We also own the Omega Gathering Pipeline, which is an approximately forty (45) mile integrated crude oil gathering and pipeline in Blaine County, Oklahoma, in the heart of the STACK play. The STACK play is tied into the Cushing, Oklahoma storage hub via the Plains STACK Pipeline. The asset principally derives revenue on a fee basis for transportation and terminaling services, and, among other customers, is underpinned by two key agreements: (a) ten (10) year Gathering and Dedication Agreement with Validus Energy II Midcon, LLC, which exclusively dedicates crude oil production across more than 36,000 acres in the STACK play to the Omega Gathering Pipeline, and (b) a ten (10) year Station Throughput Agreement with White Claw Crude, LLC (“WC Crude”) for a minimum volume commitment of 100,000 barrels of crude oil per month. WC Crude is controlled by James Ballengee, our Chief Executive Officer. Our trucking fleet also hauls approximately 1,000 barrels per day into stations located on the Omega Gathering Pipeline originated by our own marketing division and our customers, including White Claw Crude.
In addition, we have a marketing business in the early stages of developing its business. The marketing business has an experienced crude marketing manager and once the business develops we believe it will bolster trucking volumes and help us manage seasonal swings in the trucking business and larger basin-centric drilling trends.
Our Facilities
We own and operate fifteen (15) crude oil pipeline injection truck stations, the majority of which are centered in the Permian Basin. In addition, we have two operational major crude oil terminaling facilities. One is located in Colorado City, Texas, and is underpinned by an Oil Storage Agreement with WC Crude, who shares a beneficiary, James Ballengee (our Chief Executive Officer), with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by our subsidiary, White Claw Colorado City, LLC (“WCCC”). WC Crude is required to pay $150,000 per month even if the storage space is not used. The agreement expires on December 31, 2031. We received tank storage revenue of approximately $1,800,000 for the years ended December 31, 2024 and 2023, respectively. The other facility is located in Delhi, Louisiana. This facility has an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies volumes of crude petroleum to our subsidiary, Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”), which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires on December 31, 2031. For years ended December 31, 2024 and 2023, we have made crude oil purchases from WC Crude of $41,777,857 and $36,740,922, respectively. In addition, SFD entered into a sales agreement on April 1, 2022 with WC Crude to sell a natural gas liquid (NGL) product to WC Crude. SFD sells the NGL stream at a profit to WC Crude. We produced and sold natural gas liquids to WC Crude in the amount of $10,790,417 and $11,268,005 for the years ended December 31, 2024 and 2023, respectively.
2
Both facilities are located at the junction of several major interstate pipelines, receive various grades of crude oil from our customers, and their operations should give our marketing division a key competitive advantage in sales of resulting blends in critical markets once that business is developed. All of our facilities principally obtain volumes from our own trucking fleet or from customer pipelines. At our Colorado City, Texas facility, we are currently constructing a new pipeline connecting to a major intrastate transmission pipeline, which will allow us to blend and market economic barrels (cheaper produced/sourced barrels compared to local competing barrels) to new markets, and which we expect will provide incremental revenue.
In addition, we are currently constructing a RPC, strategically located at the San Jacinto River & Rail Park in Harris County, Texas. Once complete, we expect the facility to be capable of processing oilfield solid wastes into economic byproducts such as condensate, propane and butane. The RPC features an adjacent, complimentary truck wash facility from which we expect to derive additional revenue. We expect the RPC and wash plant to commence operations in the fourth quarter of 2025.
Our Commodities Marketing Business
Our petroleum marketing division principally trades petroleum commodities, including crude oil, natural gas liquids, and related hydrocarbons, around our facilities and utilizing our transportation assets. Marketing activities help us bolster operations, diversify revenue streams, and manage market risk at our facilities, and complement our transportation assets by maximizing utilization and taking advantage of economies of scale.
Our marketing division, Vivakor Supply & Trading, was organized in August 2024 and benefits from certain credit-related contracts with WC Crude, as well as WC Crude’s network of relationships in the midstream industry.
Our Remediation Processing Centers and Wash Plant
Houston, Texas
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 a new facility to be located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. Maxus has funded the entire amount it agreed to pay, approximately $2.2 million, plus additional funding of $2.1 million to finance the build-out of the Houston location, which was done in the form of a finance lease for the wash plant. The Company has contributed $2.7 million to the construction of the facility. We will lease the wash plant facility from Maxus under WCCC’s supplement to the Master Agreement. During the construction phase of this agreement, we control the asset with construction costs funded by Maxus. A third RPC has been manufactured and we are planning on deploying it at this new wash plant facility. We anticipate we will begin trial operations at the Houston facility around the fourth quarter of 2025. We will need to raise additional funds in order to complete the buildout of the Houston facility.
Kuwait
We presently plan to utilize our first two manufactured RPCs in Kuwait. We are currently negotiating with the Kuwait Oil Company (KOC) to potentially perform soil remediation services using our RPCs for the Kuwait Environmental Remediation Project (KERP), which is a multi-billion dollar project funded by the United Nations (UN) to clean up the oil that was spilled during the Gulf Wars and still polluting the desert. Our smaller-capacity RPC conducted trials in Kuwait to show the effectiveness of the RPC technology. The polluted material contained as little as 7% oil by weight and as much as 18% oil by weight. All trials were overseen by Enshaat Al Sayer (Enshaat), the main contractor with KOC for the project, Al Dali International for Gen. Trading & Cont. Co. (“DIC”) and KOC itself. In all of the trials, the RPC successfully reduced the oil content in the soil to as little as 0.02% which led to us receiving a Category A approval. It is our understanding that we are the only technology that has been able to process soil with 18% oil to under 1% oil (we were at 0.02% oil) and receive a Category A certification. We do not know if we will be successful in entering into an agreement with KOC to perform soil remediation services on the KERP, and if we are, when those services would begin. During 2023, we entered into an agreement to move our Vernal RPC to Kuwait to commence scaled up remediation services, as the Vernal plant was not producing product toward its off-take agreement, which further delayed our anticipated operations. Furthermore, in the fourth quarter of 2023, Enshaat (the original contractor chosen for the remediation of certain cleanup for the Kuwait Environmental Remediation Project (KERP) notified us that it terminated its subcontract with DIC, which effectively terminated DIC’s prior contract with us. We continue to negotiate the terms for an agreement directly with Kuwait Oil Company for the remediation services on the KERP. At December 31, 2024, we evaluated these events and determined that our inability to obtain a new agreement with Enshaat or Kuwait Oil Company to work on the KERP in 2024 was a trigger event requiring analysis for potential impairment. While we believe we will enter into an agreement with Kuwait Oil Company at some point, we cannot ensure an agreement will be executed and, therefore, have assessed an impairment loss of the assets related to our Kuwait RPCs of $7,047,179 for the year ended December 31, 2024. Additionally, we assessed the impact of the impairment loss, including the impact on our ancillary agreements. Ancillary to our prospective Kuwait RPC operations, we had an exclusive license agreement for the development and use of a nanosponge technology and have assessed an impairment loss of the nanosponge license of $1,530,496 for the year ended December 31, 2024.
3
Market Opportunity
Transportation logistics Services
On October 1, 2024, as part of the Endeavor Entities acquisition, we acquired several special purpose entities operating as an integrated trucking fleet providing crude oil and produced water transportation logistics services. The fleet is anchored by key customers in the Permian and Eagle Ford basins, including a take-or-pay contract with WC Crude. We are presently seeking additional acquisition or development opportunities within the traditional midstream oil and gas sector which are complementary to our existing facilities which provide us with an opportunity to capture more of the energy value chain. Specifically, we are looking for trucking fleet and/or pipeline injection and storage acquisitions that would allow us to grow market share by controlling more in-basing transportation and pipeline assets with term commitments from marketers and producers.
Facilities Services
Colorado City
In April 2022, we purchased a special purpose entity that owns and operates a crude oil terminaling facility in Colorado City, Texas, at the junction of two major interstate pipelines outbound from the Permian Basin to key markets in Cushing, Oklahoma and Houston, Texas. The facility provides crude oil blending, processing, remediation, storage, and transportation logistics services and is anchored by a long-term take-or-pay contract with WC Crude.
Delhi
In April 2022, we purchased a special purpose entity that owns and operates a crude oil terminaling facility in Delhi, Louisiana, Texas, which is supported by long-term marketing contracts with Denbury Onshore, LLC, a subsidiary of ExxonMobil Oil Corporation, and WC Crude. The facility provides crude oil blending, processing, remediation, storage, and transportation service and is connected to Denbury facilities via pipeline.
Houston
We secured a site location to mobilize, commission, and operate the Company’s RPC technology, which is anticipated to be on the land lease we entered into in December 2022 for approximately 3.5 acres of land in Houston, Texas (commonly known as The San Jacinto River & Rail Park). The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months. We are in the process of obtaining the required state and local permits, which are prerequisites to us being able to commence quality control testing with our RPC. After the RPC is set up and tested in Houston, Texas we intend to begin trial operations, currently planned for the fourth quarter of 2025.
Kuwait
As noted above, we are currently negotiating with the Kuwait Oil Company (KOC) to potentially perform soil remediation services using our RPCs in Kuwait for the Kuwait Environmental Remediation Project (KERP). The United Nations (UN) had allocated up to $14.7 billion for post-Iraq war reparations in order to clean up Kuwait. Kuwait suffered extensive contamination as a result of the 1991 Persian Gulf War. The oil recovered from these projects in Kuwait is considered a sovereign asset, so the ability to reclaim this asset also creates a social value for the country. Due to the timeline outlined by the U.N. to remediate all of the contaminated sand exhibiting greater than 7% contamination, we are hopeful we can arrange further agreements through KOC to utilize our technology in Kuwait.
Truck Stations
On October 1, 2024, as part of the Endeavor Entities acquisition, we acquired a network of fifteen (15) truck-to-pipeline injection stations located on key interstate pipelines to major crude oil markets, principally in the Permian Basin. These stations are strategically located near core production areas and provide crude oil blending, processing, remediation, and pipeline injection services. They are connected to key interstate and intrastate pipelines serving Cushing, Oklahoma, Houston, Texas, and other markets.
4
Our Technologies
Our transportation, terminaling and storage operations are not reliant on unique technologies.
We do own and/or license a number of technologies that we believe will allow us to effectively operate our remediation and recovery business if we get the RPCs into operations. These technologies include: (i) two U.S. patents and pending foreign applications related to remediating contaminated soil and recovering usable hydrocarbons, (ii) automation software enabling us to maximize efficiencies in our RPCs by ultimately allow us to remotely operate the RPCs twenty-four hours a day from anywhere around the world, and (iii) a license that will enable us to upgrade the hydrocarbons recovered from our remediation process. Since we were anticipating testing this license with our RPCs in Kuwait the licenses have been fully impaired on our financial statements for the year ended December 31, 2024 since we fully-impaired our RPCs in Kuwait on our financial statements for that period.
Competitive Strengths
Transportation and Facilities
We offer our customers a streamlined commercial process and fully-flexible last-minute logistics through agreements that provide immediate revenue and establish long-term relationships. Our customers actively seek to enter into agreements to use our trucking and facility resources because of our strategic locations, key remediation and reuse abilities, and locations in the core of the Permian and Eagle Ford Basins. Consequently, we believe that we are well situated to receive favorable terms from our customers. Additionally, as our customers conduct development activities they install additional infrastructure, such as solids processing and water reuse infrastructure. This additional infrastructure provides the opportunity for us to attract additional customers who can take advantage of that infrastructure to pursue new commercial opportunities that drive increased use of our trucking fleet and facilities and generate incremental revenue for us.
Our customers use our trucking and terminal resources in a variety of ways, including for:
| ● | The transportation of petroleum and waste commodities, including tank bottoms and produced water; | |
| ● | The blending, processing, and remediation of crude oils, tank bottoms, and waste products to more economic grades accepted by the market; | |
| ● | The transportation, disposal, and beneficial reuse of produced water; and | |
| ● | General resource management, including scavenging, recovering, and making economic volumes of waste products used by the foregoing. |
Our transportation and facilities revenue is primarily generated from recurring transportation freight, long-term facilities contracts, and marketing activities around the same assets from customers who use and rely upon our assets and facilities to operate their own businesses. Additionally, the contracts underlying our fee-based revenue streams generally include inflation escalators and, when combined with our relatively low operating and capital expenditure requirements, position us to generate the opportunity for superior free cash flow growth over time relative to other inflation-exposed businesses that incur significant operating costs and capital expenditures.
Our management team also provides us with a competitive edge as it has a more than seventy combined years of executive experience in the energy industry, with a proven history of value creation. Notably, our management team has grown the Endeavor Entities into one of the largest crude oil and produced water midstream flexible logistics companies in the United States.
Growth Strategies
Transportation and Facilities
Our principal business objective is maximizing risk-adjusted total return to our shareholders by growing free cash flow. We intend to pursue the following business and growth strategies to achieve this objective.
5
Actively manage our trucking fleet to grow existing revenue stream and drive new activity while minimizing capital expenditures.
Since we acquired our Colorado City, Texas and Delhi, Louisiana facilities in August 2022, we have grown our contracted revenue base while investing minimal capital in such facilities, resulting in an increase in revenue.
Although we have made considerable progress in increasing our revenue, we believe that our facilities remain underutilized and underdeveloped, with significant opportunities for growth from marketed volumes and third-parties. We target opportunities that make the most efficient use of our assets, utilize an integrated approach to trucking and facilities, resulting in interconnected revenue streams. Accordingly, we are in frequent communication with existing and potential customers with respect to creating new, and enhancing existing, revenue streams from our assets. We seek to provide a holistic solution and expect to require our customers, when possible, to use our transportation and facility assets to meet their needs for petroleum and produced water transportation and handling, marketing of petroleum commodities, the sale of remediated or reusable commodities.
Maintain and deepen integration between our crude oil facilities, trucking fleet, and marketing business.
A key goal of our marketing division is to maximize facility and transportation asset usage to take advantage of economies of scale and asset integration. Our trucking fleet delivers volumes principally to our own facilities or those of our partners, such as Pilot, which has a stabilizing effect on our revenues while driving down per barrel costs.
Increase Connectivity and Production at SFD and WCCC Facilities.
We plan to grow our crude oil gathering, storage and transportation business by pursuing the following strategies:
| ● | Increasing the number of barrels of oil gathered, stored, and transported pursuant to our existing long-term contracts; | |
| ● | Construction of wash plant facilities for oil transportation trucks to gather, store and transport reclaimed oil from these facilities; | |
| ● | Acquisition of additional gathering, storage, and transportation assets or companies; and | |
| ● | The development or acquisition of complementary midstream oil and gas companies or projects. |
WCCC operates a 120,000 barrel crude oil storage tank, in the heart of the Permian Basin, located near Colorado City, Texas. We intend to further connect the tank to major pipeline systems.
SFD operates a crude oil gathering, storage, and transportation facility, which is presently gathering and selling approximately 1,400 to 2,000 barrels of crude oil on a daily basis. We plan to increase operations at the SFD facility. This facility has the capacity to gather and sell up to 4,000 barrels of crude oil per day.
Other Holdings
Historically, as part of our strategy to find and invest in technologies that might develop synergies with our existing businesses, we have invested in other companies and/or entities. Not all of our investments to date have developed into complementary technologies and/or businesses, but with our management’s assistance, many of them have still become successful and accretive to our Company’s value. Over time, we intend to divest our ownership of companies that are not synergistic with our business.
Scepter Holdings
We currently hold 826,376,882 (approximately 13.8% of the outstanding common) shares of Scepter Holdings, Inc. (OTC Markets: BRZL), a company that manages the sales and development of consumer-packaged goods. Our holdings of 826,376,882 common shares have a market value of approximately $1,983,305 as of April 7, 2025.
6
Future Products; Research and Acquisition
We intend to identify, develop or acquire products and/or services with a primary focus on the petroleum, mining and minerals, and alternative energy industries. Our general approach is to select products or services that are at or near commercial viability, or that we believe can be substantially developed for commercialization. We then negotiate agreements to either acquire or to provide secured loan financing to these companies to complete their development, testing and product launches in exchange for control of, or a significant ownership interest in, the products or companies.
History
We were originally organized on November 1, 2006 as a limited liability company in the State of Nevada as Genecular Holdings, LLC. The name was changed to NGI Holdings, LLC on November 3, 2006. On April 30, 2008, we converted to a Nevada corporation and changed our name to Vivakor, Inc. pursuant to Articles of Conversion filed with the Nevada Secretary of State.
On August 1, 2022, we acquired all of the issued and outstanding membership interests in each of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”), White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) (the “Membership Interests”), making SFD and WCCC wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $32.9 million, after post-closing adjustments, and was paid to the Sellers in a combination of 3,009,552 shares of our common stock, par value $0.001 per share valued at an aggregate of $4,287,655, secured three-year promissory notes in the aggregate principal amount of $28,664,284, and the assumption of certain liabilities of SFD and WCCC. The sellers are beneficially owned by our now chairman, chief executive officer and principal shareholder, James Ballengee.
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The final purchase price is $116.3 million (the “Purchase Price”), after post-closing adjustments, including assumed debt and a performance adjustment, payable in a combination of our common stock, $0.001 par value per share (“Common Stock”) and shares of our Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The Preferred Stock has 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 great 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, our chairman, chief executive officer and principal shareholder. To date we have issued the sellers 6,724,291 shares of our common stock and 107,789 shares of our Series A Preferred Stock
We have the following direct and indirect wholly-owned or majority-owned active subsidiaries: Endeavor Crude, LLC, a Texas limited liability company (since October 1, 2024), and Silver Fuels Processing, LLC, a Texas limited liability company (since October 1, 2024), Meridian Equipment Leasing, LLC, a Texas limited liability company (since October 1, 2024), which owns CPE Gathering Midcon, LLC, a Delaware limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company (since October 1, 2024), which owns ET EmployeeCo, LLC, a Pennsylvania limited liability company, Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, Vivaventures Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a Utah corporation, Vivakor Supply & Trading, LLC, a Texas limited liability company, Vivakor Administration, LLC, a Texas limited liability company, Vivakor Midstream, LLC, a Texas limited liability company, Vivakor Operating, LLC, a Texas limited liability company, Vivakor Transportation, LLC, a Texas limited liability company, and VM Facilities, LLC, a Texas limited liability company. 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. 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 non-controlling interest investment from VivaOpportunity Fund, LLC, which is also managed by VivaVentures Management Company, Inc.
7
Regulations Affecting our Business
Our business is subject to federal, state and local laws, regulations and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Exploration and exploitation activities are also subject to federal, state and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of exploration methods and equipment. Environmental and other legal standards imposed by federal, state or local authorities are constantly evolving, and typically in a manner which will require stricter standards and enforcement, and increased fines and penalties for noncompliance. Such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages that we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Unknown environmental hazards may exist at our facilities, or we may acquire properties in the future that have unknown environmental issues caused by previous owners or operators, or that may have occurred naturally.
We are subject to actions taken by the federal or state governments, such as executive orders, tariffs on imported goods and commodities, or new or expanded regulations, that may impact future energy production in the U.S. Our business and revenues are also sensitive to changes in laws and regulations (or the interpretation thereof) related to hydraulic fracturing, accessing water, disposing of wastewater, transferring produced water, interstate brackish water transfer, carbon pricing, pipeline construction, taxation or emissions, leasing, permitting or drilling and various other environmental matters. These actions may affect the price or and demand for the transportation, facility, and marketing services we offer. Likewise, any acceleration of the domestic and/or international transition to a low-carbon economy as a result of the Inflation Reduction Act, Pub. L. 117-169, or due to other law, may impact the price of and demand for our services.
Failure to comply with applicable federal, state, local or foreign laws or regulations could subject our company to enforcement action, including product seizures, recalls, withdrawal of marketing clearances and civil and criminal penalties, any one or more of which could have a material adverse effect on our company’s businesses. We believe that our company is in substantial compliance with such governmental regulations.
Intellectual Property
We own four issued US patents and two pending international PCT patent application covering our propriety technology, specifically:
| ● | US Patent 7,282,167 for methods for producing nano-scale particles by vaporizing raw material and then cooling the vaporized raw material using a cooling gas, granted October 16, 2007 and expiring July 23, 2025; | |
| ● | US Patent 9,272,920 for methods for producing ammonia by mixing a first catalyst including a millimeter-sized, granular, ferrous material and a promoter and a second catalyst including discrete nano-sized ferrous catalyst particles that comprise a metallic core with an oxide shell and then reacting hydrogen and nitrogen in the presence of the mixture, granted March 1, 2016 and expiring November 7, 2028; | |
| ● | US Patent 10,913,903 for SYSTEM AND METHOD FOR USING A FLASH EVAPORATOR TO SEPARATE BITUMEN AND HYDROCARBON CONDENSATE granted February 9, 2021 and expiring August 28, 2039; | |
| ● | US Patent 7,282,167 for US Patent 10,947,456 for SYSTEMS FOR THE EXTRACTION OF BITUMEN FROM OIL SAND MATERIAL granted on March 16, 2021 to expire on December 3, 2038; and |
8
| ● | Pending Kuwait application KW/P/2020/000111 relating to systems and processes for extracting bitumen from oil sands material which employ a centrifuge and a flash evaporator, pending Kuwait application KW/P/2021/00060 and pending Saudi Arabia patent application 521421341, both relating to systems and processes for recycling condensate that is used to extract bitumen from oil sands material by employing a flash distillation drum and a throttle valve that causes the pressure of a mixture of bitumen and condensate to drop as the mixture is sprayed into the flash distillation drum to thereby vaporize the condensate to separate the condensate from the bitumen. |
Employees
As of the date of this Prospectus, we have approximately 150 employees, consisting of our CEO, CFO, COO, General Counsel, several division presidents and vice-presidents, approximately 60 non-drivers/administrative staff, and over 80 truck drivers, as well as numerous independent contractors. None of these employees are represented by a labor union or subject to a collective bargaining agreement. We have never experienced a work stoppage and our management believes that our relations with employees are satisfactory.
Properties
We currently lease executive office space in Houston, Texas, Dallas, Texas, and Laguna Hills, California. Through our subsidiaries we own (i) approximately 60 acres of land in Frio, Texas, which has an office warehouse facility and yard related to our trucking operations, and (ii) approximately 25 acres of land in Blaine, Oklahoma, related to our crude oil pipeline and exclusive connected blending and processing facility. We also own and operate fifteen (15) crude oil pipeline injection truck stations, located in Texas, New Mexico and North Dakota, as well as two operational major crude oil gathering, storage and transportation facilities located in Colorado City, Texas, and Delhi, Louisiana. We believe these facilities are in good condition but that we may need to expand our leased space and warehouses as business increases.
On December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”) with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months at our discretion. Our monthly rent is $0 for the first three months and then at month 4 it is approximately $7,000 (based on a 50% reduction) and increases to approximately $13,000 in month 7 and then increases annually up to approximately $16,000 per month by the end of the initial term. We plan to place one or more of our RPC machines on the property, as well as store certain equipment.
On October 1, 2024, the Company acquired a lease agreement for land, building, yard and improvements in Monohans, Texas related to operating a trucking yard and shop. Commencing on May 1, 2021, the five-year lease terminates on April 30, 2026.
On October 1, 2024, the Company acquired multiple lease agreements for 10 acres of land, building, yard and improvements in Reeves County, Texas related to operating a trucking yard and shop. Commencing on January 1, 2024, seventeen-month lease terminates on May 31, 2025.
History
We were originally organized on November 1, 2006 as a limited liability company in the State of Nevada as Genecular Holdings, LLC. The name was changed to NGI Holdings, LLC on November 3, 2006. On April 30, 2008, we converted to a Nevada corporation and changed our name to Vivakor, Inc. pursuant to Articles of Conversion filed with the Nevada Secretary of State.
9
On August 1, 2022, we acquired all of the issued and outstanding membership interests in each of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”), White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) (the “Membership Interests”), making SFD and WCCC wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $32.9 million, after post-closing adjustments, and was paid to the Sellers in a combination of 3,009,552 shares of our common stock, par value $0.001 per share valued at an aggregate of $4,287,655, secured three-year promissory notes in the aggregate principal amount of $28,664,284, and the assumption of certain liabilities of SFD and WCCC. The sellers are beneficially owned by our now chairman, chief executive officer and principal shareholder, James Ballengee.
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price is $116.3 million (the “Purchase Price”), after post-closing adjustments, including assumed debt and a performance adjustment, payable in a combination of our common stock, $0.001 par value per share (“Common Stock”) and shares of our Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The Preferred Stock has 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 great 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, our chairman, chief executive officer and principal shareholder. To date we have issued the sellers 6,724,291 shares of our common stock and 107,789 shares of our Series A Preferred Stock The consolidated financial statements of the Endeavor Entities for the nine months ended September 30, 2024 and for the years ended December 31, 2023 and 2022 are attached hereto as Exhibits 99.1 and 99.2.
On February 11, 2025, in order to assist our management in managing our new, combined business operations, we entered into a Consulting Agreement with WSGS, LLC, which has extensive experience in assisting public companies in the energy sector. Under the terms of the Consulting Agreement, we will pay the consultant up to $1.3 million per year, payable in registered shares of our common stock. The Consulting Agreement is for an initial term of one year, with the option for a second year. The principal of WSGS, LLC is also a former officer and director of Empire Diversified Energy, Inc., a Delaware corporation, that Client entered into an Agreement and Plan of Merger (the “Merger Agreement”) with on February 26, 2024, but has not closed, and E-Starts Money Co., a Delaware corporation, which is an investor in our common stock.
We have the following direct and indirect wholly-owned or majority-owned active subsidiaries: Endeavor Crude, LLC, a Texas limited liability company (since October 1, 2024), and Silver Fuels Processing, LLC, a Texas limited liability company (since October 1, 2024), Meridian Equipment Leasing, LLC, a Texas limited liability company (since October 1, 2024), which owns CPE Gathering Midcon, LLC, a Delaware limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company (since October 1, 2024), which owns ET EmployeeCo, LLC, a Pennsylvania limited liability company, Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, Vivaventures Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a Utah corporation, Vivakor Supply & Trading, LLC, a Texas limited liability company, Vivakor Administration, LLC, a Texas limited liability company, Vivakor Midstream, LLC, a Texas limited liability company, Vivakor Operating, LLC, a Texas limited liability company, Vivakor Transportation, LLC, a Texas limited liability company, and VM Facilities, LLC, a Texas limited liability company. 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. 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 non-controlling interest investment from VivaOpportunity Fund, LLC, which is also managed by VivaVentures Management Company, Inc.
10
Legal Proceedings
SRAX, Inc. v. Vivakor, Inc., et al., Case No. 2023CUB014131 (Sup. Ct. Ventura Cty., Cal.—Sept. 18, 2023)—Plaintiff asserts claims for breach of contract for Defendant’s failure to pay Plaintiff for financial technology services. Plaintiff seeks $28,000 in damages, and 173,972 shares of the Company’s common stock for liquidated damages through the date of the Complaint, with further liquidated damages continuing to accrue. Defendant disputes Plaintiff’s claims on grounds that the services were not rendered in accordance with the contract, and that Plaintiff terminated the contract. The Defendant did not timely file an Answer and the Plaintiff moved for a default judgment. Defendant intends to vigorously defend Plaintiff’s claims. Defendant has not reserved anything for this dispute.
Julie Ridenhour Tonroy, as the Personal Representative of the Estate of John Ridenhour, Deceased, v. Endeavor Crude, LLC, et al., Case No. CJ-2024-40, Blaine Cty. Dist. Ct., Okla.—Sept. 24, 2024)—Plaintiff asserts claims of negligence, respondent superior, and wrongful death of decedent related to a motor vehicle accident involving a driver for Endeavor Crude, LLC while operating motor vehicle equipment owned or leased by Meridian Equipment Leasing, LLC, both subsidiaries of the Company, and presently seeks damages in excess of $1,000,000. The case is set for trial in September 2025. Defendants have not reserved anything for this dispute.
Miguel Angel Munoz, et al., v. Endeavor Crude, LLC, et al., No. D-101-CV-2023-02491 (1st Dist. Ct., Santa Fe Cty., New Mex.—Oct. 11, 2023)—Plaintiff suffered injuries in connection with a motor vehicle accident involving Plaintiff and an Endeavor Crude, LLC (“EC”) driver and tractor-trailer. Plaintiff alleges negligence, respondeat superior, negligent entrustment, hiring, retention, supervision and training, and is presently seeking damages in excess of $2,000,000. Defendant is vigorously contesting the case and has not reserved anything for this dispute. Defendant believes certain costs for the defense and prospective liability are covered by applicable insurance policies.
Misty Kitson, Blaine County Assessor v. Meridian Equipment Leasing, LLC, Case No. EQ-2023-57 (Ct. of Tax Review, Okla.—Aug. 2, 2023)—Plaintiff governmental taxing authority seeks appeal of Defendant’s fair cash value valuation of certain personal property in Blaine County, Oklahoma. Plaintiff seeks a property tax valuation far in excess of Defendant’s valuation, and seeks overdue taxes in excess of $1,126,005.22, plus statutory interest, penalties, and fees. The case is in discovery. Defendant is vigorously contesting the case based on the property’s sale valuation as established by written agreement.
Novella Strmiska v. Endeavor Crude, LLC, et al., Case No. 25-01-00013-CVK (81st Dist. Ct., Karnes Cty., Tex.—Jan. 27, 2025)—Plaintiff alleges breach of contract, trespass to land, trespass to chattels, negligence, and unjust enrichment, seeking damages, interest, attorneys’ fees, and costs of court, in relation to a commercial truck yard lease. Defendants intend to vigorously contest the case based on false invoices.
Mikasa McKnight v. Endeavor Crude, LLC, et al., Case No. 202422195 (190th Dist. Ct., Harris Cty., Tex.—Jul. 2, 2024)—Plaintiff alleges negligence, negligent hiring, negligent entrustment, and respondeat superior relating to a motor vehicle accident involving a tractor-trailer operated under the motor carrier authority of Defendant EC, and seeks damages in excess of $1,000,000. Defendant EC is contesting the case. The case is set for trial on August 4, 2025. Defendant is vigorously contesting the case, and Defendant’s defense and prospective liability are covered by applicable insurance policies.
Echo Contracting, LLC v. CPE Gathering Midcon, LLC, et al., Case No. CJ-2025-73 (Dist. Ct., Blaine Cty., Okla.—Feb. 14, 2025)—Plaintiff Echo Contracting asserted claims of breach of contract, quantum meriut, and foreclosure of mechanics and materialmen’s lien filed in Blaine County against properties of Defendants. Defendants CPE Gathering Midcon, LLC and Vivakor, Inc. settled such claims pursuant to confidential agreement March 28, 2025, and such claims are pending dismissal and such liens are pending release. Co-Defendant Validus Energy II Midcon, LLC prevailed upon a motion to consolidate Case No. CJ-2025-73 with the proceeding. Defendant Validus Energy II Midcon, LLC has levied claims for declaratory judgment, indemnification, contribution, and unjust enrichment against Defendants CPE Gathering Midcon, LLC and Vivakor, Inc. and seeks damages of $431,652.42, plus attorney’s fees.
Gudeil Gonzales, et al. v. Equipment Transport, LLC, et al., Case No. 202508937 (165th Dist. Ct., Harris Cty., Tex.—Feb. 7, 2025)—Lead Plaintiff, a former field employee of ET EmployeeCo, LLC f/k/a PWS EmployeeCo, LLC, asserts claims for negligence, gross negligence, and premises liability in connection with a jobsite injury, and seek damages in excess of $1,000,000, plus interest, fees, and costs. Defendant intends to vigorously contest the suit. Defendant ET has not reserved anything for the dispute.
Vivakor, Inc. v. Al-Dali International General Trading and Contracting Company, et al., Case No. JDFC603 251052410 (Kuwait Court of First Instance, Mar. 25, 2025)—Plaintiff has asserted claims for breach of contract, unjust enrichment, and injunctive relief against Defendants Al-Dali Global Trading and Contracting Company, Al-Sayer Construction General Trading and Contracting Company, and Kuwait Oil Company relating to the placement and operation of oilfield remediation processing equipment in Kuwait.
11
Item 1A - Risk Factors
Risks Related to Our Company
Our revenues are substantially dependent on ongoing oil and natural gas exploration, development and production activity on or around our facilities and in basins in which we have established trucking operations. If exploration and production companies do not maintain drilling, completion and production activities on or around those areas, the demand for the use of our transportation and facilities, as well as the marketing activities and revenue we obtain related to those businesses, could be reduced, which could have a material adverse effect on our results of operations, cash flows and financial position.
We are not an exploration and production company, and we have no control over the oil and natural gas development activity on or around our facilities and assets. The willingness and ability of exploration and production companies to continue development activities on and around our facilities and assets is dependent on a variety of factors that are outside of their and our control, including:
| ● | the demand for and supply of oil and natural gas; | |
| ● | the capital costs required for drilling, completion and production activities, which could be significantly more than anticipated; | |
| ● | the ability to access, and cost of, capital | |
| ● | prevailing oil and natural gas prices; | |
| ● | the availability of suitable drilling equipment, production and transportation infrastructure and qualified operating personnel | |
| ● | the producers’ expected return on investment in wells drilled on or around our land as compared to opportunities in other areas; and | |
| ● | regulatory developments. |
The customer agreements we enter into and the petroleum commodities we sell in the marketplace are substantially dependent on drilling, completion and production activities by exploration and production companies near and around our facilities and transportation assets. Similarly, the revenues we earn from White Claw Crude, LLC (“WC Crude” or White Claw”) are substantially dependent on those same activities. White Claw Crude is controlled by James Ballengee, our Chief Executive Officer and member of our Board of Directors. If exploration and production companies do not maintain such activities near our facilities and transportation assets, their demand for the use of assets and transportation logistics services will decline, negatively impacting our results of operations, cash flows and financial position.
Demand for the use of our assets, as well as the revenues provided by White Claw, depends substantially on capital spending by producers to develop and produce oil and natural gas in the area. These expenditures are generally dependent on such producers’ overall financial position, capital allocation priorities and ability to access capital, and their views of future demand for, and prices of, oil and natural gas. Volatility in oil or natural gas prices (or the perception that oil or natural gas prices will decrease) affects such producers’ capital expenditures and willingness to pursue development activities. This, in turn, could lead to lower demand for the use of our assets and services, delays in payment of, or nonpayment of, amounts that are owed to us and cause lower rates and lower utilization of our transportation assets, facilities, and may negatively impact our marketing activities. For additional information, please see below, The willingness of exploration and production companies to engage in drilling, completion and production activities on and around our land is substantially influenced by the market prices of oil and natural gas, which are highly volatile. A substantial or extended decline in oil and natural gas prices may adversely affect our results of operations, cash flows and financial position.
12
For the year ended December 31, 2024, on an actual basis, we and the Endeavor Entities received approximately 75.76% of our total revenues from two major customers. While we expect these revenue streams to be recurring, our contracts with our significant customers, which represent a large portion of our revenues, typically do not contain minimum volume commitment provisions for transportation or processing of petroleum commodities or produced water volumes handled. As a result, our revenues are dependent on ongoing demand from these customers, which may decrease due to factors beyond our control. Our producer customers make all decisions as to investments in, and production from, their wells, and our revenues are dependent upon decisions made by such producers, among other factors. For example, we cannot control whether a producer chooses to develop a property or the success of drilling and development activities, which depend on a number of factors under the control of such producer. There can be no assurance that such producers will take actions or make decisions that will be beneficial to us, which could result in adverse effects on our results of operations, cash flows and financial position.
The willingness of exploration and production companies to engage in drilling, completion and production activities near our facilities and transportation assets is substantially influenced by the market prices of oil and natural gas, which are highly volatile. A substantial or extended decline in oil and natural gas prices may adversely affect our results of operations, cash flows and financial position.
Market prices for oil and natural gas are volatile and a decrease in prices could reduce drilling, completion and production activities by producers on or around our land, resulting in a reduction in the use of transportation and facilities services, as well as the amount of revenues we receive from marketing activities. The market prices for oil and natural gas are subject to U.S. and global macroeconomic and geopolitical conditions, among other things, and, historically, have been subject to significant price fluctuations and may continue to change in the future. Prices for oil and natural gas may fluctuate widely in response to relatively minor changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control and the control of producers on or around our land, such as:
| ● | general market conditions, including macroeconomic trends, inflation, elevated interest rates and associated policies of the Federal Reserve; | |
| ● | the domestic and foreign supply of and demand for oil and natural gas; | |
| ● | the price and quantity of foreign imports and U.S. exports of oil and natural gas; | |
| ● | market expectations about future prices of oil and natural gas; | |
| ● | oil and natural gas drilling, completion and production activities and the cost of such activities; | |
| ● | political and economic conditions and events domestically, including the U.S. presidential and congressional elections in the fall of 2024 election and any resultant political uncertainty, and in foreign oil and natural gas producing countries, including embargoes, increased hostilities in the Middle East, including Iran, and other sustained military campaigns, the Russia-Ukraine war and associated economic sanctions on Russia, as well as the Israel-Hamas conflict, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; | |
| ● | the ability of and actions taken by members of the Organization of Petroleum Exporting Countries (“OPEC”), Russia and other allied producing countries (together with OPEC, “OPEC+”) and other oil-producing nations in connection with their arrangements to maintain oil prices and production controls; | |
| ● | the impact on worldwide economic activity of an epidemic, pandemic, outbreak of disease, or other public health event; | |
| ● | the level of consumer product demand and efforts to accelerate the transition to a low-carbon economy; | |
| ● | weather conditions, such as winter storms, earthquakes, fires, hurricanes, and flooding, and other natural disasters; |
13
| ● | weather conditions, such as winter storms, earthquakes and flooding, and other natural disasters; | |
| ● | U.S., non-U.S., and foreign governmental regulations and energy policy, including environmental initiatives and taxation; | |
| ● | changes in global and domestic political and economic conditions, both generally and in the specific markets in which we operate; | |
| ● | the effects of litigation; | |
| ● | physical, electronic and cybersecurity breaches; | |
| ● | shareholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas to minimize emissions of carbon dioxide, a global greenhouse gas; | |
| ● | the proximity, cost, availability and capacity of oil and natural gas pipelines and other transportation infrastructure; | |
| ● | technological advances affecting energy consumption, energy storage and energy supply; | |
| ● | the price and availability of alternative fuels; | |
| ● | the impact of energy conservation efforts. |
These factors have at times resulted in, and may in the future result in, a reduction in global economic activity and volatility in the global financial markets and make it extremely difficult to predict future oil and natural gas price movements with certainty. A sustained decline in oil and natural gas prices may reduce the amount of oil and natural gas that can be produced economically by producers on or around our land, which may reduce such producers’ willingness to develop such land and hire our transportation assets and facilities services. Producers near or around our transportation assets and facilities could also determine during periods of low oil and natural gas prices to shut-in or curtail production from wells on such land, or plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices. The scale and duration of the impact of these factors cannot be predicted but could lead to an increase in our customers’ operating costs or a decrease in our or our customers’ revenues, and any substantial decline in the price of oil and natural gas or prolonged period of low oil and natural gas prices may materially and adversely affect our results of operations, cash flows and financial position.
We may not be successful in pursuing additional commercial opportunities for our facilities and transportation assets.
Future growth may place strains on our resources, possibly negatively affecting our results of operations, cash flows and financial position. Our ability to grow will depend on a number of factors, including:
| ● | investment by our customers in drilling and development area in our core areas of operations; | |
| ● | the amount of produced water use and associated prices for such produced water; | |
| ● | future and existing limitations imposed by law or environmental regulations; | |
| ● | oil and natural gas prices; | |
| ● | our ability to develop existing and future projects, including petroleum and produced water processing facilities; | |
| ● | our ability to identify and acquire accretive acquisitions; |
14
| ● | our ability to continue to retain and attract skilled personnel; | |
| ● | our ability to maintain or enter into new relationships with customers; and | |
| ● | our access to, and cost of, capital in the event we pursue future acquisitions. |
We may also be unable to make attractive acquisitions, which could inhibit our ability to grow, or we could experience difficulty commercializing any acquired assets or facilities. It may be difficult to identify attractive acquisition opportunities and, even if such opportunities are identified, our existing and/or future debt agreements contain, or may contain, limitations on our ability to enter into certain transactions, which could limit our future growth.
Our construction of new facilities and infrastructure and successful execution upon our growth plans is subject to regulatory, construction, supply chain and other risks common in the development and operation of facilities and other infrastructure.
We intend to grow our business through revenues and contracts tied to newly-constructed facilities. Facility construction projects involve numerous regulatory, environmental, political and legal uncertainties, including political opposition by environmental groups, local groups and other advocates. Such opposition can take many forms, including the delay or denial of required governmental permits, organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings related to our permitting efforts or otherwise involving their assets, or lawsuits or other actions designed to prevent, disrupt or delay the operation of our assets or their business. There can be no assurance that such infrastructure will be developed at all or that we will complete these projects on schedule or at an economical cost, and we may not realize the anticipated benefits of such projects.
We may also encounter technical difficulties during the construction of such infrastructure leading to a reduction in capacity or a shorter useful life. Moreover, we may undertake expansion projects to capture anticipated future growth that does not materialize or for which they are unable to acquire new customers. As a result, the new facilities and infrastructure developed by us may not be able to attract enough demand to achieve their expected investment return, which could materially and adversely affect our results of operations, cash flows and financial position.
In addition, acts of sabotage or eco-terrorism could cause significant damage or injury to people, property or the environment or lead to extended interruptions of operations. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits our customers require to conduct their operations to be withheld, delayed or burdened by requirements that restrict our customers’ ability to profitably conduct their business. Any such event that delays or otherwise interrupts the revenues generated by our operations, or which causes us to make significant expenditures not covered by insurance, could adversely affect our revenue in respect of use of existing transportation and facilities assets as well as our future development of facilities.
Technological advancements in connection with alternatives to hydraulic fracturing could decrease the demand for our produced water sales and the Endeavor Entities’ produced water transportation and handling operations.
Wide-scale development of techniques to recycle produced water for use in completion activities or otherwise could adversely affect the amount of produced water transported to and handled by our transportation fleet, which could materially and adversely affect our results of operations, cash flows and financial position. Some exploration and production companies are focusing on developing and utilizing non-water fracturing techniques, including those utilizing propane, carbon dioxide or nitrogen instead of water. If producers in the Permian and Eagle Ford Basins begin to shift their fracturing techniques to waterless fracturing in the development of their wells, our produced water transportation business could be materially and negatively impacted.
15
Our RPC services will be at an early operational stage after operations commence, and the success of these services is subject to the substantial risks inherent in the establishment of a new business venture.
Our RPC services will be in an early operational stage after operations commence, and our initial operations will focus on the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and hydrocarbon-based substances. Thereafter, we plan for the second stage of our operational strategy related to our RPCs, which involves the selling the asphaltic cement and/or other petroleum-based products we are able to produce from the hydrocarbons we recover.
Our services related to our RPCs may not prove to be successful. We currently have two RPCs in Kuwait but neither are presently engaged in remediation operations and we have fully-impaired the value of these two RPCs in our financial statements as of December 31, 2024. We will need to deploy these two RPC and scale our remediation business beyond these two RPCs and demonstrate that our scaled-up recovery and remediation business can be profitable. Any future success that we may enjoy related to our RPC business will depend on many factors, some of which may be beyond our control, and others which cannot be predicted at this time.
We have historically suffered net losses, and we may not be able to sustain profitability.
We had an accumulated deficit of approximately $99 million as of December 31, 2024, and we expect to continue to incur significant development expenses in the foreseeable future related to the completion of the development and commercialization of our sites and products. As a result, we are incurring operating and net losses, and it is possible that we may never be able to sustain the revenue levels necessary to achieve and sustain profitability. If we fail to generate sufficient revenues to operate profitably on a consistent basis, or if we are unable to fund our continuing losses, you could lose all or part of your investment.
Our financial condition casts doubts about our ability to continue as a going concern.
As a result of our financial condition, there is uncertainty regarding our ability to continue as a going concern. To that end, our independent registered public accounting firm for our financial statements for the year ended December 31, 2024 has included an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively balance many factors and increase our revenues to a point where we can fund our operations from our sales and revenues. If we are not able to do this, we may not be able to continue as an operating company.
We rely upon a few, select key employees who are instrumental in our ability to conduct and grow our business. In the event any of those key employees would no longer be affiliated with the Company, it may have a material detrimental impact as to our ability to successfully operate our business.
Our future success will depend in large part on our ability to attract and retain high-quality management, operations, and other personnel who are in high demand, are often subject to competing employment offers, and are attractive recruiting targets for our competitors. The loss of qualified executives and key employees, or our inability to attract, retain, and motivate high-quality executives and employees required for the planned expansion of our business, may harm our operating results and impair our ability to grow.
We depend on the continued services of our key personnel, including James Ballengee, our Chief Executive Officer, Tyler Nelson, our Chief Financial Officer, Russ Shelton, our Executive Vice President and Chief Operating Officer, and Pat Knapp, our Executive Vice President, General Counsel & Secretary. Our work with each of these key personnel are subject to changes and/or termination, and our inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.
We may have difficulty raising additional capital, which could deprive us of necessary resources, and you may experience dilution or subordinate stockholder rights, preferences and privileges as a result of our financing efforts.
We expect to continue to devote significant capital resources to fund the continued development of our sites and related technologies, as well as for potential acquisitions. In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through the sale of public or private debt or equity financing or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our common stock and the development or prospects for development of competitive technologies by others. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
16
We expect to obtain additional capital during 2025 through financing structures for our sites. Unless we can achieve and sustain profitability, we anticipate that we will need to raise additional capital to fund our operations while we implement and execute our business plan.
Any future equity financing may involve substantial dilution to our then existing shareholders. Any future debt financing could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. There can be no assurance that such additional capital will be available, on a timely basis, or on terms acceptable to us. If we are unsuccessful in raising additional capital or the terms of raising such capital are unacceptable, then we may have to modify our business plan and/or curtail our planned activities and other operations.
If we raise additional funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue stream or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.
Additionally, we have certain potential dilutive instruments, of which the conversion of these instruments could result in dilution to shareholders: Potential dilutive instruments as of December 31, 2024 include the following: convertible notes payable, which are convertible into approximately 1,044,477 shares of common stock, stock options and vesting or unissued stock awards granted to previous and current employees of 2,038,673 shares of common stock, stock options and vesting or unissued stock awards granted to board members or consultants of 477,809 shares of common stock. The Company also has warrants outstanding to purchase 399,040 shares of common stock as of December 31, 2024.
Our business plan includes operating internationally, which subjects us to a number of risks.
Our strategic plans include international operations, such as our projects in the Middle East. We intend to use our proprietary RPC technology system and develop, construct and potentially sell our RPC system in international locations. Risks inherent to international operations include the following:
| ● | inability to work successfully with third parties having local expertise to co-develop international projects; | |
| ● | multiple, conflicting and changing laws and regulations, including export and import restrictions, tax laws and regulations, environmental regulations, labor laws and other government requirements, approvals, permits and licenses; | |
| ● | difficulties in enforcing agreements in foreign legal systems; | |
| ● | changes in general economic and political conditions in the countries in which we operate, including changes in government incentives relating to oil remediation; | |
| ● | political and economic instability, including wars, acts of terrorism, political unrest, boycotts, curtailments of trade and other business restrictions; | |
| ● | difficulties and costs in recruiting and retaining individuals skilled in international business operations; | |
| ● | international business practices that may conflict with U.S. customs or legal requirements; | |
| ● | financial risks, such as longer sales and payment cycles and greater difficulty collecting accounts receivable; | |
| ● | fluctuations in currency exchange rates relative to the U.S. dollar; |
17
| ● | inability to obtain, maintain or enforce intellectual property rights | |
| ● | fluctuations in oil prices; and | |
| ● | Tariffs and trade wars between countries. |
Failure to effectively manage our expected growth could place strains on our managerial, operational and financial resources and could adversely affect our business and operating results.
Our expected growth could place a strain on our managerial, operational and financial resources. Further, if our subsidiaries’ businesses grow, then we will be required to manage multiple relationships. Any further growth by us or our subsidiaries, or any increase in the number of our strategic relationships, will increase the strain on our managerial, operational and financial resources. This strain may inhibit our ability to achieve the rapid execution necessary to implement our business plan and could have a material adverse effect on our financial condition, business prospects and operations and the value of an investment in our company.
We have identified material weaknesses in our internal control over financial reporting. Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires that we maintain internal control over financial reporting that meets applicable standards. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no assurance that all control issues have been or will be detected. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction and a decrease in our stock price.
We have identified material weaknesses in our internal controls related to the segregation of duties and financial reporting process within our internal controls. As of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that: (1) we did not have enough personnel in our accounting and financial reporting functions. Due to insufficient personnel in our accounting department, we were not able to achieve adequate segregation of duties, and as a result, we did not have adequate review controls surrounding: (i) our technical accounting matters in our financial reporting process, and (ii) the work of specialists involved in the estimation process. (2) Due to new relationships with a small banking institution and consultants in 2023, we were not able to achieve adequate controls surrounding the review and dual authorization of certain treasury transactions and fixed assets. (3) We did not always follow certain review and authorization procedures related to corporate governance and the release of information to the public. After failing to adhere to certain corporate governance administrative procedures, we did not achieve adequate review at the executive or independent Board of Director level over certain accounting and risk assessments or the timely reporting of material transactions. We also did not achieve adequate review of certain public reports and disclosures prior to the public disclosure of the information. We believe we may be able to substantially resolve our identified material weakness in our internal controls in the future as we continue to hire personnel to fulfill the duties related to the financial reporting process and growth in our business. There can be no assurances that weakness in our internal controls will not occur in the future.
If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting (if and when required), we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business, and would have a material adverse effect on our business, financial condition and results of operations.
18
Our business is dependent on the oil industry, which is subject to numerous worldwide variables.
Our prospective customers operate in the oil and gas industry. As a result, we will be subject to the success of the oil and gas industry, which is subject to substantial volatility based on numerous worldwide factors. A decline in the price of crude oil or natural gas will have a material adverse effect on our business, financial condition, results of operations and cash flows. The oil and gas industry is competitive in all its phases. Competition in the oil and gas industry is intense. Our customers could include competitors such as oil and gas companies that have substantially greater financial resources, staff and facilities than those of our customers and lessees. Competitive factors in the distribution and marketing of oil and other hydrocarbon products include price and methods and reliability of delivery.
Within the oil remediation market, demand for our services will be limited to a specific customer base and highly correlated to the oil and gas industry. The oil and gas industry’s demand for equipment is affected by a number of factors including the volatile nature of the oil industry’s business, increased use of alternative types of energy and technological developments in the oil remediation process. A significant reduction in the target market’s demand for oil and gas would reduce the demand for the equipment, which would have a material adverse effect upon our business, financial condition, results of operations and cash flows.
Low oil prices may substantially impact our ability to generate revenues.
Low oil prices may negatively impact our ability to operate. The demand for our products and services depend, in part, on the price of oil and the margins oil producers receive on the sale of oil. Oil prices are volatile and can fluctuate widely based upon a number of factors beyond our control. Any decline in the prices of and demand for oil could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations are subject to unforeseen interruptions and hazards inherent in the oil and gas industry, for which we may not be adequately insured and which could cause us to lose customers and substantial revenue.
Our operations are exposed to the risks inherent to our industry, such as equipment defects, vehicle accidents, fires, explosions, blowouts, pipe or pipeline failures, and various environmental hazards, such as oil spills and releases of, and exposure to, hazardous substances. For example, our operations are subject to risks associated with storage and handling of oil, including any mishandling or surface spillage. In addition, our operations are exposed to potential natural disasters, including blizzards, tornadoes, storms, floods, other adverse weather conditions and earthquakes. The occurrence of any of these events could result in substantial losses to us due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigations and penalties or other damage resulting in curtailment or suspension of our operations. The cost of managing such risks may be significant. The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. In particular, our customers may elect not to purchase our product if they view our environmental or safety record as unacceptable, which could cause us to lose customers and revenues.
Our insurance may not be adequate to cover all losses or liabilities we may suffer. Furthermore, we may be unable to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies have increased and could escalate further. In addition, sub-limits have been imposed for certain risks. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we are not fully insured, it could have a material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to secure additional insurance or bonding that might be required by new governmental regulations. This may cause us to restrict our operations, which might severely impact our financial position.
Additionally, we may not have coverage if we are unaware of the pollution event and unable to report the “occurrence” to our insurance company within the time frame required under our insurance policy. In addition, these policies do not provide coverage for all liabilities, and the insurance coverage may not be adequate to cover claims that may arise, or we may not be able to maintain adequate insurance at rates we consider reasonable. A loss not fully covered by insurance could have a material adverse effect on our financial position, results of operations and cash flows.
19
A substantial portion of our operating assets are located in the Permian and Eagle Ford Basins, making us vulnerable to risks associated with geographic concentration in two geographic areas.
While we have positions in every major oil and natural gas-producing basin in the contiguous lower 48 states, our assets are disproportionately located in the Permian and Eagle Ford Basins of Texas and New Mexico, making us vulnerable to risks associated with geographic concentration in those areas. In particular, we and our customers may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from oil and natural gas wells in this area, availability of equipment, facilities, personnel or services, market limitations, governmental regulation and political activities, processing or transportation capacity constraints, natural disasters, adverse weather conditions, water shortages or other drought related conditions or interruption of the processing or transportation of oil and natural gas. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the South Karnes Trough or the Delaware Basin, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions.
We require a variety of permits to operate our business. If we are not successful in obtaining and/or maintaining those permits it will adversely impact our operations.
Our business requires permits to operate. Our inability to obtain permits in a timely manner could result in substantial delays to our business. In addition, our customers may not receive permitting for our equipment’s specific use and we may be unable to adjust our equipment to meet our customer’s permitting needs. The issuance of permits is dependent on the applicable government agencies and is beyond our control and that of our customers. There can be no assurance that we and/or our customers will receive the permits necessary to operate, which could substantially and adversely affect our operations and financial condition.
We are required to pay permit and approval fees to operate in certain business segments and locations. If we are not able to pay those fees it would adversely impact our business.
We are required to pay various types of permit and approval fees to the applicable governmental and quasi-governmental agencies to operate our business. These fees are subject to change at the discretion of the various agencies. Our inability to pay these permit and approval fees could substantially and adversely affect our operations and financial condition.
We, and our customers and prospective customers, are subject to numerous governmental regulations, both domestically and internationally. In order to operate successfully we must be able to comply with these regulations.
Current and future government laws, regulations and other legal requirements may increase the costs of doing business or restrict business operations. Laws, regulations and other legal requirements, such as those relating to the protection of the environment and natural resources, health, business and tax have an effect on our cost of operation or those of our customers. Such governmental regulation may result in delays, cause us to incur substantial compliance and other costs and prohibit or severely restrict our business or that of our customers, which could have an adverse effect on our business, financial condition, results of operations and cash flows.
We currently depend, and are likely to continue to depend, on a limited number of customers for a significant portion of our revenues related to our operations.
We currently have a limited number of customers for our crude oil gathering, transportation and terminaling services and our RPC services. The failure to obtain additional customers or the loss of all or a portion of the revenues attributable to any current or future customer as a result of competition, creditworthiness, inability to negotiate extensions or replacement of contracts or otherwise could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If our customers do not enter into, extend or honor their contracts with us, our profitability could be adversely affected. Our ability to receive payment for production depends on the continued solvency and creditworthiness of our customers and prospective customers. If any of our customers’ creditworthiness suffers, we may bear an increased risk with respect to payment defaults. If customers refuse to accept our equipment or make payments for which they have a contractual obligation, our revenues could be adversely affected. In addition, if a substantial portion of our contracts are modified or terminated and we are unable to replace the contracts (or if new contracts are priced at lower levels), our results of operations will be adversely affected.
20
Our primary business is impacted by the oil industry and the manufacturing industry, which are subject to uncertain economic conditions.
The global economy is subject to fluctuation and it is unclear how stable the oil industry and the manufacturing industry will be in the future. As a result, there can be no assurance that the business will achieve anticipated cash flow levels. Further, recent world events evolving out of trade disputes, increased terrorist activities and political and military action, and the COVID-19 pandemic, among other events, have created an air of uncertainty concerning the stability of the global economy. Historically, such events have resulted in disturbances in financial markets, and it is impossible to determine the likelihood of future events. Any negative change in the general economic conditions in the United States and globally could adversely affect the financial condition and operating results of the business. We plan to expand our level of operations. Slower economic activity, concerns about inflation or deflation, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns in the general economy and recent international conflicts and terrorist and military activity have resulted in a downturn in worldwide economic conditions, especially in the United States. Political and social turmoil related to international conflicts and terrorist acts may place further pressure on economic conditions in the United States and worldwide. These political, social and economic conditions make it extremely difficult for us to accurately forecast and plan future business activities. If such conditions continue or worsen, then our business, financial condition and results of operations could be materially and adversely affected.
If we are able to begin operations with our RPCs and remediation services we could incur substantial losses from those operations.
In the event we are not able to successfully set up and/or refurbish our RPCs located in Kuwait or obtain a contract for remediation services in the area to be able to operate we could incur substantial losses from those operations and in then having to potentially move the RPCs to another location due to those losses.
Under our agreement with Maxus Capital Group, LLC (“Maxus”), we are building out a facility on land we lease near Houston, Texas and are obligated to pay Maxus approximately $58,000 per month for four years. In the event we are not able to complete the facility and commence remediation operations we could default on our obligation to Maxus, which could cause us substantial losses.
The current Israeli/Hamas conflict could impact our ability to operate in the Middle East in the future.
Any escalation in the current Israeli/Hamas conflict could involve additional Middle East countries and could impact our ability to operate our RPCs located in Kuwait in the future, which could have a material impact on our Middle East projects and our ability to monetize those projects in the future.
We are subject to the significant influence of one of our current officers and directors, and his interests may not always coincide with those of our other stockholders.
James Ballengee, one of our officers and directors, and Chairperson of the Board of Directors, beneficially owns approximately 43.63% of our outstanding Common Stock. As a result, Mr. Ballengee is able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Because the interests of Mr. Ballengee may not always coincide with those of our other stockholders, such stockholder may influence or cause us to take actions with which our other stockholders disagree.
Because a significant portion of our future revenue growth is expected to be derived from WC White Claw, any development that materially and adversely affects their business, operations or financial condition could have a material adverse impact on us.
WC Crude is anticipated to be, among our most significant customers and is expected to play an increasingly important role in our financial performance over the long term. Accordingly, we are indirectly subject to the business risks faced by WC Crude. Because a significant portion of our revenues is derived from WC Crude, any development that materially and adversely affects WC Crude’s businesses, operations or financial condition could have a material adverse impact on us.
In addition, if WC Crude is unable to enter into favorable commodity marketing contracts or to obtain the necessary trade credit on favorable terms, it may not be able to perform its obligations as anticipated, or at all, which could negatively affect our results of operations, cash flows and financial position.
21
We will continue to be subject to competition in both of our business segments.
In the crude oil gathering, storage and transportation business many of our competitors are large tank farm businesses and if one or more of them built storage tanks and/or facilities near our current facilities they could compete with us for business at our current location. As larger companies, they have greater resources than we do to compete for business in our area and may be able to price us out of business.
Our oil remediation equipment utilizes specific technology to extract oil from sand. Oil producers are continually investigating alternative oil production technologies with a view to reduce production costs. In addition, industries that compete with the oil industry, such as the electric power industry, also continue to innovate and create products that compete with the oil industry. There can be no assurance that superior alternative technologies will emerge, which could reduce the demand for and price of our product and services.
The market for our products and services is highly competitive and is becoming more so, which could hinder our ability to successfully market our products and services. We may not have the resources, expertise or other competitive factors to compete successfully in the future. We expect to face additional competition from existing competitors and new market entrants in the future. Many of our competitors have greater name recognition and more established relationships in the industry than we do. As a result, these competitors may be able to:
| ● | develop and expand their product offerings more rapidly; | |
| ● | adapt to new or emerging changes in customer requirements more quickly; | |
| ● | take advantage of acquisition and other opportunities more readily; and | |
| ● | devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can. |
We carry insurance coverage against liabilities for personal injury, death and property damage, but there is no guarantee this coverage will be sufficient to cover us against all claims.
Although, we maintain insurance coverage against liability for personal injury, death and property damage, there can be no assurance that this insurance will be sufficient to cover any such liabilities. We may not be insured or fully insured against the losses or liabilities that could arise from a casualty in the business operations. In addition, there can be no assurance that particular risks that are currently insurable will continue to be insurable on an economical basis or that the current levels of coverage will continue to be available. If a loss occurs that is partially or completely uninsured, we may incur a significant liability.
We may be unable to adequately protect our proprietary rights.
Our ability to compete partly depends on the superiority, uniqueness and value of our intellectual property. To protect our proprietary rights, we will rely on a combination of patents, copyrights and trade secrets, confidentiality agreements with our employees and third parties, and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the value of our intellectual property:
| ● | Our applications for patents relating to our business may not be granted and, if granted, may be challenged or invalidated; | |
| ● | Issued patents may not provide us with any competitive advantages; | |
| ● | Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; | |
| ● | Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we develop; or | |
| ● | Another party may obtain a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products. |
22
We may become involved in lawsuits to protect or enforce our patents that would be expensive and time consuming.
In order to protect or enforce our patent rights, we may initiate patent litigation against third parties. In addition, we may become subject to interference or opposition proceedings conducted in patent and trademark offices to determine the priority and patentability of inventions. The defense of intellectual property rights, including patent rights through lawsuits, interference or opposition proceedings, and other legal and administrative proceedings, would be costly and divert our technical and management personnel from their normal responsibilities. An adverse determination of any litigation or defense proceedings could put our pending patent applications at risk of not being issued.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. For example, during the course of this type of litigation, confidential information may be inadvertently disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. This disclosure could have a material adverse effect on our business and our financial results.
Our operations rely on our ability to transport our equipment to different locations. Any impact on the cost, availability and reliability of transportation could adversely affect our business.
The availability and reliability of transportation and fluctuation in transportation costs could negatively impact our business. Transportation logistics may play an important role in the sale of our products and related services and in the oil industry generally. Delays and interruptions of transportation logistics services because of accidents, failure to complete construction of infrastructure, infrastructure damage, lack of capacity, weather-related problems, governmental regulation, terrorism, strikes, lock-outs, third-party actions or other events could impair the operations of our customers and may also directly impair our ability to commence or complete production or services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The lands on which we conduct our business operations must be properly zoned for our services. If they aren’t then it could impact our business.
The lands on which we conduct our business operations must comply with applicable zoning regulations. Any unknown or future violations could limit or require us to cease operations.
Data security breaches are increasing worldwide. If we are the victim of such a breach it will materially impact our business.
We will collect and retain certain personal information provided by our employees and investors. We intend to implement certain protocols designed to protect the confidentiality of this information and periodically review and improve our security measures; however, these protocols may not prevent unauthorized access to this information. Technology and safeguards in this area are consistently changing and there is no assurance that we will be able to maintain sufficient protocols to protect confidential information. Any breach of our data security measures and disbursement of this information may result in legal liability and costs (including damages and penalties), as well as damage to our reputation, that could materially and adversely affect our business and financial performance.
We may indemnify our directors and officers against liability to us and holders of our securities, and such indemnification could increase our operating costs.
Our bylaws allow us to indemnify our directors and officers against claims associated with carrying out the duties of their offices. Our bylaws also allow us to reimburse them for the costs of certain legal defenses. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to our directors, officers or control persons, we have been advised by the SEC that such indemnification is against public policy and is therefore unenforceable. If our officers and directors file a claim against us for indemnification, the associated expenses could also increase our operating costs.
23
We may be subject to liability if our equipment does not perform as expected.
We may be exposed to liability in the event our equipment does not perform as expected. We intend to enter into contracts with customers, which will grant certain rights with respect to the condition and use of our products. Certain contractual and legal claims could arise in the event the equipment does not perform as expected and in the event of personal injury, death or property damage as a result of the use of our equipment. There can be no assurance that particular risks are insured or, if insured, will continue to be insurable on an economical basis or that current levels of coverage will continue to be available. We may be liable for any defects in the equipment or its products and services and uninsured or underinsured personal injury, death or property damage claims.
When operational, our RPCs depend on our ability to manufacture various pieces of equipment, many of which are quite large. Any disruption in our manufacturing ability will adversely affect our business and operations.
Our RPCs are not currently in operation. When operational, our RPCs involve manufacturing and plant operation risks of delay that may be outside of our control. Production or services may be delayed or prevented by factors such as adverse weather, strikes, energy shortages, shortages or increased costs of materials, inflation, environmental conditions, legal matters and other unknown contingencies. Our RPCs also require certain manufacturing apparatus to manufacture the equipment. If the manufacturing apparatus were to suffer major damage or are destroyed by fire, abnormal wear, flooding, incorrect operation or otherwise, we may be unable to replace or repair such apparatus in a timely manner or at a reasonable cost, which would impact our ability to stay in production or service. Any significant downtime of the equipment manufacturing could impair our ability to produce for or serve customers and materially and adversely affect our results of operations. In addition, changes in the equipment plans and specifications, delays due to compliance with governmental requirements or impositions of fees or other delays could increase production costs beyond those budgeted for the business. If any cost overruns exceed the funds budgeted for operations, the business would be negatively impacted.
Any accident at our facilities could subject us to substantial liability.
The manufacturing and operation of our equipment and assets involves hazards and risks which could disrupt operations, decrease production and increase costs. The occurrence of a significant accident or other event that is not fully insured could adversely affect our business, financial condition, results of operations and cash flows.
If critical components become unavailable or our suppliers delay their production of our key components, our business will be negatively impacted.
Our ability to get key components to build or repair our equipment is crucial to our ability to manufacture our plants and produce our products. These components are supplied by certain third-party manufacturers, and we may be unable to acquire necessary amounts of key components at competitive prices.
If we are successful in our growth, outsourcing the production of certain parts and components would be one way to reduce manufacturing costs. We plan to select these particular manufacturers based on their ability to consistently produce these products according to our requirements in an effort to obtain the best quality product at the most cost-effective price. However, the loss of all or any one of these suppliers or delays in obtaining shipments would have an adverse effect on our operations until an alternative supplier could be found, if one may be located at all. If we get to that stage of growth, such loss of manufacturers could cause us to breach any contracts we have in place at that time and would likely cause us to lose sales.
Any shortage of skilled labor would have a detrimental impact on our ability to provide our products and services.
The manufacturing and operating of our facilities and equipment requires skilled laborers. In the event there is a shortage of labor, including skilled labor, it could have an adverse impact on our productivity and costs and our ability to expand production in the event there is an increase in demand for our product or services.
24
We rely on third party contractors for some of our operations. If we are unable to find quality contractors, it would severely impact our business.
We outsource certain aspects of our business to third party contractors. We are subject to the risks associated with such contractors’ ability to successfully provide the necessary services to meet the needs of our business. If the contractors are unable to adequately provide the contracted services, and we are unable to find alternative service providers in a timely manner, our ability to operate the business may be disrupted, which may adversely affect our business, financial condition, results of operations and cash flows.
Union activities could adversely impact our business.
While none of our employees are currently members of unions, we may become adversely effected by union activities. We are not subject to any collective bargaining or union agreement; however, it is possible that future employees may join or seek recognition to form a labor union or may be required to become a labor agreement signatory. If some or all of our employees become unionized, it could adversely affect productivity, increase labor costs and increase the risk of work stoppages. If a work stoppage were to occur, it could interfere with the business operations and have a material adverse effect on our business, financial condition, results of operations and cash flows.
Although our shares of Common Stock are listed on The Nasdaq Capital Market, our shares of Common Stock are subject to potential delisting if we do not meet or continue to maintain the listing requirements of The Nasdaq Capital Market.
Our common stock is listed on Nasdaq; however, to keep our listing on Nasdaq, we are required to maintain: (i) a minimum bid price of $1.00 per share, (ii) a certain public float, (iii) a certain number of round lot shareholders and (iv) one of the following: a net income from continuing operations (in the latest fiscal year or two of the three last fiscal years) of at least $500,000, a market value of listed securities of at least $35 million or a stockholders’ equity of at least $2.5 million.
If our securities are ever delisted from Nasdaq, trading will most likely take place on the OTC Marketplace operated by OTC Markets Group Inc. An investor is likely to find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our Common Stock on an over-the-counter market, and many investors may not buy or sell our Common Stock due to difficulty in accessing over-the-counter markets, or due to policies preventing them from trading in securities not listed on a national exchange or other reasons, and our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Common Stock is not traded on a national securities exchange. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our Common Stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified executives and employees and to raise capital.
We may not be able to identify, negotiate, finance or close future acquisitions.
One component of our growth strategy focuses on acquiring additional technologies, companies and/or assets. We may not, however, be able to identify, audit, or acquire technologies, companies and/or assets on acceptable terms, if at all. Additionally, we may need to finance all or a portion of the purchase price for an acquisition by incurring indebtedness. There can be no assurance that we will be able to obtain financing on terms that are favorable, if at all, which will limit our ability to acquire additional companies or assets in the future. Failure to acquire additional companies or assets on acceptable terms, if at all, would have a material adverse effect on our ability to increase assets, revenues and net income and on the trading price of our common stock.
We may not be able to properly manage multiple businesses.
We may not be able to properly manage multiple businesses. Managing multiple businesses would be more complicated than managing one or two of business, even if the additional businesses were synergistic with our existing businesses, and would require that we hire and manage executives with experience and expertise in different fields. We can provide no assurance that we will be able to do so successfully. A failure to properly manage multiple businesses could materially adversely affect our company and the trading price of our stock.
25
We may not be able to successfully integrate new acquisitions.
Even if we are able to acquire additional technologies, companies and/or assets, we may not be able to successfully integrate those companies or assets. For example, we may need to integrate widely dispersed operations with different corporate cultures, operating margins, competitive environments, computer systems, compensation schemes, business plans and growth potential requiring significant management time and attention. In addition, the successful integration of any companies we acquire will depend in large part on the retention of personnel critical to our combined business operations due to, for example, unique technical skills or management expertise. We may be unable to retain existing management, finance, engineering, sales, customer support, and operations personnel that are critical to the success of the integrated company, resulting in disruption of operations, loss of key information, expertise or know-how, unanticipated additional recruitment and training costs, and otherwise diminishing anticipated benefits of these acquisitions, including loss of revenue and profitability. Failure to successfully integrate acquired businesses could have a material adverse effect on our company and the trading price of our stock.
Our acquisitions of businesses may be extremely risky, and we could lose all of our investments.
We may invest in seemingly synergistic businesses that are in other risky industries. An investment in these companies may be extremely risky because, among other things, the companies we are likely to focus on: (1) typically have limited operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; (2) tend to be privately-owned and generally have little publicly available information and, as a result, we may not learn all of the material information we need to know regarding these businesses; (3) are more likely to depend on the management talents and efforts of a small group of people; and, as a result, the death, disability, resignation or termination of one or more of these people could have an adverse impact on the operations of any business that we may acquire; (4) may have less predictable operating results; (5) may from time to time be parties to litigation; (6) may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence; and (7) may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. Our failure to make acquisitions efficiently and profitably could have a material adverse effect on our business, results of operations, financial condition and the trading price of our stock.
Future acquisitions may fail to perform as expected.
Future acquisitions may fail to perform as expected. We may overestimate cash flow, underestimate costs, or fail to understand risks. This could materially adversely affect our company and the trading price of our Stock.
Competition may result in overpaying for acquisitions.
Other investors with significant capital may compete with us for attractive investment opportunities. These competitors may include publicly traded companies, private equity firms, privately held buyers, individual investors, and other types of investors. Such competition may increase the price of acquisitions, or otherwise adversely affect the terms and conditions of acquisitions. This could materially adversely affect our company and the trading price of our stock.
The Merger Agreement we entered into with Empire is subject to numerous closing conditions and may not close as structured, or at all.
On February 26, 2024, we entered into the aforementioned Merger Agreement with Empire Diversified Energy, Inc., pursuant to which Empire will become a wholly-owned subsidiary at the closing of the transaction. The Merger Agreement is subject to numerous closing conditions that must be met by both parties and in the event those conditions are not satisfied the structure of the transaction may change prior to closing or the transaction may not close at all.
We may have insufficient resources to cover our operating expenses and the expenses of raising money and consummating acquisitions.
We have limited cash to cover our operating expenses and to cover the expenses incurred in connection with money raising and a business combination. It is possible that we could incur substantial costs in connection with money raising or a business combination. If we do not have sufficient proceeds available to cover our expenses, we may be forced to obtain additional financing, either from our management or third parties. We may not be able to obtain additional financing on acceptable terms, if at all, and neither our management nor any third party is obligated to provide any financing. This could have a negative impact on our company and our stock price.
26
Although we do not believe that we are, or will be, an investment company covered by the Investment Company Act of 1940, if we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to engage in strategic transactions.
A company that, among other things, is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, owning, trading or holding certain types of securities would be deemed an investment company under the Investment Company Act of 1940, as amended, (the “Investment Company Act”). Additionally, a company that is not and does hold itself out as being engaged primarily in the business of investing, reinvesting, owning, trading or holding certain types of securities may nevertheless be deemed an investment company under the Investment Company Act if more than 40% of such company’s assets are deemed to be “investment securities.”
We are not in the business of buying and selling securities of other companies. As our strategy had involved the Company investing in other companies, including Scepter Holdings, it is possible that we could be deemed an investment company, although, given the nature and extent of our business operations, we do not believe that we are or will be subject us to the Investment Company Act. Our investment in Scepter Holdings arose from loan agreements that were settled in the form of equity because cash was not available for the borrowers to pay the loans in cash. The Company has not traded or sold any securities of other companies that it has acquired. For those LLCs for which the Company serves as manager, it has been disclosed in the business plan of these LLCs that their primary business is related to our administration, or our operations, or our proposed future operations. These entities do not engage in activities such as investing, reinvesting, owning, holding or trading “investment securities,” and neither the units of ownership for these entities, nor rights to royalties, have any market and are not traded, and such interests are accounted for at cost.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Presently, our “investment securities,” which include our holdings in Scepter Holdings, as well as certain entities described in our corporate structure, comprise approximately 7% of our total assets, which is below such 40% threshold. As our business continues to develop and production increases, the percentage of our total assets comprised of investment securities is expected to decline substantially; however, in the event that the percentage of our holdings in investment securities increases, we risk exceeding such 40% threshold and being deemed an investment company. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
If we are nevertheless deemed to be an investment company under the Investment Company Act, we may be subject to certain restrictions that may make it more difficult for us to complete a business combination, including:
| ● | restrictions on the nature of our investments; and | |
| ● | restrictions on the issuance of securities. |
In addition, we may have imposed upon us certain burdensome requirements, including:
| ● | registration as an investment company; | |
| ● | adoption of a specific form of corporate structure; and | |
| ● | reporting, record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations. |
Compliance with these additional regulatory burdens would require additional expense for which we have not allotted.
27
On October 1, 2024, we closed the acquisition of the Endeavor Entities. We are in the process of integrating their operations and personnel with our own. If we are unable to complete this transition timely and effectively it could adversely affect our operations.
We are in the process of integrating the Endeavor Entities personnel and operations into our operations since we close the acquisition on October 1, 2024. Due to the size of the acquisition, we anticipate this transition will take some time. If we are not able to effectively and timely complete this transition it could adversely affect our operations.
Prior to our acquisition of the Endeavor Entities, they were private companies and, as a result, they did not have the same audit and review of financial statements requirements that we have, and their disclosure controls and procedures processes for financial reporting were not the same as a reporting, public company. We anticipate we will have additional material weaknesses in our disclosure controls and procedures over financial reporting during the time that we integrate their financial reporting processes with our financial reporting processes.
As private companies the Endeavor Entities did not have the same requirements for audited and reviewed financial statements that we do as a public company reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, the methods the Endeavor Entities used to prepare their financial statements, as well as the disclosure controls and procedures they had in place around the preparation of such financial statements, may not have been as stringent as the requirements we have as a public company reporting under the Exchange Act. If this is the case, then we may have additional material weaknesses in our disclosure controls and procedures over financial reporting during the time we integrate their financial reporting processes with our financial reporting processes.
Item 1B - Unresolved Staff Comments
Not applicable.
Item 1C - Cybersecurity
We are working with our information technology consultant to help improve our overall cybersecurity and plan to take any necessary steps to protect our information assets and operations from internal and external cyber threats in the event any such steps are recommended.
28
Item 2 - Properties
We currently lease executive office space in Houston, Texas, Dallas, Texas, and Laguna Hills, California. Through our subsidiaries we own (i) approximately 60 acres of land in Frio, Texas, which has an office warehouse facility and yard related to our trucking operations, and (ii) approximately 25 acres of land in Blaine, Oklahoma, related to our crude oil pipeline and exclusive connected blending and processing facility. We also own and operate fifteen (15) crude oil pipeline injection truck stations, located in Texas, New Mexico and North Dakota, as well as two operational major crude oil gathering, storage and transportation facilities located in Colorado City, Texas, and Delhi, Louisiana. We believe these facilities are in good condition but that we may need to expand our leased space and warehouses as business increases.
On December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”) with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months at our discretion. Our monthly rent is $0 for the first three months and then at month 4 it is approximately $7,000 (based on a 50% reduction) and increases to approximately $13,000 in month 7 and then increases annually up to approximately $16,000 per month by the end of the initial term. We plan to place one or more of our RPC machines on the property, as well as store certain equipment.
On October 1, 2024, the Company acquired a lease agreement for land, building, yard and improvements in Monohans, Texas related to operating a trucking yard and shop. Commencing on May 1, 2021, the five-year lease terminates on April 30, 2026.
On October 1, 2024, the Company acquired multiple lease agreements for 10 acres of land, building, yard and improvements in Reeves County, Texas related to operating a trucking yard and shop. Commencing on January 1, 2024, seventeen-month lease terminates on May 31, 2025.
Item 3 - Legal Proceedings
SRAX, Inc. v. Vivakor, Inc., et al., Case No. 2023CUB014131 (Sup. Ct. Ventura Cty., Cal.—Sept. 18, 2023)—Plaintiff asserts claims for breach of contract for Defendant’s failure to pay Plaintiff for financial technology services. Plaintiff seeks $28,000 in damages, and 173,972 shares of the Company’s common stock for liquidated damages through the date of the Complaint, with further liquidated damages continuing to accrue. Defendant disputes Plaintiff’s claims on grounds that the services were not rendered in accordance with the contract, and that Plaintiff terminated the contract. The Defendant did not timely file an Answer and the Plaintiff moved for a default judgment. Defendant intends to vigorously defend Plaintiff’s claims. Defendant has not reserved anything for this dispute.
Julie Ridenhour Tonroy, as the Personal Representative of the Estate of John Ridenhour, Deceased, v. Endeavor Crude, LLC, et al., Case No. CJ-2024-40, Blaine Cty. Dist. Ct., Okla.—Sept. 24, 2024)—Plaintiff asserts claims of negligence, respondent superior, and wrongful death of decedent related to a motor vehicle accident involving a driver for Endeavor Crude, LLC while operating motor vehicle equipment owned or leased by Meridian Equipment Leasing, LLC, both subsidiaries of the Company, and presently seeks damages in excess of $1,000,000. The case is set for trial in September 2025. Defendants have not reserved anything for this dispute.
Miguel Angel Munoz, et al., v. Endeavor Crude, LLC, et al., No. D-101-CV-2023-02491 (1st Dist. Ct., Santa Fe Cty., New Mex.—Oct. 11, 2023)—Plaintiff suffered injuries in connection with a motor vehicle accident involving Plaintiff and an Endeavor Crude, LLC (“EC”) driver and tractor-trailer. Plaintiff alleges negligence, respondeat superior, negligent entrustment, hiring, retention, supervision and training, and is presently seeking damages in excess of $2,000,000. Defendant is vigorously contesting the case and has not reserved anything for this dispute. Defendant believes certain costs for the defense and prospective liability are covered by applicable insurance policies.
Misty Kitson, Blaine County Assessor v. Meridian Equipment Leasing, LLC, Case No. EQ-2023-57 (Ct. of Tax Review, Okla.—Aug. 2, 2023)—Plaintiff governmental taxing authority seeks appeal of Defendant’s fair cash value valuation of certain personal property in Blaine County, Oklahoma. Plaintiff seeks a property tax valuation far in excess of Defendant’s valuation, and seeks overdue taxes in excess of $1,126,005.22, plus statutory interest, penalties, and fees. The case is in discovery. Defendant is vigorously contesting the case based on the property’s sale valuation as established by written agreement.
29
Novella Strmiska v. Endeavor Crude, LLC, et al., Case No. 25-01-00013-CVK (81st Dist. Ct., Karnes Cty., Tex.—Jan. 27, 2025)—Plaintiff alleges breach of contract, trespass to land, trespass to chattels, negligence, and unjust enrichment, seeking damages, interest, attorneys’ fees, and costs of court, in relation to a commercial truck yard lease. Defendants intend to vigorously contest the case based on false invoices.
Mikasa McKnight v. Endeavor Crude, LLC, et al., Case No. 202422195 (190th Dist. Ct., Harris Cty., Tex.—Jul. 2, 2024)—Plaintiff alleges negligence, negligent hiring, negligent entrustment, and respondeat superior relating to a motor vehicle accident involving a tractor-trailer operated under the motor carrier authority of Defendant EC, and seeks damages in excess of $1,000,000. Defendant EC is contesting the case. The case is set for trial on August 4, 2025. Defendant is vigorously contesting the case, and Defendant’s defense and prospective liability are covered by applicable insurance policies.
Echo Contracting, LLC v. CPE Gathering Midcon, LLC, et al., Case No. CJ-2025-73 (Dist. Ct., Blaine Cty., Okla.—Feb. 14, 2025)—Plaintiff Echo Contracting asserted claims of breach of contract, quantum meriut, and foreclosure of mechanics and materialmen’s lien filed in Blaine County against properties of Defendants. Defendants CPE Gathering Midcon, LLC and Vivakor, Inc. settled such claims pursuant to confidential agreement March 28, 2025, and such claims are pending dismissal and such liens are pending release. Co-Defendant Validus Energy II Midcon, LLC prevailed upon a motion to consolidate Case No. CJ-2025-73 with the proceeding. Defendant Validus Energy II Midcon, LLC has levied claims for declaratory judgment, indemnification, contribution, and unjust enrichment against Defendants CPE Gathering Midcon, LLC and Vivakor, Inc. and seeks damages of $431,652.42, plus attorney’s fees.
Gudeil Gonzales, et al. v. Equipment Transport, LLC, et al., Case No. 202508937 (165th Dist. Ct., Harris Cty., Tex.—Feb. 7, 2025)—Lead Plaintiff, a former field employee of ET EmployeeCo, LLC f/k/a PWS EmployeeCo, LLC, asserts claims for negligence, gross negligence, and premises liability in connection with a jobsite injury, and seek damages in excess of $1,000,000, plus interest, fees, and costs. Defendant intends to vigorously contest the suit. Defendant ET has not reserved anything for the dispute.
Vivakor, Inc. v. Al-Dali International General Trading and Contracting Company, et al., Case No. JDFC603 251052410 (Kuwait Court of First Instance, Mar. 25, 2025)—Plaintiff has asserted claims for breach of contract, unjust enrichment, and injunctive relief against Defendants Al-Dali Global Trading and Contracting Company, Al-Sayer Construction General Trading and Contracting Company, and Kuwait Oil Company relating to the placement and operation of oilfield remediation processing equipment in Kuwait.
From time to time, we may become involved in various legal actions that arise in the normal course of business. We intend to defend vigorously against any future claims and litigation. We are not currently involved in any material disputes and do not have any material litigation matters pending.
Item 4 - Mine Safety Disclosures
Not applicable.
30
PART II
Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Common Stock is listed on the Nasdaq Capital Market under the symbol “VIVK.”
Holders
As of April 14, 2025, there were 44,575,570 shares of Common Stock outstanding held by approximately 518 holders of record (not including an indeterminate number of beneficial holders of stock held in street name).
Warrants
There are warrants to purchase 399,040 shares of common stock issued and outstanding as of April 14, 2025.
Preferred Stock.
We are authorized to issue 15,000,000 shares of preferred stock, par value $0.001. We currently have one series of preferred stock designated, namely our Series A Preferred Stock. Our preferred stock is “blank check preferred” whereby our Board of Directors may create a series of preferred stock and set the rights and preferences of such preferred stock, without further shareholder approval. The availability or issuance of preferred shares in the future could delay, defer, discourage or prevent a change in control. We previously had five series of preferred stock designated entitled Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock. On February 6, 2025 we filed a Certificate of Amendment to our Articles of Incorporation (deemed to be effective for accounting purposes as of October 1, 2024) which withdrew those prior series of preferred stock. Our current Series A Preferred Stock was created on February 14, 2025 and has 150,000 shares authorized with 107,789 shares of outstanding, which shares were deemed to be issued as of October 1, 2024 for accounting purposes. Our Series A Preferred Stock has a stated value of $1,000 per share, as an annual dividend rate equal to six percent (6%) of the stated value per share, with such dividends payable in shares of our common stock, has liquidation preference, has no voting rights, and are only convertible into shares of common stock at the decision of the company, subject to certain ownership limitations.
Dividends
To date, we have not paid any dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. The declaration and payment of dividends on the common stock is at the discretion of our Board of Directors and will depend on, among other things, our operating results, financial condition, capital requirements, contractual restrictions or such other factors as our Board of Directors may deem relevant.
Our Series A Preferred Stock earns an annual dividend of 6% of the stated value of the stock, which dividend is paid in equal quarterly installments in shares of our common stock unless such issuance would cause the holder of the Series A Preferred Stock to exceed certain beneficial ownership limitations, and such a situation the dividend will accrue until such time as the shares are able to be issued.
Securities Authorized for Issuance under Equity Compensation Plans
On November 10, 2023, our 2023 Equity and Incentive Plan went effective. The plan was approved by our Board of Directors and by the holders of a majority of our common stock. The Plan’s number of authorized shares is 40,000,000. As of April 14, 2025, no options had been granted or exercised under the Plan. As of April 14, 2025, there were stock awards granted of 4,429,431 shares of common stock under the plan. As of April 14, 2025, the Plan had 3,817,383 vested shares and 612,048 non-vested shares underlying the stock awards. We have not issued any other type of equity awards under the Plan.
31
On February 14, 2022, our 2021 Equity and Incentive Plan went effective. The plan was approved by our Board of Directors. The Plan’s number of authorized shares is 2,000,000. As of April 14, 2025, there were stock options and awards granted to acquire 1,668,983 shares of common stock at a weighted exercise price of $1.97 per share under the plan. As of April 14, 2025, the Plan had 1,721,761 vested shares and no non-vested shares underlying the stock options. As of April 14, 2025, no options had been exercised under the Plan. We have not issued any other type of equity awards under the Plan. The stock options issued under the Plan are held by certain of our current and former executive officers.
Recent Issuance of Unregistered Securities
The following sets forth information regarding all unregistered securities sold by us in transactions that were exempt from the requirements of the Securities Act in the last fiscal year. Except where noted, all of the securities discussed in this Item 5 were all issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.
2025
On April 11, 2025, we issued Cedarview Capital Management LLC, and its assignees, 300,000 shares of our restricted common stock. The shares were issued pursuant to the terms of a Side Letter with an effective date of April 9, 2025, which modified and extended the repayment terms of the Secured Promissory Note dated October 31, 2024 held by Cedarview.
On April 11, 2025, we issued 350,000 shares of our restricted common stock to Justin Ellis pursuant to a conversion notice we received from Mr. Ellis notifying us of his desire to convert $350,000 owed to him under that certain Convertible Promissory Note dated July 7, 2024.
On April 11, 2025, we issued an aggregate of 1,298,453 shares of our restricted common stock for four months of dividends to the holders of our Series A Preferred Stock. Of those shares, 884,037 were issued to Jorgan Development, LLC and 8,933 were issued to JBAH Holdings, LLC, both of which are controlled by James Ballengee, our Chief Executive Officer.
On April 11, 2025, we issued 107,789 shares of our Series A Preferred Stock to the sellers, or their assignees, in the Endeavor Entities transaction. These shares represented the preferred stock portion of the purchase price for the transaction, including any post-closing adjustments. Of these shares, 84,931 shares went to Jorgan Development, LLC and 858 shares went to JBAH Holdings, LLC, both of which are controlled by James Ballengee, our Chief Executive Officer. The Series A Preferred Stock does not have voting rights and is only convertible by the Company. The shares do have a 6% annual dividend, based on the $1,000 stated per share value of the Series A Preferred Stock, payable in shares of our common stock.
On February 26, 2025, we issued Tysadco Partners, LLC 139,535 restricted shares for payment of $180,000 in outstanding invoices.
On February 26, 2025, we issued the Sellers in the acquisition of the Endeavor Entities transaction an additional 24,291 shares of our common stock and on April 11, 2025 107,789 shares of our Series A Preferred Stock as part of the consideration, all of which are considered to have been issued as of December 31, 2024 for accounting purposes.
On February 10, 2025, we entered into an Amendment No. 1 to our Employment Agreement with Mr. Les Patterson, our Vice President, Operations & Construction. Mr. Patterson’s Employment Agreement misstated Mr. Patterson’s annual equity compensation, which was agreed to be annual equity compensation equal to not less than One Hundred Thousand and No/100s U.S. Dollars ($100,000) to be paid in equal quarterly installments of Twenty Five Thousand and No/100s U.S. Dollars ($25,000) based on a valuation formula set forth in the Employment Agreement, but was mistakenly drafted as annual equity compensation equal to not less than Twenty Five Thousand and No/100s U.S. Dollars ($25,000) to be paid in equal quarterly installments based on a valuation formula set forth in the Employment Agreement. As a result of the Amendment No. 1 to the Employment Agreement we are obligated to issued Mr. Patterson 74,701 additional shares of our common stock, which is valued at $75,000 based on the valuation formula in Mr. Patterson’s Employment Agreement.
On February 10, 2025, we entered into an Employment Agreement with Andre Johnson to be our Vice President, Human Resources As part of Mr. Johnson’s compensation we agreed to issue him 302,297 shares of our common stock as a signing bonus, as well as $75,000 worth of our common stock annually, paid in equal quarterly installments.
32
2024
On February 5, 2024, we, as the borrower; Vivaventures Management Company, Inc., Vivaventures Oil Sands, Inc., Silver Fuels Delhi, LLC, White Claw Colorado City, LLC, Vivaventures Remediation Corporation and Vivaventures Energy Group, Inc., which are our subsidiaries, as guarantors (collectively, the “Guarantors” or “Subsidiaries”); Cedarview Opportunities Master Fund LP, as the lender (the “Lender”); and Cedarview Capital Management, LLC, as the agent (the “Agent”), entered into a Loan and Security Agreement (the “Loan and Security Agreement”). Pursuant to the Loan and Security Agreement, we issued a secured promissory note (the “Note”) in the principal amount of $3,000,000, and the Lenders agreed to provide a $3,000,000 term loan to us (the “Term Loan”). On February 6, 2024 (the “Closing Date”), we received the net proceeds from the Term Loan, less a 3% origination fee. The transaction documents were signed on February 5, 2024, and became effective as of the Closing Date. The amounts borrowed under the Loan and Security Agreement bear interest at a rate per annum of 22%. We also paid certain fees and transaction expenses in connection with the release of the funds in connection with the Term Loan. The principal amounts due under the Term Loan are payable as follows: (i) for the first three (3) months, we shall make an interest only payment of $165,000, which we prepaid on the Closing Date, and (ii) for the following twelve (12) months, we shall make monthly installment payments of $250,000 plus interest, which must be made on or before May 5, 2025 (the “Maturity Date”). We issued to the Lender 300,000 shares of our common stock, restricted in accordance with Rule 144, as additional consideration for the Term Loan.
As previously disclosed by us in a Current Report on Form 8-K filed with the SEC on February 2, 2024, we received a loan from a non-affiliated individual lender in the principal amount of $1,000,000 (the “Loan”) and, in connection therewith, we 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. We issued a promissory note dated December 5, 2023 in connection with the Loan (the “Original Note”). On April 8, 2024, the lender returned an executed amended and restated convertible promissory note for the Loan (the “Amended Note”). The convertible promissory note replaces the Original Note, but maintains the same interest rate and maturity date of the Original Note, and the obligation to issue 100,000 shares of our restricted stock remains in effect. Pursuant to the terms of the Amended Note the holder had the right to convert the outstanding principal and interest due under the Amended Note into shares of our common stock at price equal to 90% of the average closing price of our common stock for the previous three (3) trading days prior to the conversion date, with a floor conversion price of $0.75 per share. On July 1, 2024, we issued 903,095 shares of our common stock to the non-affiliated investor for the conversion of the $1 million principal amount convertible promissory note. The investor converted the all the outstanding principal and interest due under the promissory note in the amount of $1,048,493.15 into 903,095 shares of common stock pursuant to the terms of the promissory note.
On June 3, 2024, the Company entered into a Director Agreement with Michael Thompson (the “Thompson Director Agreement”). Pursuant to the Thompson Director Agreement, effective June 3, 2024, Mr. Thompson agreed to serve as a member of the Company’s Board of Directors and the chair of the Audit Committee and would receive $50,000 in shares of restricted stock annually as part of his compensation, vesting quarterly and valued at the stock price on the date of grant. Mr. Thompson will also receive a one-time grant of 50,000 shares of the Company’s common stock under the Company’s 2023 Equity and Incentive Plan.
As previously disclosed herein, on June 26, 2024 the Company entered into the Knapp Agreement. As part of our hiring of Pat Knapp for his compensation under the Knapp Agreement, Mr. Knapp received a one-time signing grant of Company common stock equivalent in value to $250,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant (calculated to be 140,190 shares based on the effective date of the Knapp Agreement), subject to an eighteen (18)-month lockup period and a conditional clawback obligation concurrent therewith, which shall be granted within thirty (30) days after the Start Date, as defined therein.
On July 8, 2024, we received a loan from a non-affiliated individual lender in the principal amount of Three Hundred Fifty Thousand Dollars ($350,000) (the “First Loan”) and, in connection therewith, we agreed to issue 15,982 restricted shares of our common stock. The First Loan bears interest at the rate of 10% per annum, matures on December 31, 2024, with all unconverted principal due on the maturity date and interest payable monthly on the last day of the month after the month in which the interest accrued. We issued a promissory note dated July 5, 2024 in connection with the First Loan (the “First Note”). The First Note allows the holder to convert the outstanding principal and interest due under the First 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 First 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 no less than 61 days’ notice to us regarding his desire to increase the conversion limitation percentage. We issued the 15,982 shares on February 11, 2025.
33
On July 5, 2024, we received a loan from Ballengee Holdings, LLC, an entity controlled by James Ballengee, the Company’s Chairman, President, and Chief Executive Officer, in the principal amount of Five Hundred Thousand Dollars ($500,000) (the “BH Loan”) and, in connection therewith, we agreed to issue 21,552 restricted shares of the Company’s common stock. The BH Loan bears interest at the rate of 10% per annum, matures on December 31, 2024, with all unconverted principal due on the maturity date and all unconverted interest payable monthly on the last day of the month after the month in which the interest accrued. The Company issued a promissory note dated July 9, 2024 in connection with the BH Loan (the “BH Note”). The BH Note allows the holder to convert the outstanding principal and interest due under the BH 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 BH 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 no less than 61 days’ notice to us regarding his desire to increase the conversion limitation percentage. We issued the 21,552 shares on February 11, 2025.
On July 5, 2024, we entered into a Consulting Agreement with 395 Group, LLC, a Nevada limited liability company (“395”), under which 395 agreed to provide us with general advisory and business development services. Specifically, 395 agreed to advise us for the next four (4) months regarding capitalization, business development, business relationships, industry guidance, and assist with understanding what is happening in our market space. In exchange for 395’s services, we agreed to pay total cash compensation of $340,000 and equity compensation of 50,000 shares of our restricted common stock, with one-half of the cash compensation and all the equity compensation due upon signing of the agreement and the other half of the cash compensation due in thirty (30) days. The 50,000 shares of common stock were issued to 395 on February 11, 2025.
On July 26, 2024, we entered into that certain Securities Purchase Agreement and Strata Purchase Agreement (the “ClearThink Agreements”) with ClearThink Capital Partners, LLC. Under the terms of the ClearThink Agreements, we agreed to issue ClearThink Capital (i) 67,568 shares of common stock in exchange for $125,000 upon the entry into the relevant term sheet (ii) 67,568 shares of common stock upon filing of the relevant S-1 Registration Statement, and (iii) 150,000 shares of common stock upon entry of the Strata Purchase Agreement. As a result, the Company has issued 217,568 to ClearThink.
On July 26, 2024, we entered into a Securities Purchase Agreement with James K. Granger (the “Granger SPA” and “Granger”, respectively), under which Granger, or an entity he controls, purchased 1,600,000 common shares of our stock for $800,000, at a price of $0.50 per common share. Pursuant to the Granger SPA, the shares issued to Granger will be subject to Rule 144 restrictions. Granger funded the purchase price in cash to the Company on July 31, 2024.
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.
On September 5, 2024, we closed on a Securities Purchase Agreement with E-Starts Money Co., a Delaware corporation (the “E-Starts SPA” and “E-Starts”, respectively) dated August 28, 2024, under which E-Starts, purchased 1,000,000 shares of our common stock for $500,000, at a price of $0.50 per common share. Pursuant to the E-Starts SPA, the shares issued to E-Starts will be subject to standard Rule 144 restrictions. E-Starts is controlled by William Tuorto, who was at the time a control person of Empire Diversified Energy, Inc., (“Empire”), serving as its Executive Chairman and Chairman of its Board of Directors. As previously disclosed in our Current Report on Form 8-K filed with the Commission on March 1, 2024 (the “March 8-K”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Empire under which Empire will merge with and into a subsidiary of the Company and Empire will become a wholly-owned subsidiary of the Company if the parties close the transaction contemplated by the Merger Agreement. There is no guarantee that the transactions contemplated by the Merger Agreement will close.
34
On September 9, 2024, Al Dali International for Gen. Trading & Cont. Co. (“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.
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price is $116.3 million (the “Purchase Price”), after post-closing adjustments, including assumed debt and a performance adjustment, payable in a combination of our common stock, $0.001 par value per share (“Common Stock”) and shares of our Series A Preferred Stock $0.001 par value per share (“Series A Preferred Stock”). The Preferred Stock has 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 great 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, our chairman, chief executive officer and principal shareholder. To date we have issued the sellers or their assignees 6,724,291 shares of our common stock and 107,789 shares of our Series A Preferred Stock with both the amount of shares of common stock and shares of Series A Preferred Stock subject to adjustment once final purchase price accounting has been completed.
Pursuant to our Executive Employment Agreement with Russ Shelton entered into on October 1, 2024, Mr. Shelton will receive a one-time grant of Company common stock equivalent in value to $150,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant, subject to an eighteen (18)-month lockup period, which shall be granted in the near future.
On October 31, 2024, we, as the borrower, and certain of our subsidiaries, being Vivaventures Management Company, Inc., Vivaventures Oil Sands, Inc., Silver Fuels Delhi, LLC, White Claw Colorado City, LLC, Vivaventures Remediation Corporation, Vivaventures Energy Group, Inc., Endeavor Crude, LLC, and Meridian Equipment Leasing, LLC, and Silver Fuels Processing, LLC, as guarantors (collectively, the “Guarantors” or “Subsidiaries”, as context requires), Cedarview Opportunities Master Fund LP, as the lender (the “Lender”); and Cedarview Capital Management, LLC, as the agent (the “Agent”), entered into a Loan and Security Agreement (the “Loan Agreement”). Pursuant to the Loan Agreement, we 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, and accruing interest at 22% per annum. On November 5 and 6, 2024 (the “Closing Date”), 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. As additional consideration for the Term Loan we issued the Lender 300,000 shares of our restricted common stock.
35
Item 6 – [Reserved].
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on 10-K.
Overview
We have two operating business segments: (i) transportation logistics services and (ii) terminaling and storage facility product and services related to oil and gas production.
Our transportation and facilities services primarily consist of trucking crude oil and produced water and transportation and terminaling services of crude oil via the Omega Gathering Pipeline. Our trucking services are centered in the Permian and Eagle Ford Basins, which are the most active regions for oil and natural gas exploration and development in the United States. On average, each new oil well in the Permian Basin produces approximately 1,300 barrels of crude oil or more per day. Those same wells produce approximately 10,000 barrels or more of produced water per day, historically considered a waste product. We utilize one of the largest combined oil and produced water trucking fleet in the United States to transport those products to a fully-integrated network of facilities where we blend various grades of crude oil, and reuse or dispose of produced water. Access to immediate, flexible, scalable transportation is a vital component of oil and natural gas exploration and development, as is the efficient takeaway, treatment, disposal, and/or reuse of commodities associated with oil and gas production. Transportation and terminaling of crude oil is also conducted utilizing our Omega Gathering Pipeline, which is an integrated approximately forty-five (45) mile crude oil gathering and pipeline in Blaine County, Oklahoma, in the heart of the STACK play. The line is tied into the Cushing, Oklahoma storage hub via the Plains STACK Pipeline. We also own and operate fifteen (15) crude oil pipeline injection truck stations, primarily centered in the Permian Basin.
Our terminaling and storage product and services primary consist of two operational major crude oil terminaling facilities. One is located in Colorado City, Texas, and the other facility is located in Delhi, Louisiana. Both facilities are located at the junction of several major interstate pipelines, receive various grades of crude oil from our customers, and their operations should give our marketing division a key competitive advantage in sales of resulting blends in critical markets once that business is developed. These crude oil terminals are industrial facilities that serve as hubs for the storage, handling and distribution of crude oil and petroleum products.
In addition to our two operating business segments, we plan to perform remediation services utilizing our remediation processing centers (“RPCs”) at some point in the future. We are currently constructing a full-capacity RPC at the San Jacinto River & Rail Park in Harris County, Texas. Once complete, we anticipate the strategically located facility to be capable of processing oilfield solid wastes into economic byproducts such as condensate, propane, and butane. This RPC will feature an adjacent, complimentary truck wash facility from which we expect to derive additional revenue. Last year we moved our other full-capacity RPC to Kuwait, where we are currently in negotiations with the Kuwaiti Oil Company to potentially use the RPC to clean sands contaminated with oil, primarily from oil wells destroyed during the Persian Gulf War.
Our website is www.vivakor.com.
Reclassifications
Certain reclassifications may have been made to prior years’ amounts to conform to the 2024 presentation.
Results of Consolidated Operations
Revenue
For the years ended December 31, 2024 and 2023, we realized revenues of $89,811,240 and $59,321,752, respectively, representing an increase of $30,489,488 or 51.40%. The increase in revenue is primarily attributed to the sales of logistics and terminaling realized through the operations of our newly acquired Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024.
36
Cost of Revenue
For the year ended December 31, 2024 and 2023, our cost of revenues consisted primarily of costs associated with selling oil and natural gas liquid and through the operations from our newly acquired businesses in logistics, which were acquired through our business combination which closed on October 1, 2024.
For the years ended December 31, 2024 and 2023, costs of revenue were $79,592,036 and $54,300,788, respectively, representing an increase of $25,291,248 or 46.58%. The increase in the cost of revenue is primarily attributed to the cost of goods sold for our logistics and terminaling realized through the operations from our newly acquired Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024.
Gross Profit and Gross Margin
For the years ended December 31, 2024 and 2023, we realized gross profit of $10,219,204 and $5,020,964, respectively, representing an increase of $5,198,240 or 103.53%. For the years ended December 31, 2024 and 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.
Our gross margin will continue to be affected by a variety of factors that include the market prices of our oil products, the volume produced by our facilities, and our ability to raise capital to continue to fund our operations or other ancillary agreements outside of the oil gathering, transportation, and storage activities.
Operating Expenses
Our operating expenses consist primarily of marketing, general and administrative expenses, impairment loss, and amortization and depreciation expense. Marketing expenses include marketing fees of company representatives for marketing the business and its products and services. General and administrative expenses include professional services, including audit, tax, and legal fees associated with the costs for services in finance, accounting, administrative activities and the formation and compliance of a public company. Impairment loss includes the expense associated with events or changes in circumstances that indicate the carrying amount of an asset may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized. Amortization and depreciation expense uses the useful life of the asset to calculate the amortization or depreciation expense in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and management’s judgment.
For the years ended December 31, 2024 and 2023, we realized operating expenses of $32,214,497 and $11,352,624, which represents an increase of $20,861,873, or 183.76%. Our operating expenses increased due to the operations from our newly acquired Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024, and impairment expense of $8,632,773, which was mainly attributed to an impairment loss of $7,047,179 for related to the impairment of our Kuwait RPCs and the impairment loss on our ancillary agreements, including the exclusive license agreement for the development and use of a nanosponge technology of $1,530,496 for the year ended December 31, 2024.
Loss from Operations
For the years ended December 31, 2024 and 2023, we realized a loss from operations of $21,995,293 and $6,331,660, which represents an increase of $15,663,633, or 247.39%. The increase in loss is attributed to the net effect of the operations from our newly acquired Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024, and the impairment loss of $7,047,179 on its Kuwait RPCs and impairment loss of $1,530,496 on the exclusive nanosponge license for the year ended December 31, 2024.
Interest expense
For the years ended December 31, 2024 and 2023, we realized interest expense of $4,816,692 and $4,025,077, which represents an increase of $791,615, or 19.67%. The increase in interest expense is mainly attributable to the net effect of the accrued interest on newly acquired debt from the close of the acquisition of the Endeavor Entities on October 1, 2024, and the amendment of our note issued as consideration in the 2022 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 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.
37
Unrealized loss on marketable securities
For the years ended December 31, 2024 and 2023, we reported an unrealized gain of $165,275 and an unrealized loss of $1,156,928 on marketable securities, which represents an increase in the unrealized gain of $1,322,203, or 114.29%. 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 gain as noted above.
Gain on deconsolidation of variable interest entity
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. The assets ($10.2 million), liabilities ($551,950) and equity ($10.1 million) related to VWFI were removed from our financial statements (Note 3 Principles of Consolidation), resulting in the gain on deconsolidation.
Provision for income tax
The Company recorded an income tax provision of $126,869 and 92,703 for the years ended December 31, 2024 and 2023, respectively. The Company’s effective tax rate for 2024 and 2023 was -0.57% and -0.88%, which was the result of the (provision) or benefit of book income/losses offset by an additional valuation allowance on the net operating losses.
Noncontrolling interest
Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. The decrease in noncontrolling interest was due primarily related to the noncontrolling interest’s allocation of the impairment expenses noted above.
Segment Operating Results for the Years Ended December 31, 2024 and 2023
Operating Results of our Terminaling and Storage Segment:
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| Revenues | $ | 39,829,406 | $ | 46,202,141 | ||||||||||||
| Revenues- related party | 31,199,089 | 13,069,611 | ||||||||||||||
| Total revenues | 71,028,495 | 59,271,752 | $ | 11,756,743 | 19.84 | % | ||||||||||
| Cost of revenues | 65,788,017 | 54,300,788 | 11,487,229 | 21.15 | % | |||||||||||
| Gross profit | 5,240,478 | 4,970,964 | 269,514 | 5.42 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 598,465 | 718,548 | (120,083 | ) | (16.71 | )% | ||||||||||
| Amortization and depreciation | 4,997,297 | 2,961,902 | 2,035,395 | 68.72 | % | |||||||||||
| Total operating expenses | 5,595,762 | 3,680,450 | 1,915,312 | 52.04 | % | |||||||||||
| Loss from operations | (355,284 | ) | 1,290,514 | (1,645,798 | ) | (127.53 | )% | |||||||||
| Interest expense | (1,248,138 | ) | (548,500 | ) | (699,638 | ) | 127.55 | % | ||||||||
| Loss before provision for income taxes | $ | (1,603,422 | ) | $ | 742,014 | $ | (2,345,436 | ) | (316.09 | )% | ||||||
38
Revenue
The increase in revenue is primarily attributed to the net effect of an increase in related party volumes purchased and processed at our Silver Fuels Delhi facility of approximately $8.1 million, and additional revenues of approximately $3.6 million from our newly acquired or newly formed entities related to the Endeavor Entities acquisition, which were acquired through our business combination, which closed on October 1, 2024.
Cost of Revenue
The increase in the cost of revenue is primarily attributed to the cost of goods sold related to the increase in related party volumes purchased and processed at our Silver Fuels Delhi facility, and additional costs of goods sold from our newly acquired or newly formed entities related to the Endeavor Entities acquisition, which were acquired through our business combination, which closed on October 1, 2024.
Operating Expenses
Our operating expenses increased due to the increase in amortization and depreciation from the acquired customer relationships and property and equipment from our newly acquired Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024.
Interest Expense
The increase in interest expense is attributed to newly acquired loans and notes payable assumed from our newly acquired Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024.
Operating Results of our Transportation Logistics Segment:
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| Revenues | $ | 18,782,745 | $ | - | $ | 18,782,745 | 100 | % | ||||||||
| Cost of revenues | 13,804,019 | - | 13,804,019 | 100 | % | |||||||||||
| Gross profit | 4,978,726 | - | 4,978,726 | 100 | % | |||||||||||
| Operating expenses: | 100 | % | ||||||||||||||
| General and administrative | 2,194,857 | - | 2,194,857 | 100 | % | |||||||||||
| Amortization and depreciation | 5,187,972 | - | 5,187,972 | 100 | % | |||||||||||
| Total operating expenses | 7,382,829 | - | 7,382,829 | 100 | % | |||||||||||
| Loss from operations | (2,404,103 | ) | - | (1,404,103 | ) | 100 | % | |||||||||
| Other income (expense), net | (1,410,498 | ) | - | (1,410,498 | ) | 100 | % | |||||||||
| Loss before provision for income taxes | $ | (3,814,601 | ) | $ | - | $ | (3,814,601 | ) | 100 | % | ||||||
This operating segment in its entirety was acquired from our business combination acquisition of the Endeavor Entities’ businesses, which closed on October 1, 2024.
39
Operating Results of our Corporate and Other:
For information purposes, we have reported separately “Corporate and Other”, which is not determined to be an operating segment, but allows for analysis of non-operating entities and shared services and personnel that support both of the operating segments. Corporate and Other contains expenses for the corporate entity and non-operating entities, such as corporate overhead payroll expenses, stock-based compensation, corporate legal and audit expenses, impairment expense not related to operating segments, interest expense from loans at the corporate level, and amortization of intangible assets held at corporate and non-operating entities.
| 2024 | 2023 | Change ($) | Change (%) | |||||||||||||
| Revenues | $ | - | $ | 50,000 | ||||||||||||
| Total revenues | - | 50,000 | $ | (50,000 | ) | (100.00 | )% | |||||||||
| Gross profit | - | 50,000 | (50,000 | ) | (100.00 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 15,268 | 3,070 | 12,198 | 397.33 | % | |||||||||||
| General and administrative | 9,412,709 | 6,698,262 | 2,714,447 | 40.52 | % | |||||||||||
| Impairment expense | 8,632,773 | - | 8,632,773 | 100.00 | % | |||||||||||
| Amortization and depreciation | 1,175,156 | 970,842 | 204,314 | 21.05 | % | |||||||||||
| Total operating expenses | 19,235,906 | 7,672,174 | 11,563,732 | 150.72 | % | |||||||||||
| Loss from operations | (19,235,906 | ) | (7,622,174 | ) | (11,613,732 | ) | 152.37 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Unrealized gain (loss) on marketable securities | 165,275 | (1,156,928 | ) | 1,322,203 | (114.29 | )% | ||||||||||
| Gain on deconsolidation of variable interest entity | - | 438,099 | (438,099 | ) | (100.00 | )% | ||||||||||
| Gain on deconsolidation of subsidiary | 177,550 | - | 177,550 | 100.00 | % | |||||||||||
| Interest income | 29,546 | 14,953 | 14,593 | 97.59 | % | |||||||||||
| Interest expense | (1,936,040 | ) | (417,637 | ) | (1,518,403 | ) | 363.57 | % | ||||||||
| Interest expense- related parties | (121,458 | ) | (3,058,940 | ) | 2,937,482 | (96.03 | )% | |||||||||
| Other income | 115,000 | 318,041 | (203,041 | ) | (63.84 | )% | ||||||||||
| Total other income (expense) | (1,570,127 | ) | (3,862,412 | ) | 2,292,285 | (59.35 | )% | |||||||||
| Loss before provision for income taxes | (20,806,033 | ) | (11,484,586 | ) | (9,321,447 | ) | 81.16 | % | ||||||||
| Provision for income taxes | (126,869 | ) | (92,703 | ) | (34,166 | ) | 36.86 | % | ||||||||
| Consolidated net loss | (20,932,902 | ) | (11,577,289 | ) | (9,355,613 | ) | 80.81 | % | ||||||||
| Less: Net loss attributable to noncontrolling interests | (4,161,105 | ) | (96,650 | ) | (4,064,455 | ) | 4,205.33 | % | ||||||||
| Net loss attributable to Vivakor, Inc. | $ | (16,771,797 | ) | $ | (11,480,639 | ) | $ | (5,291,158 | ) | 46.09 | % | |||||
Operating Expenses
Our operating expenses increased due to the acquisition of the workforce of the Endeavor Entities’ businesses, which were acquired through our business combination, which closed on October 1, 2024, including multiple new executives and administrative personnel, where stock based compensation increase approximately $1.3 million, and benefits, bonuses and new employee contracts increased approximately $500 thousand, and consultants and merger and acquisition expenses were approximately $900 thousand. The increase in our impairment expense was mainly attributed to an impairment loss of $7 million related to the impairment of our Kuwait RPCs and the impairment loss on our ancillary agreements, including the exclusive license agreement for the development and use of a nanosponge technology of $1,5 million.
Unrealized loss on marketable securities
Our marketable securities are 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 as noted above.
40
Interest expense
The decrease in interest expense is mainly attributable to the amendment of our note issued as consideration in the 2022 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 to the amount of the undiscounted future cash flows on the note to maturity in 2023, and therefore no interest expense is realized for the remainder of the note to maturity.
Noncontrolling interest
Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. The decrease in noncontrolling interest was due primarily related to the noncontrolling’s allocation of the impairment expenses noted above.
Cash flows
The following table sets forth the primary sources and uses of cash and cash equivalents for the years ended December 31, 2024 and 2023 as presented below:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used) in operating activities | $ | 1,810,827 | $ | (764,902 | ) | |||
| Net cash provided by (used) in investing activities | 302,188 | (3,712,839 | ) | |||||
| Net cash provided by financing activities | 819,670 | 2,039,255 | ||||||
Liquidity and Capital Resources
We have historically suffered net losses and cumulative negative cash flows from operations and, as of December 31, 2024 and 2023, we had an accumulated deficit of approximately $99 million and $65.9 million. As of December 31, 2024 and 2023, we had a working capital deficit of approximately $101.5 million and $34.9 million, respectively.
As of December 31, 2024 and 2023, we had cash and cash equivalents of $3.7 million and $744,307, which includes $3 million and none as restricted cash, respectively.
To date we have financed our operations primarily through debt financing, private equity offerings. The Company’s Common Stock began trading on the Nasdaq Capital Market under the symbol “VIVK”.
For the years ended December 31, 2024 and 2023, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $26,350,925 and $10,835,275, a $66,058 and $88,323 related to our provision for income taxes and the net effect on deferred tax liabilities, our depreciation and amortization of $11,360,425 and $3,932,744, an impairment loss of $8,632,773 and none, a gain on the deconsolidation of a variable interest entity of none and $438,099, an increase in accounts receivable of $5,116,717 and an decrease of $930,893, a decrease of $7,488,301 and increase of $366,592 in accounts payable, an increase in other assets of $2,184,691 and $417,890. For the years ended December 31, 2024 and 2023, we were also able to issue stock for services of $19,998 and none, and stock-based compensation of $2,551,959 and $1,597,881 in lieu of using cash. We also realized interest expense on loans and notes payable of $4,816,692 and $3,476,577 related newly acquired debt from the Endeavor Entities, which were acquired through our business combination, which closed on October 1, 2024. For the years ended December 31, 2024 and 2023, we also realized an unrealized gain of $165,275 and an unrealized loss of $1,156,928 on marketable securities as described above.
41
For the years ended December 31, 2024 and 2023, our net cash used in investing activities was mainly attributed to the following: Our purchase of equipment of $4,539,882 and $3,320,918 related to the manufacturing of our RPCs, wash plant and pipeline facilities. The Company also reported $210,862 of notes receivable assumed and a decrease in $181,059 of cash and cash equivalents in the deconsolidation of a variable interest entity and as of December 31, 2023. We also acquired cash of $4,842,070 from the Endeavor Entities acquisition, which we acquired through our business combination, which closed on October 1, 2024.
Our net cash provided by our financing activities was mainly attributed to the net effect of the following events:
For the years ended December 31, 2024 and 2023, we received proceeds of $7,509,701 and $2,956,197 related to the issuance of notes and other loans, which includes proceeds of $1,664,150 and $11,500 from related parties. For the years ended December 31, 2024 and 2023, we paid down notes payable and related party notes payable by $6,111,208 and $470,160. For the years ended December 31, 2024 and 2023, we paid down finance lease liabilities by $2,003,823 and $446,782. For the year ended December 31, 2024 we received proceeds of $1,425,000 from the sale of our common stock.
We have historically suffered net losses and cumulative negative cash flows from operations, and as of December 31, 2024, we had an accumulated deficit of approximately $99 million. As of December 31, 2024 and 2023, we had a working capital deficit of approximately $101.5 million and $34.9 million, respectively. As of December 31, 2024, we had cash of approximately $3.7 million, of which $3 million is restricted cash. In addition, we have obligations to pay approximately $61 million of debt within one year of the issuance of these financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
During the year ended December 31, 2024, subject to available cash flows, the Company continued its strategy to monetize its intellectual properties and execute its business plan, including the acquisition of the Endeavor Entities. To date we have financed our operations primarily through debt financing, and private and public equity offerings.
Based on the above, we believe there is substantial doubt about the Company’s ability to continue as a going concern. The Company has prepared the consolidated financial statements on a going concern basis. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Management cannot provide any assurance that the Company will be able to execute its plans to raise additional capital, close its merger and acquisitions, or that its operations or business plan will be profitable.
Our ability to continue to access capital could be affected adversely by various factors, including general market and other economic conditions, interest rates, the perception of our potential future earnings and cash distributions, any unwillingness on the part of lenders to make loans to us and any deterioration in the financial position of lenders that might make them unable to meet their obligations to us. If we cannot raise capital through public or private debt financings, equity offerings, or other means, our ability to grow our business may be negatively affected. In such a case, we may need to suspend site and plant construction or further acquisitions until market conditions improve.
Contractual Obligations
Our contractual obligations as of December 31, 2024 for finance lease liabilities are for certain land, property, plant, and equipment that were acquired in the closing of our business combination, which acquired the Endeavor Entities on October 1, 2024, which leases end in 2025 and 2026. Finance lease obligations as of December 31, 2024 are as follows:
| 2025 | $ | 4,267,396 | ||
| 2026 | 3,109,343 | |||
| Total | $ | 7,376,738 |
42
Our contractual obligations as of December 31, 2024 for operating lease liabilities are for office warehouse space, land, and truck yards, which leases end in 2026 through 2027, except for a land lease which ends in 2042. Operating lease obligations as of December 31, 2024 are as follows:
| 2025 | $ | 2,636,151 | ||
| 2026 | 1,246,055 | |||
| 2027 | 261,441 | |||
| 2028 | 173,899 | |||
| 2029 | 177,855 | |||
| Thereafter | 2,683,523 | |||
| Total | $ | 7,178,923 |
Interest Rate and Market Risk
Interest Rate Risk
Interest rate risk is the potential for reduced net interest income and other rate-sensitive income resulting from adverse changes in the level of interest rates. We do not have variable interest rate-sensitive income agreements. We do have financing arrangement, in which notes have variable interest rates based on the prime rate, which exposes us to further interest expense if the prime rate increases.
Market Risk — Equity Investments
Market risk is the potential for loss arising from adverse changes in the fair value of fixed-income securities, equity securities, other earning assets, and derivative financial instruments as a result of changes in interest rates or other factors. We own equity securities that are publicly traded. Because the fair value of these securities may fall below the cost at which we acquired them, we are exposed to the possibility of loss. Equity investments are approved, monitored, and evaluated by members of management.
Inflation
Prolonged periods of slow growth, significant inflationary pressures, volatility and disruption in financial markets, could lead to increased costs of doing business. Inflation generally will cause suppliers to increase their rates, and inflation may also increase employee salaries and benefits. In connection with such rate increases, we may or may not be able to increase our pricing to consumers. Inflation could cause both our investment and cost of revenue to increase, thereby lowering our return on investment and depressing our gross margins.
Off Balance Sheet Arrangements
None.
Critical Accounting Policies & Use of Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements included in this report, which have been prepared in accordance with GAAP. For further information on the critical accounting policies see Note 3 of the Notes to the Consolidated Financial Statements. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. Estimates by their nature are based on judgments and available information. Our estimates are made based upon historical factors, current circumstances and the experience and judgment of management. Assumptions and estimates are evaluated on an ongoing basis, and we may employ outside experts to assist in evaluations. Therefore, actual results could materially differ from those estimates under different assumptions and conditions. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, stock-based compensation, income taxes, effective interest rates related to long-term debt, marketable securities, lease assets and liabilities, valuation of stock used to acquire assets, and derivatives.
43
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8 - Financial Statements and Supplementary Data
The consolidated financial statements required by this item begin on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A - Controls and Procedures
Our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, as of December 31, 2024, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified include the following: (1) We did not have enough personnel in our accounting and financial reporting functions. Due to insufficient personnel in our accounting department, we were not able to achieve adequate segregation of duties, and, as a result, we did not have adequate review controls surrounding: (i) our technical accounting matters in our financial reporting process, and (ii) the work of specialists involved in the estimation process. Due to new relationships with a small banking institution and consultants in 2023, we were not able to achieve adequate controls surrounding the review and dual authorization of certain treasury transactions and fixed assets. (2) We did not always follow certain review procedures related to corporate governance. Due to a vacancy of an independent audit committee chairman with financial expertise, and failing to adhere to certain corporate governance administrative procedures, we did not achieve adequate review at the independent Board of Director level over subjective and complex accounting and risk assessment. These control deficiencies, which are pervasive in nature, result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Since our assessment as of December 31, 2024, we have hired additional external accounting staff, whom are consultants with expertise in research and technical guidance, and we are working to retain additional qualified valuation experts that report on their internal controls. We believe that these additions may provide for the remediation of these material weaknesses in 2025.
We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
44
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the fourth quarter ended December 31, 2023 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s report on internal control over financial reporting.
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2024 for the reasons discussed above.
Item 9B - Other Information
Item 9C - Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
45
PART III
Item 10 - Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table sets forth information about our directors, executive officers and significant employees.
| Name | Age | Position(s) | ||
| James Ballengee | 59 | Chief Executive Officer (Principal Executive Officer) and Director | ||
| Tyler Nelson | 44 | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director | ||
| Russ Shelton | 48 | Executive Vice President & Chief Operating Officer | ||
| Patrick M. Knapp | 39 | Executive Vice President, General Counsel & Secretary | ||
| John Harris | 76 | Independent Director | ||
| Albert Johnson | 50 | Independent Director | ||
| Michael Thompson | 55 | Independent Director |
Executive Officers
James H. Ballengee joined Vivakor as Chief Executive Officer and Chairman of the Board in 2022. Prior to joining the Company, Mr. Ballengee had more than two decades of experience in midstream oil and gas senior management roles. Previously, he had been involved in two major private equity portfolio companies holding positions including Chief Commercial Officer, Chief Financial Officer, Chief Executive Officer, and Chairman of the Board. From 1997 through 2010, Mr. Ballengee served first as Chief Financial Officer, then Chief Executive Officer, then Chief Commercial Officer of Taylor Logistics, LLC, a Halifax Group-backed private equity portfolio company focused on crude oil marketing and logistics, which he led through a successful sale to Gibson Energy, Inc. (TSX: GEI). From 2010 to 2013, he was Chief Executive Officer and Chairman of the Board of Bridger Group, LLC, a private crude oil marketing firm. From 2013 to 2015, he was a board member and Chief Commercial Officer of Bridger, LLC, a Riverstone Holdings-backed private equity portfolio company focused on crude oil marketing and logistics, which he led through a successful sale to Ferrellgas Partners, LP (NYSE: FGP). Mr. Ballengee currently manages an exempt family office, which in turn holds and manages investments principally in the oil and gas, sports and entertainment, and real estate sectors. He has an undergraduate degree in accounting from Louisiana State University—Shreveport.
Tyler Nelson joined Vivakor on a part-time basis as Chief Financial Officer in 2014 and has served as full-time Chief Financial Officer since September 2020. Mr. Nelson joined the Board of Directors of Vivakor in January 2023. Mr. Nelson is a CPA who worked from 2006 to 2011 in Audit and Enterprise Risk Services at Deloitte LLP (USA) and later at KSJG, LLP (later acquired by Withum+Brown, PC). He worked with clients with assets of more than $100 billion and annual revenues of more than $15 billion, which are considered some of the most respected financial institutions in the world. In 2011, Mr. Nelson began working for LBL Professional Consulting, Inc. where he provided merger and acquisition, initial public offering, and interim chief financial officer services to clients. Mr. Nelson continues to sit on the Board of Directors and remains an officer of LBL Professional Consulting, Inc. Mr. Nelson earned a Master’s Degree in Accountancy from the University of Illinois- Urbana-Champaign, and a Bachelor’s Degree in Economics with a minor in Business Management from Brigham Young University.
Russ Shelton joined the Company as its Executive Vice President & Chief Operating Officer in October 2024. He is a seasoned operations executive with more than three decades of management experience with midstream trucking, terminaling, and marketing companies, including for several of the business units being acquired in the Company’s purchase of the Endeavor Entities. Mr. Shelton was most recently the Chief Operating Officer for Endeavor Crude, LLC, and prior to that served as its Vice President of Transportation since 2023. Prior to Endeavor Crude, he worked as Director of Operations for Senergy Petroleum from 2021-23, and prior to that worked as Director of Transportation for Pilot Travel Centers LLC from 2018-21.
46
Patrick M. Knapp joined the Company in June 2024 as its Executive Vice President, General Counsel, & Secretary. He is an accomplished corporate securities lawyer whose practice has focused on M&A, financings, and complex commercial transactions principally relating to midstream liquids such as crude oil, refined products, and oilfield produced water. He has represented oil and gas producers, marketers, refiners, midstream infrastructure providers, OFS companies, and oilfield waste recyclers in billions of dollars’ worth of transactions in the United States, Canada, and Mexico. Prior to Vivakor, he was a partner in the energy practice at Jackson Walker LLP from 2021-2024, where he organized and led the firm’s oilfield produced water working group. From 2019-2021, he was a partner at the international law firm McGuireWoods LLP. Knapp holds a bachelor’s degree in economics and marketing from the University of Notre Dame and a juris doctor from Southern Methodist University. Mr. Knapp is admitted to practice law in Texas.
Directors
James Ballengee - See “Executive Officers”
Tyler Nelson - See “Executive Officers”
John R. Harris, age 75, combines over 35 years of experience in Board of Directors, CEO and Senior Management positions in a variety of industries including technology services, telecommunications, healthcare, and business process outsourcing. He currently serves on the board of directors for the Hackett Group, Hifu Prostate Services, GenHemp, and Everservice. Since 2009 Mr. Harris has primarily been a private investor, advisor, and board member for both public and privately held companies. From 2006 to 2009 he was CEO of Etelecare Global solutions a leading provider of offshore teleservices to Fortune 1,000 companies. From 2003 to 2005 he served as the CEO of Seven Worldwide, a digital content management company where he was previously a member of the board of directors of the company. From 2001 to 2003, Mr. Harris consulted with a variety of venture-backed early-stage companies. Previously Mr. Harris spent 25 years with Electronic Data Systems in a variety of senior executive positions to include President of the 4 strategic business units serving the telecommunications and media industries world-wide. He was elected as a Corporate Vice-President and Officer of the company. During his tenure with EDS, he gained extensive international experience working and living in the Middle East, Europe and Asia. Mr. Harris has extensive public company board experience through prior services on the boards of Premier Global Services, Cap Rock Communications, Genuity, Ventiv Health, Startek, Sizmek, Mobivity and Applied Graphic Technologies and served in a variety of positions to include board member, committee chairman, lead director and chairman. Mr. Harris received his BBA and MBA from the University of West Georgia where he serves on the Board of Advisors to the Richards School of Business.
Albert Johnson, age 49, brings over 25 years of experience in operations and senior management in the midstream and downstream sectors of the oil and gas industry. Previously, Mr. Johnson had been involved in public and privately held companies holding various positions in senior management and serving as a member of boards of directors. From 2014 to 2015, he was Director of Business Development for Sunoco Logistics, LP., a publicly traded master limited partnership involved in the marketing, trading, transportation and terminaling of crude oil, products and NGLS. From July 2015 through May 2017, Mr. Johnson was the Vice President of Business Development for Navigator Energy Services, LLC., a private equity backed company involved in the gathering, transportation and terminaling of crude oil. From March 2018 to November 2022, Mr. Johnson served as Executive Vice President Business Development for ARX Energy, LLC. Since November 2022, Mr. Johnson has served as Chief Commercial Officer for ARX Energy, LLC., a privately held company involved in building a world class clean fuels facility in the Port of Brownsville, Texas. Mr. Johnson served on the Board of Directors for West Texas Gulf Pipe Line Company and on the Management Committee of SunVit Pipeline, LLC. He has an undergraduate degree in History from the University of Texas at Austin and an MBA finance concentration from Jones Graduate School of Business at Rice University.
Michael Thompson, age 55, combines over 25 years of experience in company directorship. Previously, he had been involved in four companies and two nonprofit organizations, holding positions including President, Representative Director, and board member. Mr. Thompson presently serves as the Global Head of Multi-Vendor Solutions at HP. From 2016 to 2021, Mr. Thompson has served on the Board of Directors as the Chair of the Audit Committee and Conflicts Committee of Rhino Resources, LTD, a company concentrated on coal and energy-related assets and activities. From 2014 to 2016, Mr. Thompson was a Director and Chair of the Strategic Planning Committee of Idaho Aquarium, a nonprofit aquarium. From 2010 to 2012, Mr. Thompson was a member of the board of Asister, a nonprofit organization focused on designing and distributing appliances in Latin America. From 2005 to 2009, Mr. Thompson served on the Board of Directors for Environmental Energy Services, Inc. and Blaze Energy, Inc., energy services and asset accumulation companies. From 1996 to 1999, he served as President and Representative Director of Micron Electronics Japan, K.K. and Micron Electronics China. Mr. Thompson has a bachelor’s degree in Business and Japanese from Brigham Young University and a master’s degree in Organizational Leadership from Gonzaga University. Mr. Thompson is a member of the National Association of Corporate Directors and brings to our Board over 25 years of experience in corporate governance, compliance and turnaround.
47
Family Relationships
There are no family relationships between any of our directors and executive officers.
Corporate Governance Overview
Board Composition and Director Independence
Our Board of Directors consists of five members. The directors are elected at each annual meeting to hold office until the next annual meeting and until their successors are duly elected and qualified. The Company defines “independent” as that term is defined in the Nasdaq rules.
In making the determination of whether a member of the board is independent, our board considers, in addition to Nasdaq rules, among other things, and transactions and relationships between each director and his immediate family and the Company, including those reported under the caption “Related Party Transactions.” The purpose of this review is to determine whether any such relationships or transactions are material and, therefore, inconsistent with a determination that the directors are independent. On the basis of such review and its understanding of such relationships and transactions, our Board of Directors affirmatively determined that John Harris and Albert Johnson are qualified as independent and do not have any material relationships with us that might interfere with his exercise of independent judgment.
Our Board, as currently constituted, has a majority of directors who would be considered “independent directors,” as that term is defined in Nasdaq Listing Rule 5605(a)(2). Consistent with Nasdaq Listing Rules 5605(b)(1)(A) and Rule 5605(c)(4), Nasdaq provided us a cure period until June 3, 2024 to evidence compliance with the Listing Rules.
Board Committees
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee has its own charter, which is available on our website at www.vivakor.com. Each of the board committees has the composition and responsibilities described below.
Members will serve on these committees until their resignation or until otherwise determined by our Board of Directors.
Audit Committee
Our Audit Committee is currently comprised of Michael Thompson, Albert Johnson and John Harris, each of whom qualify as an independent director under applicable Nasdaq and SEC rules, and “financially literate” under applicable Nasdaq rules. Our board has determined that Michael Thompson, qualifies as an “audit committee financial expert”, as such term is defined in Item 407(d)(5) of Regulation S-K. Michael Thompson serves as the chairman of the Audit Committee.
The Audit Committee oversees our accounting and financial reporting processes and oversee the audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting. The responsibilities of this committee include, but are not limited to:
| ● | selecting and recommending to our Board of Directors the appointment of an independent registered public accounting firm and overseeing the engagement of such firm; | |
| ● | approving the fees to be paid to the independent registered public accounting firm; | |
| ● | helping to ensure the independence of the independent registered public accounting firm; | |
| ● | overseeing the integrity of our financial statements; |
48
| ● | preparing an audit committee report as required by the SEC to be included in our annual proxy statement; | |
| ● | resolving any disagreements between management and the auditors regarding financial reporting; | |
| ● | reviewing with management and the independent auditors any correspondence with regulators and any published reports that raise material issues regarding the Company’s accounting policies; |
| ● | reviewing and approving all related-party transactions; and | |
| ● | overseeing compliance with legal and regulatory requirements. |
The Audit Committee is authorized to retain independent legal and other advisors and conduct or authorize investigations into any matter within the scope of its duties.
Compensation Committee
Our Compensation Committee is currently comprised of John Harris, Albert Johnson and Michael Thompson, each of whom qualify as an independent director under applicable Nasdaq rules. John Harris serves as the chairman of the Compensation Committee.
Our Compensation Committee assists the board of directors in the discharge of its responsibilities relating to the compensation of the board of directors and our executive officers.
The responsibilities of this committee include, but are not limited to:
| ● | reviewing and approving on an annual basis the corporate goals and objectives with respect to compensation for our Chief Executive Officer; | |
| ● | reviewing, approving and recommending to our board of directors on an annual basis the evaluation process and compensation structure for our other executive officers; | |
| ● | determining the need for and the appropriateness of employment agreements and change in control agreements for each of our executive officers and any other officers recommended by the Chief Executive Officer or Board of Directors; | |
| ● | providing oversight of management’s decisions concerning the performance and compensation of other company officers, employees, consultants and advisors; | |
| ● | reviewing our incentive compensation and other equity-based plans and recommending changes in such plans to our Board of Directors as needed, and exercising all the authority of our Board of Directors with respect to the administration of such plans; |
| ● | reviewing and recommending to our Board of Directors the compensation of independent directors, including incentive and equity-based compensation; and | |
| ● | selecting, retaining and terminating such compensation consultants, outside counsel or other advisors as it deems necessary or appropriate. |
The Compensation Committee may delegate any of its responsibilities to subcommittees as it deems appropriate. The Compensation Committee is authorized to retain independent legal and other advisors, and conduct or authorize investigations into any matter within the scope of its duties.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee is currently comprised of Albert Johnson, John Harris and Michael Thompson, each of whom qualify as an independent director under applicable Nasdaq rules. Albert Johnson serves as the chairman of the Nominating and Corporate Governance Committee.
49
The purpose of the Nominating and Corporate Governance Committee is to recommend to the Board of Directors nominees for election as directors and persons to be elected to fill any vacancies on the Board of Directors, develop and recommend a set of corporate governance principles and oversee the performance of the Board of Directors.
The responsibilities of this committee include, but are not limited to:
| ● | recommending to the Board of Directors nominees for election as directors at any meeting of stockholders and nominees to fill vacancies on the board; | |
| ● | considering candidates proposed by stockholders in accordance with the requirements in the Committee charter; | |
| ● | overseeing the administration of the Company’s code of business conduct and ethics; | |
| ● | reviewing with the entire Board of Directors, on an annual basis, the requisite skills and criteria for board candidates and the composition of the board as a whole; | |
| ● | the authority to retain search firms to assist in identifying board candidates, approve the terms of the search firm’s engagement, and cause the Company to pay the engaged search firm’s engagement fee; | |
| ● | recommending to the Board of Directors on an annual basis the directors to be appointed to each committee of the Board of Directors; | |
| ● | overseeing an annual self-evaluation of the Board of Directors and its committees to determine whether it and its committees are functioning effectively; and | |
| ● | developing and recommending to the board a set of corporate governance guidelines applicable to the Company. |
The Nominating and Corporate Governance Committee may delegate any of its responsibilities to subcommittees as it deems appropriate. The Nominating and Corporate Governance Committee is authorized to retain independent legal and other advisors and conduct or authorize investigations into any matter within the scope of its duties.
Board Leadership Structure
Currently, Mr. Ballengee is our principal executive officer and chairman of the board.
Risk Oversight
Our Board will oversee a company-wide approach to risk management. Our Board will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our Board will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.
Specifically, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interests. Our board of directors will be responsible for overseeing the management of risks associated with the independence of our Board.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics applicable to our principal executive, financial and accounting officers and all persons performing similar functions. A copy of that code is available on our corporate website at www.vivakor.com. We expect that any amendments to such code, or any waivers of its requirements, will be disclosed on our website.
50
Item 11 - Executive Compensation
Summary Compensation Table
The particulars of compensation paid to the following persons:
| (a) | all individuals serving as our principal executive officer during the year ended December 31, 2024; | |
| (b) | each of our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2024 who had total compensation exceeding $100,000 (if applicable); and | |
| (c) | up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at December 31, 2024 (if applicable), |
who we will collectively refer to as the named executive officers, for the years ended December 31, 2024 and 2023, are set out in the following summary compensation table:
Executive Officers and Directors
The Summary Compensation Table shows certain compensation information for services rendered in all capacities for the fiscal years ended December 31, 2024 and 2023. Other than as set forth herein, no executive officer’s salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the estimated fair value of stock options granted and certain other compensation, if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE**
| Name and Principal Position | Year | Salary ($) |
Bonus |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
||||||||||||||||||||||||||
| James Ballengee | 2024 | 1,000,000 | (2) | -0- | -0- | -0- | -0- | -0- | 76,923 | (6) | 1,076,923 | ||||||||||||||||||||||||
| CEO and Chairman(1) | 2023 | 1,000,000 | (2) | -0- | -0- | -0- | -0- | -0- | 76,923 | (6) | 1,076,923 | ||||||||||||||||||||||||
| Tyler Nelson | 2024 | 450,000 | 100,000 | (3) | 450,000 | (3) | -0- | -0- | -0- | 512,603 | (6)(4) | 1,512,603 | |||||||||||||||||||||||
| CFO | 2023 | 350,000 | 700,000 | -0- | -0- | -0- | -0- | 57,631 | (6) | 1,107,631 | |||||||||||||||||||||||||
| Russ Shelton COO(7) | 2024 | 76,474 | -0- | 150,000 | (3) | -0- | -0- | -0- | 4,734 | 231,208 | |||||||||||||||||||||||||
| Pat Knapp, Exec VP, GC and Secretary(5) | 2024 | 188,461 | -0- | 250,000 | -0- | -0- | -0- | 5,797 | 444,254 | ||||||||||||||||||||||||||
| (1) | Mr. Ballengee was hired as our Chief Executive Officer on October 28, 2022. |
| (2) | Pursuant to Mr. Ballengee’s Employment Agreement, his salary ($1,000,000) is paid in shares of our common stock, priced based on the volume-weighted average price for the preceding five (5) NASDAQ trading days prior to the Effective Date or annual anniversary of his Employment Agreement, as applicable. The five (5) day volume-weighted average price of our common stock for shares issued for his salary from October 28, 2022 to October 27, 2023 was approximately $1.08. As a result, we issued Mr. Ballengee 923,672 shares of our common stock as payment for that salary. The five (5) day volume-weighted average price of our common stock for shares issued for his salary from October 28, 2023 through October 27, 2024 was approximately $0.60. As a result, we issued Mr. Ballengee 1,657,016 shares of our common stock as payment for this salary. We issued Mr. Ballengee an additional 122,679 shares for the remainder of his 2024 salary (through December 31, 2024), valued at the preceding five (5) NASDAQ trading days prior to the annual anniversary of his Employment Agreement (October 28, 2024, or $1.45 per share. |
51
| (3) | Accrued as of December 31, 2024. |
| (4) | Includes $437,839 in payments toward accrued compensation or notes payable due to employee. |
| (5) | Mr. Knapp was hired as our Executive Vice President, General Counsel and Secretary in June 2024. |
| (6) | Includes amounts for accrued employee benefits, including sick and vacation benefits. |
| (7) | Mr. Shelton was hired as our Chief Operating Officer in October 2024. |
| ** | Mr. Les Patterson was listed in our Summary Compensation Table in our Annual Report on Form 10-K for the year ended December 31, 2023, however, we do not consider Mr. Patterson an executive officer and he was only included in our prior Summary Compensation Table as a result of being the third highest paid employee in the company as of December 31, 2023. The Company hired additional executive officers in 2024 and, as a result, Mr. Patterson does not appear in the above Summary Compensation Table. |
Employment Agreements
James Ballengee
On October 28, 2022, we entered into an executive employment agreement with James Ballengee (the “Ballengee Employment Agreement”) with respect to our appointment of Mr. Ballengee as Chief Executive Officer and Chairman of the Board of Directors. Pursuant to the Ballengee Employment Agreement, Mr. Ballengee will receive annual compensation of $1,000,000 payable in shares of our common stock, priced at the volume weighted average price (VWAP) for the five trading days preceding the date of the Ballengee Employment Agreement and each anniversary thereof (the “CEO Compensation”). The CEO Compensation is subject to satisfaction of Nasdaq rules, the provisions of our equity incentive plan and other applicable requirements and shall be accrued if such issuance is due prior to satisfaction of such requirements. Additionally, Mr. Ballengee shall be eligible for a discretionary performance bonus. The Ballengee Employment Agreement may be terminated by either party for any or no reason, by providing a five days’ notice of termination.
Pursuant to the Ballengee Employment Agreement, Mr. Ballengee was granted the right to nominate two additional directors for appointment to the Board in his sole discretion, as well as a third additional director upon issuance of the Note Payment Shares (defined below), subject to such directors passing a background check. Pursuant to the Ballengee Employment Agreement, Mr. Ballengee nominated John Harris and Albert Johnson as Board of Director appointees and both were appointed in January 2023.
On February 26, 2025, we issued James Ballengee, our Chairman, Chief Executive Officer and principal shareholder, 160,266 shares of our common stock under the terms of the Ballengee Employment Agreement for his services rendered from October 28, 2024 to January 27, 2025. The shares were issued as unrestricted shares under our Equity Incentive Plan registered under a Registration Statement on Form S-8. Based on the Ballengee Employment Agreement, we owe Mr. Ballengee 688,891 shares of Common Stock for his employment period beginning October 28, 2024 through October 27, 2025, to be paid in three equal quarterly installments of 172,222 shares of Common Stock, and one installment of 172,225 shares (prior to tax withholdings).
Tyler Nelson
On June 13, 2024, we entered into a new Employment Agreement with Mr. Tyler Nelson with respect to our appointment of Mr. Nelson as Chief Financial Officer. Pursuant to the New Employment Agreement, Mr. Nelson will receive: (i) $450,000 annually (the “Base Salary”); (ii) an annual cash incentive bonus of a minimum of 50% of the Base Salary (a portion of which may be payable in the form of restricted common stock of the Company) and a maximum of 120% of the Base Salary; and (iii) an annual equity incentive bonus of a minimum of 25% of the Base Salary and a maximum of 120% of the Base Salary in shares of restricted stock. Mr. Nelson will also be eligible for a cash transaction bonus (the “Transaction Bonus”) for Qualified Transactions, as defined in the New Employment Agreement, of 0.5% of the enterprise value of the assets, equity or business sold or acquired or the listing value of the equity or debt being listed on a national exchange. For each of the closing of the Merger Agreement and Endeavor MIPA, Mr. Nelson will receive a bonus of $200,000, with $100,000 for each such bonus to be paid in cash and the remaining $100,000 for each such bonus to be paid in shares of our common stock, valued on the date of close of the Merger Agreement and the Endeavor MIPA, respectively. The foregoing bonuses are in lieu of a Transaction Bonus for either the Merger Agreement or the Endeavor MIPA. The new Employment Agreement is for an initial term of two years and will auto-renew for subsequent one-year terms if not terminated by either party at the end of a term, which requires 90 days prior notice. The new Employment Agreement may also be terminated under standard cause and without cause termination and resignation provisions.
52
At the time of entering into the new Employment Agreement, we owed Mr. Nelson $1,167,750 in accrued salary and bonuses, plus interest (together, the “Accrued Compensation”), for serving as our Chief Financial Officer under the Original Agreement. Pursuant to the Settlement Agreement, we agreed with Mr. Nelson on the Accrued Compensation would be paid to Mr. Nelson under of a straight promissory note in the principal amount of the Accrued Compensation (the “Note”). Under the terms of the Note, the amounts due under the Note will accrue interest at 8% per annum, and will be paid to Mr. Nelson by paying him 5% of any money received by us from closed future financings or acquisition/merger/sale transactions until the Note has been paid in full. In the event the Note has not been paid in full by June 30, 2025, the Note will mature and any amounts due thereunder will be due and payable in full in such date.
Under the terms of the Settlement Agreement we issued Mr. Nelson a stock option agreement (the “Option Agreement”) setting forth the stock options Mr. Nelson were issued on June 9, 2022 (the “Grant Date”). Pursuant to the Option Agreement, as of the Grant Date, Mr. Nelson was granted 917,825 stock options (the “Options”) at an exercise price per share of $1.80. The Options shall vest as follows: (i) 360,145 shares on the Grant Date, (ii) 219,312 shares three (3) months after the Grant Date, (iii) 48,338 shares for each of the following six (6) quarters, and (iv) 48,340 shares following the eighth (8th) quarter after the Grant Date. The Options were fully vested as of June 9, 2024.
Under our Employment Agreement with Tyler Nelson, our Chief Financial Officer, he is due bonuses at various times and/or upon certain events happening, namely an annual cash incentive bonus for December 31, 2024 of $225,000, an annual equity incentive bonus of $112,500, and a bonus for the close of the acquisition of the Endeavor Entities of $100,000, totaling $437,500 (the “Nelson Bonuses”). The Nelson Bonuses are due to Mr. Nelson in shares of common stock, which total 462,462 shares of common stock (prior to tax withholdings) based on the calculations in the Nelson Employment Agreement. In payment of the Nelson Bonuses, on February 26, 2025, we issued Mr. Nelson 105,213 shares of our common stock after tax withholdings. The shares were issued as unrestricted shares under our Equity Incentive Plan registered under a Registration Statement on Form S-8.
Russ Shelton
In connection with the Closing of the Endeavor Entities on October 1, 2024, we entered into an executive employment agreement with Russ Shelton (the “Shelton Agreement”) with respect to our appointment of Mr. Shelton as Executive Vice President and Chief Operating Officer. Pursuant to the Shelton Agreement, Mr. Shelton will receive (i) base salary compensation of $337,000 USD annually (the “Base Compensation”); (ii) an annual cash and equity incentive compensation of up to $808,000 based upon certain performance criteria as more particularly described therein. As an inducement to enter into the Shelton Agreement, Mr. Shelton shall receive a one-time signing grant of our common stock equivalent in value to $150,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant, subject to an eighteen (18) month lockup period, which shall be granted promptly after the Effective Date, as defined therein. Pursuant to the Shelton Agreement, Mr. Shelton’s employment is at-will under Texas law, except as modified therein. Mr. Shelton’s employment with Vivakor Administration, LLC, a subsidiary of ours, began on October 1, 2024.
In connection with the Shelton Agreement, Mr. Shelton and Ballengee Holdings, LLC, an affiliate of James H. Ballengee, our Chairman, President, and CEO, have entered into a side letter agreement (the “Shelton Side Letter”) promising Mr. Shelton (i) certain additional Base Compensation equal to the difference between Mr. Shelton’s current salary and $375,000 by January 1, 2025, should we not increase Mr. Shelton’s Base Compensation, as defined in the Shelton Agreement, to such level, and (ii) a one-time special cash bonus of $100,000.00 USD upon completion of an equity capital raise, as more particularly set forth therein.
Pat Knapp
On June 26, 2024, we entered into that certain Executive Employment Agreement with Patrick M. Knapp to join the company as our Executive Vice President, General Counsel, & Secretary (the “Knapp Agreement”).
The Knapp Agreement provides for an annual base salary of $350,000, payable in equal installments every two weeks. In addition, the Knapp Agreement provides for annual incentive cash and equity compensation of up to $840,000 based on certain performance goals as further set forth therein. As an inducement to enter into the Knapp Agreement, Mr. Knapp shall receive a one-time signing grant of our common stock equivalent in value to $250,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant (calculated to be 140,190 shares based on the effective date of the Knapp Agreement), subject to an eighteen (18) month lockup period and a conditional clawback obligation concurrent therewith, which shall be granted within thirty (30) days after the Start Date, as defined therein. Pursuant to the Knapp Agreement, Mr. Knapp’s employment is at-will under Texas law, except as modified therein. Mr. Knapp’s employment began on June 26, 2024.
53
Stock Incentive Plan
Equity Incentive Plans
Our Board of Directors and the holders of a majority of our common stock approved a new equity incentive plan in November 2023, which authorizes the issuance of up to 40,000,000 shares of common stock through the grant of stock options (including incentive stock options qualifying under section 422 of the Code and nonstatutory stock options), restricted stock awards, stock appreciation rights, restricted stock units, performance awards, other stock-based awards or any combination of the foregoing.
Our Board of directors approved an equity incentive plan in February 2022, which authorizes the issuance of up to 2,000,000 shares of common stock through the grant of stock options (including incentive stock options qualifying under section 422 of the Code and nonstatutory stock options), restricted stock awards, stock appreciation rights, restricted stock units, performance awards, other stock-based awards or any combination of the foregoing.
Outstanding Equity Awards at December 31, 2024
The following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers on December 31, 2024:
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
| Name |
Number of Exercisable |
Number of Unexercisable |
Equity Incentive (#) |
Option ($) |
Option Expiration Date |
Number of |
Market Value |
Equity Incentive |
Equity Incentive |
||||||||||||||||||||||||||
| James Ballengee(1) | -0- | -0- | -0- | N/A | N/A | 566,212 | 416,732 | (2) | -0- | -0- | |||||||||||||||||||||||||
| Tyler Nelson | 917,825 | -0- | -0- | 1.80 | June 8, 2032 | -0- | -0- | 112,500 | 82,800 | (2) | |||||||||||||||||||||||||
| Russ Shelton | -0- | -0- | -0- | N/A | N/A | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||
| Pat Knapp | -0- | -0- | -0- | N/A | N/A | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||
| (1) | Includes shares issued to Mr. Ballengee under our equity incentive plan for his annual salary. | |
| (2) | Valued as of April 7, 2025. |
Aggregated Option Exercises
There were no options exercised by any officer or director of our company during our twelve-month period ended December 31, 2024.
54
Employee Pension, Profit Sharing or other Retirement Plan
We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.
Director Compensation
The table below shows the compensation paid to our directors during the year ended December 31, 2024.
| Name | Fees Earned or Paid in Cash ($) |
Stock Awards |
Option Awards |
Non-Equity |
Nonqualified |
All Other |
Total |
|||||||||||||||||||||
| James Ballengee | - | - | - | - | - | - | - | |||||||||||||||||||||
| Tyler Nelson | - | - | - | - | - | - | - | |||||||||||||||||||||
| John Harris(2) | 60,000 | (1) | 50,000 | - | - | - | - | 110,000 | ||||||||||||||||||||
| Albert Johnson(3) | 60,000 | (1) | 50,000 | - | - | - | - | 110,000 | ||||||||||||||||||||
| Michael Thompson(4) | 34,615 | (1) | 107,845 | - | - | - | - | 142,460 | ||||||||||||||||||||
| (1) | $15,000 was accrued as of December 31, 2024. |
| (2) | John Harris was appointed to the Board of Directors on January 16, 2023. He qualifies as an independent director and serves on the Board’s Audit Committee, Compensation Committee and Nominating Committee, serving as the chairman of the Compensation Committee. |
| (3) | Albert Johnson was appointed to the Board of Directors on January 16, 2023. He qualifies as an independent director and serves on the Board’s Audit Committee, Compensation Committee and Nominating Committee, serving as the chairman of the Nominating Committee. |
| (4) | Michael Thompson was appointed to the Board of Directors on June 3, 2024. He qualifies as an independent director and serves on the Board’s Audit Committee, Compensation Committee and Nominating Committee, serving as the chairman of the Audit Committee. |
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
The following table sets forth certain information regarding our voting shares beneficially owned as of April 14, 2025 by (i) each stockholder known to be the beneficial owner of 5% or more of the outstanding shares of the particular class of voting stock, (ii) each executive officer, (iii) each director, and (iv) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options, warrants and/or other convertible securities. Unless otherwise indicated, voting and investment power relating to the shares shown in the tables for each beneficial owner is exercised solely by the beneficial owner.
For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons, any shares that such person or persons has the right to acquire within 60 days of April 14, 2025 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
55
The percentage of beneficial ownership of our common stock is based on an aggregate of 44,575,570 shares outstanding.
Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated, the address for each director and executive officer listed is: c/o Vivakor, Inc., 5220 Spring Valley Road, Suite 500, Dallas, Texas 75242.
| Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned |
Percentage of Common Stock Beneficially Owned |
||||||
| James H. Ballengee, Chief Executive Officer and Director(1) | 21,139,323 | 45.53 | % | |||||
| Tyler Nelson, Chief Financial Officer and Director(2) | 105,213 | * | ||||||
| Russ Shelton, Chief Operating Officer(7) | 88,548 | - | ||||||
| Patrick M. Knapp, EVP, General Counsel | 140,190 | * | ||||||
| John R. Harris, Director(3) | 164,384 | * | ||||||
| Albert Johnson, Director(4) | 164,384 | * | ||||||
| Michael Thompson, Director(5) | 76,167 | * | ||||||
| All Officers and Directors as a group (7 persons) | 21,878,209 | 46.93 | % | |||||
| 5% Beneficial Stockholders | ||||||||
| Matthew Nicosia(6) | 4,189,405 | 9.40 | % | |||||
| (1) | James H. Ballengee’s address is 5151 Beltline Road, Suite 715 Dallas, Texas 75234. Includes 17,609,837 shares of common stock held or to be acquired in the next 60 days for Series A preferred Stock dividends in the name of Jorgan Development, LLC, 108,737 shares of common stock held in the name of JBAH Holdings, LLC, 21,552 shares of common stock held in the name of Ballengee Holdings, LLC, and 3,420,749 held in his name. James Ballengee, in his capacity as sole manager, has sole voting and investment power over both Jorgan Development, LLC and JBAH Holdings, LLC. Does not include the shares of Series A Preferred Stock owned by Jorgan or JBAH since such shares do not have voting rights and are not convertible by the holder. The shares of Series A Preferred Stock do have a 6% annual dividend payable in shares of our common stock in equal quarterly installments, and are convertible at the option of the company based on the $1,000 stated value of the shares of the Series A Preferred Stock and a value of $1.00 per share for the common stock. The issuance of the shares of common stock for the dividend payments and the conversion right are subject to ownership limitations of the holders of the Series A Preferred Stock. Any shares of common stock for the dividend payments that cannot be issued due to ownership limitations will accrue until such time as they are able to be issued. The shares of common stock we have issued, or that we are required to issue in the next 60 days, to Jorgan or JBAH as a dividend on the Series A Preferred Stock are included in Mr. Ballengee’s beneficial ownership |
| (2) | Does not include vested stock options to purchase 917,825 shares of common stock. |
| (3) | Includes 12,255 shares due to Mr. Harris in the next 60 days for Board fees. |
| (4) | Includes 12,255 shares due to Mr. Johnson in the next 60 days for Board fees. |
| (5) | Includes 76,167 shares either currently owed to Mr. Thompson or owed to Mr. Thompson in the 60 days for Board fees. |
| (6) | The shares of common stock beneficially owned by Matthew Nicosia includes 4,189,405 shares of common stock held by AKMN Irrevocable Trust and 262 shares of common stock held by Nicosia Family Trust. Matthew Nicosia is the trustee of the AKMN Irrevocable Trust, of which Jonathan Nicosia, Matthew Nicosia’s son, a minor, is the beneficiary. Does not include options to purchase 503,935 shares of common stock. |
| (7) | Mr. Shelton under is owed 88,547 pursuant to his employment agreement, which we expect to issue in the second quarter of 2025. |
56
Item 13 - Certain Relationships and Related Transactions and Director Independence
Related Party Transactions
The following is a description of each transaction from January 1, 2024 to December 31, 2024, and any material, publicly disclosed transaction through the date of this filing and each currently proposed transaction in which:
| ● | we have been or are to be a participant; |
| ● | the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years; and |
| ● | any of our directors, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest. |
Our current policy with regard to related party transactions is for the Board as a whole to approve any material transactions involving our directors, executive officers or holders of more than 5% of our outstanding capital stock.
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 consolidated financial statements of the Endeavor Entities for the nine months ended September 30, 2024 and for the years ended December 31, 2023 and 2022 are attached hereto as Exhibits 99.1 and 99.2.
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 pipeline and exclusive connected blending and processing facility in Blaine County, Oklahoma.
The purchase price for the Membership Interests is $116.3 million (the “Purchase Price”), after post-closing adjustments, including a reduction for assumed debt and a possible increase for a performance 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 number of shares of Common Stock for the Purchase Price is 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 remaining Purchase Price is due to the Sellers in 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 ($1.00) per share of Common Stock. The Sellers are beneficially owned by James Ballengee, the Company’s chief executive officer and principal shareholder.
57
On December 2, 2024, the Company issued 6,700,000 shares of Common Stock to the Sellers, or their assignees, with 4,999,500 shares issued to Jorgan and 50,500 shares issued to JBAH. The remaining shares were issued to two non-related parties as part of the consideration for the Purchase Price at the instruction of the Sellers. On February 11, 2025, the Company issued 24,291 shares of Common Stock and 107,789 shares of Series A Preferred Stock to the Sellers as part of the Purchase Price, with such shares deemed to be issued as of October 1, 2024 for accounting purposes.
Upon the Closing of our acquisition of the Endeavor Entities, the parties of that certain Membership Interest Purchase Agreement dated June 15, 2022, and the Amendment of Transaction Documents Related to Threshold Payment dated March 31, 2024 (together, the “2022 MIPA”), agreed that Section 8.7 Unwinding of the 2022 MIPA expired and is no longer enforceable. As a result, the selling entities in the 2022 MIPA no longer have the right to unwind our acquisitions of White Claw Colorado City and Silver Fuels Delhi.
In connection with the Closing of the Endeavor Entities on October 1, 2024, a certain Repair and Maintenance Subscription Plan dated October 1, 2024 was entered into between Horizon Truck and Trailer, LLC, which is a related party as our Chief Executive Officer is the beneficiary, and Meridian Equipment Leasing, LLC (“MEL”) for the maintenance and repairs of all commercial trailers and tractors owned, leased, or controlled by MEL, which includes a $100,000 monthly retainer that is credited against open monthly charges and invoices.
Upon the Closing of our acquisition of the Endeavor Entities, we acquired Trucking Transportation Agreement & Addendum with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must, through its own operations or source for the Company, a minimum volume of 75,000 bbls per day for our trucking logistics services. The agreement expires on December 31, 2034. For the year ended December 31, 2024, we realized related party revenue related to this agreement of $3,756,097.
Upon the Closing of our acquisition of the Endeavor Entities, we acquired a Station Throughput Agreement with Posse Wasson, LLC (Posse Monroe, LLC) (“Possee”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, Possee must source for the Company, a minimum volume of 230,000 bbls per month through our storage facility at $0.275 per barrel, guaranteeing $759,000 of throughput revenue on an annual basis. The agreement expires on December 31, 2034. For the year ended December 31, 2024, we realized related party revenue related to this agreements of $189,750.
Upon the Closing of our acquisition of the Endeavor Entities, we acquired a Station Throughput Agreement with WC Crude, who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must source for the Company, a minimum volume of 200,000 bbls per month through our storage Omega Gathering Pipeline at $1.00 per barrel, guaranteeing $2,400,000 of throughput revenue on an annual basis. The agreement expires on December 31, 2034. For the year ended December 31, 2024, we realized related party revenue related to this agreements of $427,844.
On June 15, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Jorgan Development, LLC, (“Jorgan”) and JBAH Holdings, LLC, (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Silver Fuels Delhi, LLC (“SFD”) and White Claw Colorado City, LLC (“WCCC”) whereby, at closing, which occurred on August 1, 2022, we acquired all of the issued and outstanding membership interests where the consideration included secured three-year promissory notes issued by us in favor of the Sellers (the “Notes”). At the time of the closing of these transactions Jorgan, JBAH, and our newly hired CEO, James Ballengee were not considered related parties. As James Ballengee is now our Chief Executive Officer and is the beneficiary of Jorgan and JBAH, and the Sellers are significant shareholders, certain transactions, as noted below, related to Jorgan, JBAH, and James Ballengee are now considered related party transactions. As of December 31, 2024, the balance of the promissory note is $18,109,503. For the year ended December 31, 2024, we made cash payments of $2,573,883 on the note.
Our subsidiary, White Claw Colorado City, LLC, has an Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $150,000 per month even if the storage space is not used. The agreement expires on December 31, 2031. For the year ended December 31, 2024, we realized tank storage revenue of approximately $1,800,000.
58
Our subsidiary, Silver Fuels Delhi, LLC (SFD), has an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies volumes of Crude Petroleum to our facility, which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires on December 31, 2031. For the year ended December 31, 2024, we made crude oil purchases from WC Crude of $43,632,933 and received deficiency payments of $1,855,076. In addition, SFD has a sales agreement to sell a natural gas liquid product and crude petroleum products to WC Crude. These sales agreements are cash net settled at market prices. We produced and sold crude and natural gas liquids to WC Crude in the amount of $10,790,417, for the year ended December 31, 2024.
On October 17 2024, our newly acquired subsidiaries under the Endeavor Entities, received funding of $530,000 under our May 14, 2024 promissory note between Vivakor, Inc. and Ballengee Holdings, LLC, of which our Chief Executive Officer is the beneficial owner. The Company also made payments of $530,000 on this promissory note in October 2024. See Note 6 for further information regarding the promissory note between Ballengee Holdings, LLC and Vivakor, Inc.
On May 14, 2024, we issued a promissory note, to James Ballengee, 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. 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 December 31, 2024, the principal balance and accrued interest of this note was $1,164,150 and $43,880.
On June 13, 2024, we owed our Chief Financial Officer $1,167,750 in accrued salary and bonuses, plus interest (together, the “Accrued Compensation”), for serving as the Company’s Chief Financial Officer, and executed a Settlement Agreement where the Accrued Compensation would be paid under the terms of a straight promissory note in the principal amount of the Accrued Compensation. Under the terms of the note, the amounts due will accrue interest at 8% per annum and will be paid by paying 5% of any money received by the Company from closed future financings or acquisition/merger/sale transactions until the note has been paid in full. In the event the note has not been paid in full by June 30, 2025, the note will mature and any amounts due thereunder will be due and payable in full on such date. As of December 31, 2024 the balance of principal and accrued interest was $1,020,872 and $48,121.
On July 5, 2024, the Company received a loan from Ballengee Holdings, LLC, 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 December 31, 2024 the balance of principal and accrued interest was $500,000 and $24,456.
We have an existing note payable issued to Triple T, which is owned by Dr. Khalid Bin Jabir Al Thane, the 51% majority-owner of Vivakor Middle East LLC. The note is interest free, has no fixed maturity date and will be repaid from revenues generated by Vivakor Middle East LLC. As of December 31, 2024, the balance owed was $404,120.
59
Policy on Future Related-Party Transactions
All future transactions between us and our officers, directors, principal stockholders and their affiliates will be approved by the audit committee, or a similar committee consisting of entirely independent directors, according to the terms of our Code of Business Conduct and Ethics and our Related-Party Transaction Policies and Procedures.
Item 14 - Principal Accounting Fees and Services
The aggregate fees billed for the two most recently completed fiscal periods ended December 31, 2024 and December 31, 2023 for professional services rendered by our independent registered public accounting firm auditors for the audit of our annual consolidated financial statements, quarterly reviews of our interim consolidated financial statements and services normally provided by independent accountants in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| Year Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Audit Fees | $ | 535,000 | $ | 722,881 | ||||
| Audit Related Fees | 224,957 | 30,873 | ||||||
| Tax Fees | - | - | ||||||
| Total | $ | 759,957 | $ | 753,754 | ||||
In the above table, Audit Fees are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year. “Tax fees” are fees billed for professional services rendered for tax compliance, tax advice and tax planning. The audit fees include review of our interim financial statements and year-end audit.
60
PART IV
Item 15 - Exhibits and Financial Statement Schedules
VIVAKOR, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Vivakor, Inc.
Dallas, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Vivakor, Inc. (the “Company”) as of December 31, 2024, the related consolidated statement of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a significant working capital deficiency, suffered significant recurring losses from operations, and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Urish Popeck & Co., LLC
We have served as the Company’s auditor since 2024.
Pittsburgh, PA
April 15, 2025
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Vivakor, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Vivakor, Inc. (the “Company”) as of December 31, 2023 the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Marcum llp
We served as the Company’s auditor from 2022 to 2024.
April 16, 2024
F-3
VIVAKOR, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash- restricted | ||||||||
| Accounts receivable | ||||||||
| Accounts receivable- related party | ||||||||
| Prepaid expenses | ||||||||
| Marketable securities | ||||||||
| Inventories | ||||||||
| Other assets, current | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Notes receivable | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets- operating leases | ||||||||
| License agreements, net | ||||||||
| Intellectual property, net | ||||||||
| Customer relationships, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable and accrued expenses- related parties | ||||||||
| Accrued compensation | ||||||||
| Unearned revenue | ||||||||
| Operating lease liabilities, current | ||||||||
| Finance lease liabilities, current | ||||||||
| Loans and notes payable, current | ||||||||
| Loans and notes payable, current- related parties | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, long term | ||||||||
| Finance lease liabilities, long term | ||||||||
| Loans and notes payable, long term | ||||||||
| Loans and notes payable, long term- related parties | ||||||||
| Long-term debt (working interest royalty programs) | ||||||||
| Deferred tax liability | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized, and outstanding as of December 31, 2024 and 2023 | $ | $ | ||||||
| Common stock, $ par value; shares authorized; and were issued and outstanding as of December 31, 2024 and 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost | ( |
) | ( |
) | ||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Vivakor, Inc. stockholders’ equity | ||||||||
| Noncontrolling interest | ( |
) | ||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements
F-4
VIVAKOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | ||||||||
| Terminaling and storage | $ | $ | ||||||
| Terminaling and storage- related party | ||||||||
| Transportation logistics | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Impairment expense | ||||||||
| Amortization and depreciation | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Other income (expense): | ||||||||
| Unrealized gain (loss) on marketable securities | ( |
) | ||||||
| Gain on disposition of asset | ||||||||
| Gain on deconsolidation of variable interest entity | ||||||||
| Gain on deconsolidation of subsidiary | ||||||||
| Interest income | ||||||||
| Interest expense | ( |
) | ( |
) | ||||
| Interest expense- related parties | ( |
) | ( |
) | ||||
| Other income | ||||||||
| Total other income (expense) | ( |
) | ( |
) | ||||
| Loss before provision for income taxes | ( |
) | ( |
) | ||||
| Provision for income taxes | ( |
) | ( |
) | ||||
| Consolidated net loss | ( |
) | ( |
) | ||||
| Less: Net loss attributable to noncontrolling interests | ( |
) | ( |
) | ||||
| Net loss attributable to Vivakor, Inc. | $ | ( |
) | $ | ( |
) | ||
| Series A preferred stockholder dividend | $ | $ | ||||||
| Net loss to common shareholders | $ | ( |
) | $ | ( |
) | ||
| Basic and diluted net loss per share | $ | ) | $ | ) | ||||
| Basic weighted average common shares outstanding | ||||||||
See accompanying notes to consolidated financial statements
F-5
VIVAKOR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Series A Preferred Stock |
Common Stock | Additional Paid-in |
Treasury | Accumulated | Non-controlling | Total Stockholders’ |
||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Interest | Equity | ||||||||||||||||||||||||||||
| January 1, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| Issuance of common stock for a reduction of liabilities | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for a reduction of note payable to Jorgan | - | |||||||||||||||||||||||||||||||||||
| Elimination of noncontolling interest related to deconsolidation of variable interest entity | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Non-qualified stock options issued to third party | - | - | ||||||||||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for a reduction of liabilities | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock on conversion of debt | - | |||||||||||||||||||||||||||||||||||
| Issuance of warrants for services | - | - | ||||||||||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||||||
| Stock based compensation- Consultant | - | |||||||||||||||||||||||||||||||||||
| Series A Preferred Stock issued as part consideration for the purchase of the Endeavor Entities | - | |||||||||||||||||||||||||||||||||||
| Common stock issued as part consideration for the purchase of the Endeavor Entities | - | |||||||||||||||||||||||||||||||||||
| Common stock distributable- Series A Preferred Stock Dividends | - | ( |
) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
See accompanying notes to consolidated financial statements
F-6
VIVAKOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Consolidated net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Impairment loss | ||||||||
| Forgiveness of liabilities | ( |
) | ||||||
| Stock-based compensation | ||||||||
| Stock-based compensation- consultant | ||||||||
| Unrealized (gain) loss- marketable securities | ( |
) | ||||||
| Gain on deconsolidation of variable interest entity | ( |
) | ||||||
| Gain on deconsolidation of subsidiary | ( |
) | ||||||
| Gain on settlement of accounts payable | ( |
) | ||||||
| Deferred income taxes | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Prepaid expenses | ( |
) | ||||||
| Inventory | ( |
) | ||||||
| Other assets | ( |
) | ( |
) | ||||
| Right of use assets- finance leases | ||||||||
| Right of use assets- operating leases | ||||||||
| Operating lease liabilities | ( |
) | ( |
) | ||||
| Accounts payable and accrued expenses | ( |
) | ||||||
| Interest on notes receivable | ( |
) | ( |
) | ||||
| Interest on notes payable | ||||||||
| Net cash provided by (used) in operating activities | ( |
) | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Deconsolidation of subsidiaries cash, cash equivalents and restricted cash | ( |
) | ||||||
| Acquisition of assets | ||||||||
| Notes receivable assumed from deconsolidation of variable interest entity | ( |
) | ||||||
| Purchase of equipment | ( |
) | ( |
) | ||||
| Net cash provided by (used) in investing activities | ( |
) | ||||||
| FINANCING ACTIVITIES: | ||||||||
| Payment on financing lease liabilities | ( |
) | ( |
) | ||||
| Proceeds from loans and notes payable | ||||||||
| Proceeds from loans and notes payable- related party | ||||||||
| Proceeds from sale of common stock | ||||||||
| Payment of notes payable | ( |
) | ||||||
| Payment of notes payable- related party | ( |
) | ( |
) | ||||
| Distributions to noncontrolling interest | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( |
) | ||||||
| CASH AND CASH EQUIVALENTS and CASH RESTRICTED, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS and CASH RESTRICTED, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASHFLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Noncash transactions: | ||||||||
| Accounts payable on purchase of equipment | $ | $ | ||||||
| Capitalized interest on construction in process | $ | $ | ||||||
| Common stock issued with debt | $ | $ | ||||||
| Non-qualified stock options issued with debt | $ | $ | ||||||
| Common stock issued for services | $ | $ | ||||||
| Common stock issued on conversion of debt | $ | $ | ||||||
| Common stock issued for a reduction in liabilities | $ | $ | ||||||
| Common stock and Series A preferred stock issued in the acquisition of the Endeavor Entities | $ | $ | ||||||
See accompanying notes to consolidated financial statements
F-7
VIVAKOR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
Vivakor, Inc. (collectively “we”, “us,” “our,” “Vivakor” or the “Company”) is a socially responsible operator, acquirer and developer of technologies and assets in the oil and gas industry, as well as related environmental solutions. Currently, our efforts are primarily focused on operating crude oil gathering, storage and transportation facilities, as well as contaminated soil remediation services. The Company was originally organized on November 1, 2006 as a limited liability company in the State of Nevada as Genecular Holdings, LLC. The Company’s name was changed to NGI Holdings, LLC on November 3, 2006. On April 30, 2008, the Company was converted to a C-corporation and changed its name to Vivakor, Inc. pursuant to Articles of Conversion filed with the Nevada Secretary of State.
We operate in two main business segments: (i) transportation logistics services and (ii) terminaling and storage facility product and services related to oil and gas production.
Our transportation and facilities services primarily consist of trucking crude oil and produced water and transportation and terminaling services of crude oil via the Omega Gathering Pipeline. Our trucking services are centered in the Permian and Eagle Ford Basins. We utilize our trucking fleet to transport those products to a fully-integrated network of facilities where we blend various grades of crude oil grades of crude oil, and reuse or dispose of produced water. Transportation and terminaling of crude oil is also conducted utilizing our Omega Gathering Pipeline, which is an approximately forty-five (45) mile integrated crude oil gathering and pipeline in Blaine County, Oklahoma, in the heart of the STACK play. The line is tied into the Cushing, Oklahoma storage hub via the Plains STACK Pipeline. We also own and operate fifteen (15) crude oil pipeline injection truck stations, primarily centered in the Permian Basin.
Our terminaling and storage product and services primary consist of two operational major crude oil terminaling facilities. One is located in Colorado City, Texas, and the other facility is located in Delhi, Louisiana. Both facilities are located at the junction of several major interstate pipelines, receive various grades of crude oil from our customers. These crude oil terminals are industrial facilities that serve as hubs for the storage, handling and distribution of crude oil and petroleum products
In addition to our two operating business segments, we plan to perform remediation services utilizing our remediation processing centers (“RPCs”) at some point in the future. We are currently constructing a full-capacity RPC at the San Jacinto River & Rail Park in Harris County, Texas. Once complete, we anticipate the strategically located facility to be capable of processing oilfield solid wastes into economic byproducts such as condensate, propane, and butane. This RPC will feature an adjacent, complimentary truck wash facility from which we expect to derive additional revenue. Last year we moved our other full-capacity RPC to Kuwait, where we are currently in negotiations with the Kuwaiti Oil Company to potentially use the RPC to clean sands contaminated with oil, primarily from oil wells destroyed during the Persian Gulf War.
On September 7, 2023 we entered into an Acquisition Agreement (the “Agreement”) to sell 100% of the common stock of VivaSphere, Inc. (“VivaSphere”) and its assets, which were completely impaired by the Company in the fiscal year 2022, to a private buyer. The transaction closed on February 15, 2024. Under the terms of the Agreement, the purchase price of approximately $
In accordance with ASC 810, as of October 1, 2023, we deconsolidated Viva Wealth Fund I, LLC (“VWFI”), recognizing a gain on deconsolidation of $
Note 2. Going Concern & Liquidity
We have historically suffered net losses and cumulative negative cash flows from operations, and as of December 31, 2024, we had an accumulated deficit of approximately
F-8
During the year ended December 31, 2024, subject to available cash flows, the Company continued its strategy to monetize its intellectual properties and execute its business plan, including the acquisition of the Endeavor Entities. To date we have financed our operations primarily through debt financing, and private and public equity offerings.
Based on the above, we believe there is substantial doubt about the Company’s ability to continue as a going concern. The Company has prepared the consolidated financial statements on a going concern basis. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Management cannot provide any assurance that the Company will be able to execute its plans to raise additional capital, close its merger and acquisitions, or that its operations or business plan will be profitable.
Note 3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
All figures are in U.S. dollars unless indicated otherwise.
Principles of Consolidation
The consolidated financial statements include the accounts of 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. Inactive entities have no value, assets or liabilities.
We have the following direct and indirect wholly-owned or majority-owned active subsidiaries: Endeavor Crude, LLC, a Texas limited liability company (since October 1, 2024), and Silver Fuels Processing, LLC, a Texas limited liability company (since October 1, 2024), Meridian Equipment Leasing, LLC, a Texas limited liability company (since October 1, 2024), which owns CPE Gathering Midcon, LLC, a Delaware limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company (since October 1, 2024), which owns ET EmployeeCo, LLC, a Pennsylvania limited liability company, Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, Vivaventures Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a Utah corporation, Vivakor Supply & Trading, LLC, a Texas limited liability company, Vivakor Administration, LLC, a Texas limited liability company, Vivakor Midstream, LLC, a Texas limited liability company, Vivakor Operating, LLC, a Texas limited liability company, Vivakor Transportation, LLC, a Texas limited liability company, and VM Facilities, LLC, a Texas limited liability company. 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. 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 non-controlling interest investment from VivaOpportunity Fund, LLC, which is also managed by VivaVentures Management Company, Inc.
In accordance with ASC 810, the Company deconsolidated Viva Wealth Fund I, LLC from its consolidated balance sheet as of December 31, 2023.
The Company follows ASC 810-10-15 guidance with respect to accounting for Variable Interest Entities (“VIE”). A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions of the entity’s expected residual returns. Variable interests are contractual, ownership, or other pecuniary interests that change with changes in the fair value of the entity’s net assets. A party is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination of variable interests, which provides the party with a controlling financial interest. A party is deemed to have a controlling financial interest if it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in facts and circumstances. For the year ended December 31, 2024, RPC Design and Manufacturing, LLC was considered to be a VIE and is consolidated in our consolidated financial statements. In accordance with ASC 810, as of October 1, 2023, we deconsolidated Viva Wealth Fund I, LLC (VWFI), recognizing a gain on deconsolidation of $
F-9
For the years ended December 31, 2024 and 2023 the following entities were inactive, but considered to be a VIE, but were not consolidated in our consolidated financial statements due to a lack of the power criterion or the losses/benefits criterion: Vivaventures UTS I, LLC, Vivaventures Royalty II, LLC, Vivaopportunity Fund, LLC, and International Metals Exchange, LLC. For the years ended December 31, 2024 and 2023, the unaudited financial information for the unconsolidated VIEs is as follows: Vivaventures UTSI, LLC held assets of none and $
RPC Design and Manufacturing, LLC: The Company established RPC Design and Manufacturing, LLC (“RDM”) in December 2018 with a business purpose of manufacturing custom machinery and selling or leasing the manufactured equipment in long term contracts with financing or leasing activities to the Company. We own 100% of the voting rights in RDM. We, as the sole general partner of RDM, have the full, exclusive and complete right, power and discretion to operate, manage and control the affairs of RDM and take certain actions necessary to maintain RDM in good standing without the consent of the limited partners. RDM has entered into a license agreement with the Company indicating that while RDM builds custom machinery incorporating the Company’s hydrocarbon extraction technology, RDM will pay the Company a license fee of $
Viva Wealth Fund I, LLC: The Company assisted in designing and organizing Viva Wealth Fund I, LLC (“VWFI”) in November 2020, as a special purpose entity, for the purpose of manufacturing, leasing and selling custom equipment solely to the Company. Wealth Space, LLC, an unaffiliated entity, is the sole manager. The Company was retained by the manager to assist with the administrative operations. VWFI retained the Company to act as its sole plant manager, and to manage and direct all of the manufacturing, leasing and selling of custom equipment on behalf of VWFI to the Company. In November 2020, VWFI commenced a $ private placement offering to sell convertible promissory notes, which convert to VWFI LLC units, to accredited investors to raise funds to manufacture equipment to expand the Company’s second RPC, amended to manufacture one separate double capacity RPC.
As of October 1, 2023, Viva Wealth Fund I, LLC (VWFI) began its own business activities, which would no longer include fundraising, financing, or manufacturing RPCs with the Company. In November 2020, VWFI commenced a $
F-10
Business Combinations
We apply the provisions of ASC 805, Business Combinations (ASC 805), in accounting for our acquisitions. ASC 805 requires that we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business. A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis; whereas the acquisition of a business requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values. Goodwill as of the business acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the business acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the business acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of a business acquisition’s measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
In addition, uncertain tax positions and tax related valuation allowances assumed in a business combination are initially estimated as of the acquisition date. We reevaluate these items quarterly based upon facts and circumstances that existed as of the business acquisition date with any adjustments to our preliminary estimates being recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in our consolidated statement of operations and could have a material impact on our results of operations and financial position.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when acquired to be cash equivalents. As of December 31, 2024 and 2023, the Company did not have any cash equivalents. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Accounts Receivable
Accounts receivable are carried at original invoice amount less an estimated allowance for doubtful accounts, if deemed necessary by management, and based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts, if any, by identifying troubled accounts and by using historical experience applied to an aging of accounts.
Investments
Investments in marketable securities consist of equity securities recorded at fair value. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. We analyze our marketable securities in accordance with Accounting Standard Codification 321 (“ASC 321”). Valuations for marketable securities are based on quoted prices for identical assets in active markets.
As of December 31, 2024 and 2023, the Company owns 1,000 Class A LLC Units in each of the following entities, which are not consolidated: Vivaopportunity Fund LLC, Vivaventures UTSI, LLC, Vivaventures Royalty II, LLC, and International Metals Exchange, LLC. In aggregate these units amount to $
F-11
Convertible Instruments
The Company reviews the terms of convertible debt and preferred stock for indications requiring bifurcation, and separate accounting for the embedded conversion feature. Generally, embedded conversion features where the ability to physical or net-share settle the conversion option is not within the control of the Company or the number of shares is variable are bifurcated and accounted for as derivative financial instruments. (See Derivative Financial Instruments below). Bifurcation of the embedded derivative instrument requires the allocation of the proceeds first to the fair value of the embedded derivative instrument with the residual allocated to the host instrument. The resulting discount to the debt instrument or the redemption value of convertible preferred securities is accreted through periodic charges to interest expense over the term of the agreements or to dividends over the period to the earliest conversion date using the effective interest rate method, respectively.
Derivative Financial Instruments
The Company does not use derivative financial instruments to hedge exposures to cash-flow or market risks. However, certain other financial instruments, such as warrants to purchase the Company’s common stock and the embedded conversion features of debt and preferred instruments that are not considered indexed to the Company’s common stock are classified as liabilities when either (a) the holder possesses rights to net-cash settlement, (b) physical or net share settlement is not within the control of the Company, or (c) based on its anti-dilutive provisions. In such instances, net-cash settlement is assumed for financial accounting and reporting. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. Fair value for embedded conversion features and option-based derivative financial instruments is determined using the Monte Carlo Simulation or the Black-Scholes Option Pricing Model, respectively.
Other convertible instruments that are not derivative financial instruments are accounted for by recording the intrinsic value of the embedded conversion feature as a discount from the initial value of the instrument and accreting it back to face value over the period to the earliest conversion date using the effective interest rate method.
Leases
The Company follows Accounting Standards Codification 842, Leases (“ASC 842”). We determine if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances.
We are the lessee in a lease contract when we obtain the right to control the asset. Lease right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on our consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of operations. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. As most of our leases do not provide an implicit interest rate, we use our local incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. According to ASC 842, the Company has measured the lease liabilities acquired on October 1, 2024 by measuring the present value of the remaining lease payments, as if the lease were acquired on acquisition date. The right-of-use assets were measured at the same amount as the lease liabilities as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms. Finance ROU assets are included in property, plant, equipment, net (see Note 8). As of December 31, 2024 and 2023, we recorded operating right-of-use assets of $
Long Lived Assets
The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset.
F-12
During 2023, the Company entered into an agreement to move our Vernal RPC to Kuwait to commence scaled up remediation services, as the Vernal plant was not producing product toward its off-take agreement, which further delayed our anticipated operations. Furthermore, in the fourth quarter of 2023, Enshaat Al Sayer (Enshaat) (the original contractor chosen for the remediation of certain cleanup for the Kuwait Environmental Remediation Project (KERP) notified us that it terminated its subcontract with DIC, which effectively terminated DIC’s contract with the Company. For the year ended December 31, 2024, the Company realized an impairment loss of $
There can be no assurance that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.
Property and equipment, net
Property and equipment are stated at cost or fair value when acquired. Depreciation is computed by the straight-line method and is charged to the statement of operations over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the term of the related lease. Impairment losses are recognized for long-lived assets, including definite-lived intangibles, used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are not sufficient to recover the assets’ carrying amount. Impairment losses are measured by comparing the fair value of the assets to their carrying amount.
Interest on long-term debt for the development or manufacturing of Company assets is capitalized to the asset until the asset enters production or use, and thereafter all interest is charged to expense as incurred. Maintenance and repairs are charged to expense as incurred. Leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the term of the related lease.
The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in our results of operations. The estimated useful lives of property and equipment are as follows:
| Schedule of useful lives for property plant and equipment | ||
| Computers, software, and office equipment | ||
| Machinery and equipment | ||
| Vehicles | ||
| Furniture and fixtures | ||
| Crude oil gathering, storage, and transportation facilities | ||
| Remediation Processing Centers (heavy extraction and remediation equipment) (“RPC”) | ||
| Pipeline and related facilities | ||
| Leasehold improvements |
Equipment that is currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into service.
Intangible Assets and Goodwill:
We account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Intangible asset amounts represent the acquisition date fair values of identifiable intangible assets acquired. The fair values of the intangible assets were determined by using the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflected a weighted average cost of capital based on our industry, capital structure and risk premiums including those reflected in the current market capitalization. Definite-lived intangible assets are amortized over their useful lives, which have historically ranged from
F-13
We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.
We have evaluated our intangible assets for the years ended December 31, 2024 and 2023, and found that certain losses and a delay in our business plan may have constituted a triggering event for our long-lived intangible assets under ASC 360. We performed an analysis and did not find any impairment for the year ended December 31, 2023. For the year ended December 31, 2024, the Company continues to negotiate the terms for an agreement directly with Kuwait Oil Company for the remediation services on the KERP. The Company evaluated these events and determined that the inability to obtain an agreement with Enshaat or Kuwait Oil Company in 2024 was a trigger event requiring analysis for impairment. We analyzed the events and assessed an impairment loss of the assets related to our Kuwait RPCs of $7,047,179 for the year ended December 31, 2024. Additionally, the Company assessed the impact of the impairment loss, including the impact on our ancillary agreements. Ancillary to our prospective Kuwait RPC operations, the Company had an exclusive license agreement for the development and use of a nanosponge technology and has assessed an impairment loss of the nanosponge license of $1,530,496 for the year ended December 31, 2024.
The Company performs its annual goodwill impairment test in the fourth quarter each year, and more frequently if facts and circumstances indicate such assets may be impaired, including significant declines in actual or future projected cash flows and significant deterioration of market conditions.
The Company’s goodwill impairment assessment includes a qualitative assessment to determine whether it is more likely than not that the fair value of the goodwill is below its carrying value, each year, and more often if there are significant changes in business conditions that could result in impairment. When a quantitative analysis is considered necessary for the annual impairment analysis of goodwill, the Company develops an estimated fair value for the reporting unit considering three different approaches: 1) market value, using the Company’s stock price plus outstanding debt; 2) discounted cash flow analysis; and 3) multiple of earnings before interest, taxes, depreciation and amortization based upon relevant industry data.
The estimated fair value of the reporting unit is then compared to its carrying amount, including goodwill. If the estimated fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount, including goodwill, exceeds its estimated fair value, any excess of the carrying value of goodwill of the reporting unit over its fair value is recorded as an impairment.
Asset Retirement Obligations
Under ASC 410-20, Asset Retirement and Environmental Obligations – Asset Retirement Obligations, which relates to accounting requirements for costs associated with legal obligations to retire tangible, long-lived assets, the Company records an Asset Retirement Obligation (“ARO”) at fair value in the period in which it is incurred by increasing the carrying amount of the related long-lived asset. In each subsequent period, liability is accreted over time towards the ultimate obligation amount and the capitalized costs are depreciated over the useful life of the related asset. The Company did
F-14
Share-Based Compensation
Share-based compensation is accounted for based on the requirements of ASC 718, “Compensation-Stock Compensation’ (“ASC 718”) which requires recognition in the financial statements of the cost of employee, consultant, or director services received in exchange for an award of equity instruments over the period the employee, consultant, or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee, consultant, or director services received in exchange for an award based on the grant-date fair value of the award.
Income tax
Deferred income taxes are provided on the asset and liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Our annual effective tax rate is based on our income and the tax laws in the various jurisdictions in which we operate. Judgment is required in determining our annual tax expense and in evaluating our tax positions. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that the position becomes uncertain based upon one of the following conditions: (1) the tax position is not “more likely than not” to be sustained; (2) the tax position is “more likely than not” to be sustained, but for a lesser amount; or (3) the tax position is “more likely than not” to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without considerations of the possibility of offset or aggregation with other tax positions taken. We adjust these reserves, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. See Note 20 for further information on income tax.
Revenue Recognition
We follow Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”).
The revenue standard contains a five-step approach that entities will apply to determine the measurement of revenue and timing of when it is recognized, including (i) identifying the contract(s) with a customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to separate performance obligations, and (v) recognizing revenue when (or as) each performance obligation is satisfied. The standard requires a number of disclosures intended to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue, and the related cash flows. The disclosures include qualitative and quantitative information about contracts with customers, significant judgments made in applying the revenue guidance, and assets recognized from the costs to obtain or fulfill a contract.
Our sales consist of storage services and the sale of crude oil or like products. For the years ended December 31, 2024 and 2023, disaggregated revenue by customer type was as follows: $
We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. After completion of our performance obligation, we have an unconditional right to consideration as outlined in our contracts. Due to the nature of our product we do not accept returns. Our receivables will generally be collected in less than three months, in accordance with the underlying payment terms.
F-15
For the years ended December 31, 2024 and 2023, approximately
In order to ensure the revenue recognition in the proper period, we review material sales contracts for proper cut-off based upon the business practices and legal requirements of each country.
Related Party Revenues
Our revenue from related parties for 2024 and 2023 was $
We sell crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC and our October 1, 2024 acquisition of Silver Fuels Processing, LLC. These contracts were entered into in the normal course of our business. We also provide pipeline throughput and trucking logistics services to related parties under long-term contracts. We acquired these contracts in our October 1, 2024 acquisition of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC. These contracts were entered into in the normal course of our business.
Major Customers and Concentration of Credit Risk
The Company has two major customers, which account for approximately
Contingent liabilities
From time to time the Company may work with success based professional service providers, including securities counsel for private offerings, which may require contingent payments to be made based on the future offering fundraising and financial performance of the offering. In the event that an offering does not perform or is never consummated, the Company may still be required to pay a portion of the success fees for the services provided in preparing the offering. The fair value of the contingent payments would be estimated using the present value of management’s projections of the financial results. Failure to correctly project the financial results of the offering or settlement of legal fees related to the offering could materially impact our results of operations and financial position.
Advertising Expense
Advertising costs are expensed as incurred. The Company did not incur advertising expense for the years ended December 31, 2024 and 2023.
Recent Accounting Pronouncements
Under the Jumpstart Our Business Startups Act, or the JOBS Act, we meet the definition of an “emerging growth company.” We have irrevocably elected to opt-out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, we comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non- emerging growth companies.
F-16
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which improves Convertible Instruments and Contracts in an Entity’s Own Equity and is expected to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. This guidance was adopted by the Company for fiscal year 2024.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07), which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity disclose the title and position of its CODM and explain how the CODM uses these reported measures in assessing segment performance and determining how to allocate resources. ASU 2023-07 will be effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 31, 2024, with retrospective application. This guidance was adopted by the Company for fiscal year 2024.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires that a public entity disclose specific categories in its annual income tax rate reconciliation table and provide additional qualitative information for reconciling items representing at least 5% of pre-tax income or loss from continuing operations, using the federal statutory tax rate. The standard also requires an annual breakdown of income taxes paid by jurisdiction (i.e., federal, state and foreign), with further disaggregation by jurisdictions representing at least 5% of total income taxes paid. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, with prospective application. We are currently evaluating the disclosure impact of our adoption of this standard, and do not expect a significant impact.
Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments have been excluded from the calculation of the weighted-average number of common shares outstanding when the Company is in a net loss position. For the years ended December 31, 2024 and 2023 our potential dilutive instruments were excluded from the weighted-average calculation as they were antidilutive. Potential dilutive instruments as of December 31, 2024 and 2023 include the following: convertible notes payable convertible into approximately and shares of common stock, stock options and awards granted to previous and current employees of and shares of common stock, stock options and awards granted to Board members or consultants of and shares of common stock. The Company issued free standing stock options to purchase shares of our common stock to a third party in a bundled transaction with debt during 2023, which such stock option was exercised in September 2024 for a reduction in debt. The Company also has a warrant outstanding to purchase
F-17
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes, effective interest rates related to long-term debt, lease assets and liabilities, valuation of stock used to acquire assets, derivatives, and fair values of the intangible assets and goodwill related to business combinations.
While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.
Fair Value of Financial Instruments
The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the consolidated balance sheets for marketable securities are classified as Level 1 assets due to observable quoted prices for identical assets in active markets. The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their estimated fair market values based on the short-term maturity of these instruments. The recorded values of notes payable approximate their current fair values because of their nature, rates, and respective maturity dates or durations.
F-18
Note 4. Business Combination
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price is $
For the acquisition of the Endeavor Entities, the following table summarizes the acquisition date fair value of consideration paid, identifiable assets acquired and liabilities assumed:
| Schedule of recognized identified assets acquired and liabilities assumed | ||||
| Common stock | $ | |||
| Series A preferred stock | ||||
| Fair value of total consideration paid | $ | |||
| Net assets acquired and liabilities assumed | ||||
| Assets acquired in business combination | ||||
| Current assets | $ | |||
| Operating lease right-of-use assets | ||||
| Property, plant and equipment, net (includes finance lease right of use assets, net) | ||||
| Other assets | ||||
| Contract-based intangible assets | ||||
| Total assets acquired | $ | |||
| Liabilities assumed in business combination | ||||
| Current liabilities | $ | |||
| Long term liabilities | ||||
| Total liabilities acquired | $ | |||
| Total net assets acquired | $ | |||
| Goodwill | $ |
The value of goodwill represents the Endeavor Entities’ ability to generate profitable operations going forward. Management engaged a valuation expert who performed a valuation study to calculate the fair value of the acquired assets and goodwill. As of December 31, 2024 and 2023, goodwill was $
F-19
Business combination related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional fees of $
From the date of acquisition on October 1, 2024 through December 31, 2024, $
| Schedule of proforma information | ||||||||
| (Unaudited) | ||||||||
| Years ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Total net sales | $ | $ | ||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Net loss (attributable to Vivakor, Inc.) | $ | ( |
) | $ | ( |
) | ||
| Series A Preferred Stockholder Dividends | $ | $ | ||||||
| Net loss to common shareholders | $ | ( |
) | $ | ( |
) | ||
| Basic and diluted loss per share | ( |
) | ( |
) | ||||
| Weighted average shares outstanding- Basic and diluted | ||||||||
Note 5. Accounts receivable
Accounts receivable primarily relates to trade accounts receivable for crude oil sales and reflects. any differences between the amounts due from customers less an estimated allowance for doubtful accounts, if deemed necessary by management. Estimated allowances for doubtful accounts is based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts, if any, by identifying troubled accounts and by using historical experience applied to an aging of accounts. As of December 31, 2024 and 2023, an allowance for doubtful accounts of
Note 6. Prepaid Expenses and Other Assets
As of December 31, 2024 and 2023, we had other assets of $
As of December 31, 2024 and 2023, our prepaid expenses of $
F-20
Note 7. Marketable Securities
The Company owns shares of common stock of Scepter Holdings, Inc. (“Scepter”), ticker: BRZL, OTC Markets., for a diluted 14% and 15% equity holding in the company as of December 31, 2024 and 2023. The Company accounted for such securities based on the quoted price from the OTC Markets where the stock is traded which resulted in the Company recording an unrealized gain (loss) on marketable securities of $
Note 8. Property and Equipment
The following table sets forth the components of the Company’s property and equipment at December 31, 2024 and 2023:
| Schedule of property and equipment, net | ||||||||||||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Depreciation |
Net Book Value |
Gross Carrying Amount |
Accumulated Depreciation |
Net Book Value |
|||||||||||||||||||
| Office furniture | $ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
| Vehicles and trailers | ( |
) | ( |
) | ||||||||||||||||||||
| Equipment | ( |
) | ( |
) | ||||||||||||||||||||
| Land | ||||||||||||||||||||||||
| Building | ( |
) | ||||||||||||||||||||||
| Crude & NGL terminal and related equipment | ( |
) | ( |
) | ||||||||||||||||||||
| Crude Oil Transfer Stations | ( |
) | ||||||||||||||||||||||
| Pipeline and related facilities | ( |
) | ||||||||||||||||||||||
| Finance lease- Right of use assets | ( |
) | ( |
) | ||||||||||||||||||||
| Construction in process: | ||||||||||||||||||||||||
| Wash Plant Facilities | ||||||||||||||||||||||||
| Cavitation device | ||||||||||||||||||||||||
| Remediation Processing Unit 1 | ||||||||||||||||||||||||
| Remediation Processing Unit 2 | ||||||||||||||||||||||||
| Remediation Processing Unit System A | ||||||||||||||||||||||||
| Remediation Processing Unit System B | ||||||||||||||||||||||||
| WCCC Tank Expansion | ||||||||||||||||||||||||
| Total fixed assets | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
For the years ended December 31, 2024 and 2023, depreciation expense was $
During 2023, the Company entered into an agreement to move our Vernal RPC to Kuwait to commence scaled up remediation services, as the Vernal plant was not producing product toward its off-take agreement, which further delayed our anticipated operations. Furthermore, in the fourth quarter of 2023, Enshaat Al Sayer (Enshaat) (the original contractor chosen for the remediation of certain cleanup for the Kuwait Environmental Remediation Project (KERP) notified us that it terminated its subcontract with DIC, which effectively terminated DIC’s contract with the Company. For the year ended December 31, 2024, the Company continues to negotiate the terms for an agreement directly with Kuwait Oil Company for the remediation services on the KERP. The Company evaluated these events and determined that the inability to obtain an agreement with Enshaat or Kuwait Oil Company in 2024 was a trigger event requiring analysis for impairment. We analyzed the events and assessed an impairment loss of the assets related to our Kuwait RPCs of $
F-21
Note 9. License Agreements
On
August 17, 2017, the Company purchased rights to an exclusive license for the applications and implementations involving the
Nanosponge Technology and to use and develop the Nanosponge as we see fit at our sole discretion. The Nanosponge contribution in the
Company’s processes is to facilitate a cracking process whereby remediated or extracted oil may be further refined from a
crude product to a diesel fuel. The license was valued at $
Note 10. Intangible Assets, Net
The following table sets forth the components of the Company’s intangible assets at December 31, 2024 and 2023:
| Schedule Of intangible assets | ||||||||||||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||
|
Gross Amount |
Accumulated Amortization |
Net Book Value |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
|||||||||||||||||||
| Extraction Technology patents | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Extraction Technology | ( |
) | ( |
) | ||||||||||||||||||||
| Total intangible assets | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
The Company entered into a Contribution Agreement dated January 5, 2015, where proprietary information and intellectual property related to certain petroleum extraction technology (also known as hydrocarbon extraction technology) suitable to extract petroleum (or hydrocarbons) from tar sands and other sand-based ore bodies, and all related concepts and conceptualizations thereof (the “Extraction Technology”) was contributed to VivaVentures Energy Group, Inc., a 99% majority-owned subsidiary of Vivakor, and was assessed a fair market value of $
In 2019, the Company began the process of patenting the Extraction Technology and all of its developments and additions since the acquisition, and we have filed a series of patents and capitalized the costs of these patents. The capitalized costs of these patents are $
F-22
Note 11. Customer Relationships, Net and Goodwill
The following table sets forth the components of the Company’s customer relationships at December 31, 2024 and 2023:
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
|||||||||||||||||||
| Oil Storage Agreement | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Crude Petroleum Supply Agreement | ( |
) | ( |
) | ||||||||||||||||||||
| Customer relationships | ( |
) | ||||||||||||||||||||||
| Total customer relationships | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $
Upon the Closing of our acquisition of the Endeavor Entities, we acquired Trucking Transportation Agreement & Addendum with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must, through its own operations or source for the Company, a minimum volume of 75,000 bbls per day for our trucking logistics services. The agreement expires on December 31, 2034.
Upon the Closing of our acquisition of the Endeavor Entities, we acquired a Station Throughput Agreement with Posse Wasson, LLC (Posse Monroe, LLC) (“Possee”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, Possee must source for the Company, a minimum volume of 230,000 bbls per month through our storage facility at $0.275 per barrel, guaranteeing $759,000 of throughput revenue on an annual basis. The agreement expires on December 31, 2034.
Upon the Closing of our acquisition of the Endeavor Entities, we acquired Trucking Transportation Agreement & Addendum with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must, through its own operations or source for the Company, a minimum volume of 75,000 bbls per day for our trucking logistics services. The agreement expires on December 31, 2034.
In the 2022 business combination acquisition of White Claw Colorado City, LLC, we acquired an Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), of which our CEO is a beneficiary. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $
In the 2022 business combination acquisition of Silver Fuels Delhi, LLC, we acquired an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies volumes of Crude Petroleum to SFD, which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires on December 31, 2031.
F-23
The measurement of assets acquired and liabilities assumed in the business combination was based on preliminary estimates made by management and subject to adjustment within twelve months. Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill. Based on the valuation study, we increased the fair value of goodwill and decreased the value of the acquired contracts by $
The changes in the carrying amount of goodwill are as follows:
| Schedule of goodwill | ||||
| Goodwill | ||||
| January 1, 2023 | $ | |||
| Business combination(1) | ||||
| December 31, 2023 | $ | |||
| Business combination(2) | ||||
| December 31, 2024 | $ | |||
| (1) | ||
| (2) |
Note 12. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
| Schedule of accounts payable and accrued expenses | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest (various notes and loans payable) | ||||||||
| Accrued interest (working interest royalty programs) | ||||||||
| Accrued tax penalties and interest | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Schedule of accounts payable and accrued expenses related parties | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Accounts payable- related parties | $ | $ | ||||||
| Accrued interest (notes payable)- related parties | ||||||||
| Accounts payable and accrued expenses- related parties | $ | $ | ||||||
| Accrued compensation | $ | $ | ||||||
F-24
For the year ended December 31, 2024, our accounts payable and accrued expenses include unverified billings from a service provider in the amount of $
As of December 31, 2024 and 2023, our accounts payable are primarily made up of trade payables. Trade accounts payables in the amount of $
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 four-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. Maxus funded approximately $
On December 24, 2024, our subsidiary Meridian Equipment Leasing, LLC (“MEL”), supplemented (Schedule 21) an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a four-year agreement, which Maxus agreed to a sale leaseback of approximately $1.5 million of certain gathering and pipeline assets. Under the terms of the lease, lease payments to are $40,335 per month over four years, with an early buyout option or option at the end of the base term to purchase the equipment for $470,462. As of December 31, 2024, Maxus has only funded $
F-25
Note 13. Unearned Revenue
In accordance with ASC 810, as of October 1, 2023, we deconsolidated Viva Wealth Fund I, LLC (VWFI), recognizing a gain on deconsolidation of $
Note 14. Loans and Notes Payable
Loans and notes payable and their maturities consist of the following:
Third party debt:
| Schedule of loans and notes payable | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Various promissory notes and convertible notes | $ | $ | ||||||
| Novus Capital Group LLC Note | ||||||||
| Various promissory notes for vehicle financing (a) | ||||||||
| Blue Ridge Bank (b) | ||||||||
| Small Business Administration (c) | ||||||||
| Al Dali International for Gen. Trading & Cont. Co. | ||||||||
| RSF, LLC (d) | ||||||||
| Keke Mingo (e) | ||||||||
| Justin Ellis | ||||||||
| Cedarview Opportunities Master Fund LP (f) | ||||||||
| Business First Bank (g) | ||||||||
| Note payable to Pilot OFS Holdings, LLC (h) | ||||||||
| Maxus Capital Group, LLC (i) | ||||||||
| Curve Capital, LLC (j) | ||||||||
| Agile Capital Funding, LLC (k) | ||||||||
| Total notes payable | $ | $ | ||||||
| Loans and notes payable, current | $ | $ | ||||||
| Loans and notes payable, long term | $ | $ | ||||||
F-26
Related party debt:
| Schedule of loans and notes payable related parties | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Jorgan Development, LLC (l) | $ | $ | ||||||
| Ballengee Holdings, LLC (m) | ||||||||
| Tyler Nelson (n) | ||||||||
| Triple T Trading Company LLC | ||||||||
| Waskom Enterprises, LLC (o) | ||||||||
| Total notes payable- related parties | $ | $ | ||||||
| Loans and notes payable, current- related parties | $ | $ | ||||||
| Loans and notes payable, long term- related parties | $ | $ | ||||||
| Schedule of maturities of loans and notes payable | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ |
| (a) | |
| (b) | |
| (c) | |
| (d) |
F-27
| (e) | |
| (f) |
| (g) |
| (h) |
|
| (i) |
| (j) |
| (k) |
F-28
| (l) | |
| (m) | |
| (n) | |
| (o) |
F-29
Note 15. Commitments and Contingencies
Finance Leases
We acquired Silver Fuels Delhi, LLC (SFD) and White Claw Colorado City, LLC (WCCC) in a business combination in August 2022, in which we acquired certain finance lease contracts and liabilities as described below:
SFD has two finance lease agreements with Maxus Capital Group, LLC (“Maxus”). The first finance lease involves twelve storage tanks and other equipment for consideration of $
We are required to make minimum cash reserve payments of at least $
WCCC a finance lease with Maxus for the terminaling and storage delivery terminal, commonly known as the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus for consideration of approximately $
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 four-year agreement, which Maxus agreed to finance the build-out of our new wash plant facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. Maxus has funded approximately $
F-30
We acquired Meridian Equipment Leasing, LLC (MEL) in a business combination in October 2022, in which we acquired certain finance lease contracts and liabilities as described below:
Meridian Equipment Leasing has a master lease agreement (which originally contained eighteen finance leases) containing eight finance leases as of December 31, 2024 with Maxus Capital Group, LLC (“Maxus”). The leases have funded the purchase of tractors, trailers, and other crude oil transportation assets for consideration of $
We are required to make minimum cash reserve payments of at least $25,919 (for the 8 leases) each month in addition to the base lease payments. The cash reserve payments are to be used in the event of a default. At the end of the term, Maxus will return the balance of any cash reserve payments. As of December 31, 2024, the balances of the cash reserves for these leases were recorded as other assets in the amount of $1,490,562 (see Note 6). As these leases grant the lessee an option to purchase the underlying asset that the lessee is reasonably certain to be exercised, the leases are accounted for as finance leases. We have recorded right of use assets in our property, plant, and equipment, and depreciated them on a straight-line basis. We have also recorded a finance lease liability due to Maxus. According to ASC 842, the Company has measured the lease liability and at the present value of the remaining lease payments, as if the lease were acquired on acquisition date of October 1, 2024. This measurement as imputed interest rate of ranging from 6.05% to 6.30% lease obligations, which results in the carrying value of the financial liabilities equating the estimated book value of the leased assets at the end of the lease terms and the dates at which the Company may exercise its buy-back options. Future minimum lease payments for each of the remaining years under the Maxus lease obligations are as follows: 2025 $3,672,604, 2026: $2,637,587.
On December 24, 2024, our subsidiary Meridian Equipment Leasing, LLC (“MEL”), supplemented (Schedule 21) an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a four-year agreement, which Maxus agreed to a sale leaseback of approximately $1.5 million of certain gathering and pipeline assets. Under the terms of the lease, lease payments to are $40,335 per month over four years, with an early buyout option or option at the end of the base term to purchase the equipment for $470,462. As of December 31, 2024, Maxus has only funded $
The following table reconciles the undiscounted cash flows for the finance leases as of December 31, 2024 to the finance lease liability recorded on the balance sheet:
| Schedule of financing lease liability | ||||
| 2025 | ||||
| 2026 | ||||
| Total undiscounted lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease payments | ||||
| Add: carrying value of lease obligation at end of lease term | ||||
| Total finance lease obligations | $ | |||
| Finance lease liabilities, current | $ | |||
| Finance lease liabilities, long-term | $ | |||
| Weighted-average discount rate | % | |||
| Weighted-average remaining lease term (months) |
The discount rate is the Company’s incremental borrowing rate, or the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on an assessment of the Company’s borrowings at the time the finance leases were entered into or revalued upon acquisition, the incremental borrowing rate was determined to be between 6.29% and 18.00%.
F-31
Operating Leases
On December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”) with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months at our discretion. Our monthly rent is $0 for the first three months and then at month 4 it is approximately $7,000 (based on a 50% reduction) and increases to approximately $13,000 in month 7 and then increases annually up to approximately $16,000 per month by the end of the initial term. We plan to place one or more of our RPC machines on the property, as well as store certain equipment.
On October 1, 2024, the Company acquired a lease agreement for corporate office space in Dallas, Texas at Spring Valley. Commencing on June 1, 2022, the five-year lease terminates on May 31, 2027 with Spring Valley Leasing LLC. The lease required a monthly lease payment $
On October 1, 2024, the Company acquired a lease agreement for land, building, yard and improvements in Monohans, Texas related to operating a trucking yard and shop. Commencing on May 1, 2021, the five-year lease terminates on April 30, 2026. The lease requires a monthly lease payment of $
On October 1, 2024, the Company acquired a lease agreement for 10 acres of land and its buildings and improvements in Reeves County, Texas. Commencing on January 1, 2024, seventeen-month lease terminates on May 31, 2025. The lease requires a monthly lease payment of $
On October 1, 2024, the Company acquired a lease agreement for building and yard in Reeves County, Texas related to operating a trucking yard and shop. Commencing on January 1, 2024, the seventeen-month lease terminates on May 31, 2025. The lease requires a monthly lease payment of $
The right-of-use asset for operating leases as of December 31, 2024 and 2023 was $
The following table reconciles the undiscounted cash flows for the leases as of December 31, 2024 to the operating lease liability recorded on the balance sheet:
| Schedule of lessee operating lease liability | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total undiscounted lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease payments | $ | |||
| Operating lease liabilities, current | $ | |||
| Operating lease liabilities, long-term | $ | |||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % |
The discount rate is the Company’s incremental borrowing rate, or the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on an assessment of the Company’s borrowings at the time the operating leases were entered into or acquired, the incremental borrowing rate was determined to be between 6.29 and 10.5%.
F-32
Employment Agreements
On October 28, 2022 we entered into an executive employment agreement with a new Chief Executive Officer, James Ballengee, which provides for annual compensation of $
On June 13, 2024, we entered into a new Employment Agreement with Mr. Tyler Nelson with respect to our appointment of Mr. Nelson as Chief Financial Officer. Pursuant to the New Employment Agreement, Mr. Nelson will receive: (i) $
On October 1, 2024, we entered into an executive employment agreement with Russ Shelton as Executive Vice President and Chief Operating Officer. Mr. Shelton will receive (i) base salary compensation of $
F-33
On June 26, 2024, we entered into an executive employment agreement with Patrick M. Knapp to join the company as our Executive Vice President, General Counsel, & Secretary and provides for an annual base salary of $
Note 16. Long-term Debt
To assist in funding the manufacture of the Company’s Remediation Processing Centers, between 2015 and 2017, the Company entered into two agreements which include terms for the purchase of participation rights for the sale of future revenue of the funded RPCs, and which also require working interest budget payments by the Company.
The Company accounted for the terms under these contracts for the sale of future revenue under Accounting Standards Codification 470 (“ASC 470”). Accordingly, these contracts included the receipt of cash from an investor where the Company agrees to pay the investor for a defined period a specified percentage or amount of the revenue or a measure of income (for example, gross revenue) according to their contractual right, in which the Company would record the cash as debt and apply the effective interest method to calculate and accrue interest on the contracts. The terms of these agreements grant the holder a prorated 25% participation in the gross revenue of the assets as defined in the agreements for 20 years after operations commence for a purchase price of approximately $
Some holders of these participation rights also have the option to relinquish ownership and all remaining benefits of their LLC units in exchange for Common Stock in the Company. Depending on the contract, these options to convert to common stock range from between 1 and 5.5 years. The exercise period ranges from between 1 year to 5.5 years with a step-up discount to market for each year the option is not exercised with a range of between 5% to 25% discount to market. As of December 31, 2024 and 2023 none of these options have been exercised to convert to Common Stock. Accordingly, under Accounting Standards Codification 815 (“ASC 815”) the Company valued these options at fair value, which found the fair value of the options to be nominal. Long-term debt related to these participation rights is recorded in “Long-term debt” on the consolidated balance sheet.
F-34
The accounting for the terms under these contracts that call for working interest budget payments by the Company are recorded in current liabilities on the consolidated balance sheet and paid down through pass-through expenses or cash according to the contract. Accordingly, the Company records any unpaid balance of budget payments received in “Long-term debt, current” as these liabilities are generally paid within 12 months after proceeds are received.
Long-term debt consists of the following:
| Schedule of long-term debt | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Principal | $ | $ | ||||||
| Accrued interest | ||||||||
| Debt discount | ( |
) | ||||||
| Total long term debt | $ | $ | ||||||
| Long term debt, current | $ | $ | ||||||
| Long term debt | $ | $ | ||||||
Note 17. Stockholders’ Equity
Series A, Series B, Series B-1, Series C and Series C-1 Preferred Stock
The Preferred Stock authorized by the Company may be issued from time to time in one or more series. The Company is authorized to issue shares of preferred stock. The Company is authorized to issue shares of Series A Preferred Stock, shares of Series B Preferred Stock, shares of Series B-1 Preferred Stock, shares of Series C Preferred Stock, and shares of Series C-1 Preferred Stock. The Board of Directors is authorized to fix or alter the number of shares constituting any series of Preferred Stock and the designation thereof. In 2021, the Board of Directors authorized, and a majority vote acceptance was received of each voting class of preferred stock, including Series B Preferred Stock, Series B-1 Preferred Stock, and Series C-1 Preferred Stock, that each class’s designations be amended that upon the Company’s public offering in conjunction with an up list to a senior stock exchange that these classes of preferred stock will convert their preferred shares to common shares on a one for one basis. In conjunction with our acquisition of the Endeavor Entities on October 1, 2024, on February 6, 2025 the Company filed a Certificate of Amendment to our Articles of Incorporation (deemed to be effective for accounting purposes as of October 1, 2024) which withdrew all prior series of preferred stock and set forth the certificate of designation of our the Series A Preferred Stock issued as consideration for the acquisition. Such filing is deemed to have been effective as of December 31, 2024 as such filing’s delay was due to administrative reasons. For the year ended December 31, 2024 and 2023, there were no outstanding shares of the previous preferred stock series at the time of the amendment. As a result of the amendment Series A was replaced as disclosed below, and Series B, B-1, C, and C-1 were all withdrawn. The Company has issued outstanding shares of Series A Preferred as of December 31, 2024. The conversion price is subject to adjustment under certain customary circumstances, including as a result of stock splits and combinations, dividends and distributions, and certain issuances of common stock. The Company has the right to convert the Preferred Stock at any time using the stated value of $ per share of Preferred Stock and the conversion price of one dollar ($1.00) per share of Common Stock. Holders of shares of Series A Preferred Stock will have no voting rights. Our Series A Preferred Stock earns an annual dividend of
F-35
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price is $116.3 million (the “Purchase Price”), after post-closing adjustments, including assumed debt and an earn-out adjustment, payable in a combination of our common stock, $0.001 par value per share (“Common Stock”) and shares of our Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The sellers are beneficially owned by James Ballengee, our chairman, chief executive officer and principal shareholder. To date we have issued the sellers shares of our common stock and shares of our Series A Preferred Stock.
Common Stock
In November 2023, the Company’s shareholders voted to increase the Company’s authorized shares of common stock to . As of December 31, 2024 and 2023, there were and shares of our common stock issued and outstanding, respectively. Treasury stock is carried at cost.
On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price is $116.3 million (the “Purchase Price”), after post-closing adjustments, including assumed debt and an earn-out adjustment, payable in a combination of our common stock, $0.001 par value per share (“Common Stock”) and shares of our Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The sellers are beneficially owned by James Ballengee, our chairman, chief executive officer and principal shareholder. To date we have issued the sellers 6,724,291 shares of our common stock and 107,789 shares of our Series A Preferred Stock. For the years ended December 31, 2024 and 2023, the Company issued and common shares for a $
For the year ended December 31, 2024, the Company sold common shares for $
For the year ended December 31, 2024, the Company converted $
Noncontrolling Interest
In accordance with ASC 810, as of October 1, 2023, we deconsolidated Viva Wealth Fund I, LLC (VWFI), recognizing a gain on deconsolidation of $
F-36
On November 10, 2023, our 2023 Equity and Incentive Plan (the Plan) went effective. The plan was approved by our Board of Directors and by the holders of a majority of our common stock.
The following is a summary of the material features of the Plan, which is qualified in its entirety by reference to the actual text of the Plan.
Eligibility. The Plan provides for the grant of equity awards to the officers, employees, directors, consultants and other key persons of the Company and our subsidiaries selected from time to time by our Compensation Committee of the Board. The Compensation Committee will determine in its sole and absolute discretion the specific individuals eligible to participate in the Plan. As of April 14, 2025, we had approximately one hundred and fifty employees and five directors. The Company also employs consultants to supplement its operational activities.
Awards. Awards under the Plan may take the form of stock options, stock appreciation rights (“SARs”), restricted stock awards, unrestricted stock awards, restricted stock units (“RSUs”), and other share-based awards, or any combination of the foregoing (each, an “award” and collectively, “awards”).
Shares Available. Subject to the adjustment provisions discussed below under “Adjustments,” the total number of shares that may be issued under the Plan is .
Plan Administration. Our Compensation Committee of the Board will administer the Plan at the time we add additional independent directors. Until then the Board will administer the Plan. The Board and the Compensation Committee are to as the “Administrator.” The Administrator will be authorized to grant awards under the Plan, to interpret the provisions of the Plan and to prescribe, amend and rescind rules relating to the Plan or any award thereunder. It is anticipated that the Administrator (either generally or with respect to specific transactions) will be constituted so as to comply, as necessary or desirable, with the requirements of Section 162(m) of the Internal Revenue Code (the “Code”) and Rule 16b-3 promulgated under the Exchange Act.
Stock Options. The Plan permits the granting of “incentive stock options” meeting the requirements of Section 422 of the Code, and “nonqualified stock options” that do not meet such requirements. The term of each option is determined by the Compensation Committee and shall not exceed ten years after the date of grant. Options may also be subject to restrictions on exercise, such as exercise in periodic installments, as determined by the Administrator. In general, the per share exercise price for options must be at least equal to 100% of the fair market value of the underlying shares on the date of the grant, unless the option is intended to be compliant with the requirements of Section 409A of the Code. All shares authorized for issuance under the Plan shall be available for issuance in respect of incentive stock options.
Stock Appreciation Rights. The Plan permits the granting of SARs. The Administrator will determine any vesting schedules and the terms and conditions of each grant. Upon the exercise of a SAR, the recipient is entitled to receive from the Company an amount in cash or shares with a fair market value equal to the appreciation in the value of the shares subject to the SAR over a specified reference price. The reference price per share of any SAR will not be less than 100% of the fair market value per share of Company Common Stock on the date of the grant of the SAR, unless the SAR is intended to be compliant with the requirements of Section 409A of the Code.
Restricted Stock Awards. The Administrator may award restricted stock under the Plan. Restricted stock gives a participant the right to receive stock subject to a risk of forfeiture based upon certain conditions. The forfeiture restrictions on the shares may be based upon performance standards, length of service and/or other criteria as the Compensation Committee may determine. Until all restrictions are satisfied, lapsed or waived, we will maintain custody over the restricted stock, but the participant will be able to vote the shares and will be entitled to all distributions paid with respect to the shares (but see below, under the heading “No Current Dividends on Unvested Awards” with respect to the treatment of dividends while the shares remain unvested). During the period in which shares are restricted, the restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered. Upon termination of employment, the participant will forfeit the restricted stock to the extent the applicable vesting requirements have not by then been met.
F-37
Unrestricted Stock Awards. The Administrator may award unrestricted stock under the Plan. Unrestricted stock may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.
Restricted Stock Units. The Plan provides that the Administrator may grant restricted stock units (“RSUs”), which represent the right to receive shares following the satisfaction of specified conditions. The Administrator will determine any vesting schedules and the other terms of each grant of RSUs. A participant will not have the rights of a stockholder with respect to the shares subject to an RSU award prior to the actual issuance of those shares.
Performance Awards. The Plan provides that the Administrator may grant awards that are contingent upon the achievement of specified performance criteria (“Performance Awards”). Such awards may be payable in cash, shares or other property. The Administrator will determine the terms of Performance Awards, including the performance criteria, length of the applicable performance period, and the time and form of payment.
Other Share-Based Awards. The Plan provides that the Administrator may grant other awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares. All the terms of such other share-based awards will be determined by the Administrator.
No Payment of Dividends Until Awards Vest. Dividends or dividend equivalents payable with respect to Plan awards will be subject to the same vesting terms as the related award.
Adjustments. In the event of any corporate transaction or event such as a stock dividend, extraordinary dividend or similar distribution (whether in the form of cash, shares, other securities, or other property), reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the Plan provides that the Administrator will make equitable adjustments to (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to any then outstanding awards under the Plan, (iii) the repurchase price, if any, per phare subject to each outstanding award, and (iv) the exercise price for each Share subject to any then outstanding Stock Options under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options) as to which such Stock Options remain exercisable.
Transferability of Awards. Restricted Stock awards, Stock Options, SARs and, prior to exercise, the shares issuable upon exercise of such Stock Option shall not be transferred other than by will, or by the laws of descent and distribution. The Administrator, however, may allow for the assignment or transfer of an award (other than incentive stock options and restricted stock awards) to a participant’s spouse, children and/or trusts, partnerships, or limited liability companies established for the benefit of the participant’s spouse and/or children, subject in each case to certain conditions on assignment or transfer.
Termination and Amendment. The Board may, at any time, amend or discontinue the Plan and the Compensation Committee may, at any time, amend or cancel any outstanding award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding award without the consent of the holder of the Award. The Compensation Committee may exercise its discretion to reduce the exercise price of outstanding Stock Options or effect repricing through cancellation of outstanding Stock Options and by granting such holders new awards in replacement of the cancelled Stock Options. To the extent determined by the Compensation Committee to be required either by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or otherwise, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. The Board has the right to amend the Plan and/or the terms of any outstanding Stock Options to the extent reasonably necessary to comply with the requirements of the exemption pursuant to Rule 12h-1 of the Exchange Act.
Treatment of Awards Upon a Sale Event. In the case of and subject to the consummation of a Sale Event (as the term is defined in the Plan), the Plan and all outstanding Stock Options and SARs issued thereunder shall become one hundred percent (100%) vested upon the effective time of any such Sale Event, all unvested Restricted Stock and unvested Restricted Stock Unit Awards issued thereunder shall become one hundred percent (100%) vested, with an equitable or proportionate adjustment as to the number and kind of shares subject to such awards as such parties shall agree, and such Restricted Stock shall be repurchased from the holder thereof at the then fair market value of such shares. In the event of the termination of the Plan, each holder of Stock Options shall be permitted, within a period of time prior to the consummation of the Sale Event as specified by the Administrator, to exercise all such Stock Options or SARs which are then exercisable or will become exercisable as of the effective time of the Sale Event.
F-38
Treatment of Termination of Service Relationship. Any portion of a Stock Option or SAR that is not vested and exercisable on the date of termination of an optionee’s service relationship, a grantee’s right in all Restricted Stock Units that have not vested upon the grantee’s cessation of service relationship with the Company and any subsidiary for any reason, shall immediately expire and be null and void, unless otherwise be provided by the Administrator. Once any portion of the Stock Option becomes vested and exercisable, the optionee’s right to exercise such portion of the Stock Option or SAR in the event of a termination of the optionee’s service relationship shall continue until the earliest of: (i) the date which is: (A) 12 months following the date on which the optionee’s Service Relationship terminates due to death or Disability (or such longer period of time as determined by the Committee and set forth in the applicable Award Agreement), or (B) three months following the date on which the optionee’s Service Relationship terminates if the termination is due to any reason other than death or Disability (or such longer period of time as determined by the Committee and set forth in the applicable Award Agreement), or (ii) the expiration date set forth in the award agreement; provided that notwithstanding the foregoing, an award agreement may provide that if the optionee’s service Relationship is terminated for cause, the Stock Option shall terminate immediately and be null and void upon the date of the optionee’s termination and shall not thereafter be exercisable.
Tax Withholding. The Company and its subsidiaries may deduct amounts from participants to satisfy withholding tax requirements arising in connection with Plan awards. The Company’s obligation to deliver stock certificates (or evidence of book entry) to any grantee is subject to and conditioned on any such tax withholding obligations being satisfied by the grantee.
Stock Options & Awards
Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.
The Company has granted stock-based compensation to employees, including the issuance of employee stock options granted in June 2022 that were to vest over a period of two years. For the years ended December 31, 2024 and 2023, we also issued and shares in stock awards in conjunction with the CEO’s employment agreement. As of December 31, 2024 and 2023, we issued additional stock awards of
There were no other options or awards granted during the years ended December 31, 2024 and 2023, respectively.
The assumptions used in the Black-Scholes option pricing model to determine the fair value of the options on the date of issuance are as follows:
| Schedule of option activity | |||
| December 31, 2023 |
|||
| Risk-free interest rate | – | ||
| Expected dividend yield | |||
| Expected life of warrants | - years | ||
| Expected volatility rate | – |
F-39
The following table summarizes all stock option activity of the Company for the years ended December 31, 2024 and 2023:
| Schedule of warrant assumptions | ||||||||||||
| Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (Years) |
||||||||||
| Outstanding, December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited | ( |
) | - | |||||||||
| Outstanding, December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | ( |
) | $ | - | ||||||||
| Forfeited | ( |
) | - | |||||||||
| Outstanding, December 31, 2024 | $ | |||||||||||
| Exercisable, December 31, 2023 | $ | |||||||||||
| Exercisable, December 31, 2024 | $ | |||||||||||
As of December 31, 2024 and 2023, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.
Warrants
As of December 31, 2024 and 2023, the Company had
Management uses the Black-Scholes option pricing model to determine the fair value of warrants on the date of issuance.
The assumptions used in the Black-Scholes option pricing model to determine the fair value of the warrants on the date of issuance during 2024 and 2023 are as follows:
| Schedule of warrant activity | |||
| Risk-free interest rate | - | ||
| Expected dividend yield | |||
| Expected life of warrants | - years | ||
| Expected volatility rate | - % |
F-40
Note 19. Segments
The Company has two reportable operating segments, which consist of trucking logistics services and terminaling and storage product and services, and uses segment income/(loss) from operations to assess performance against forecasted results and allocate resources to its segments. Segment income/(loss) from operations is determined on the same basis as consolidated income/(loss) from operations presented in the Company’s consolidated statements of operations.
The trucking logistics services segment generates revenue from trucking crude oil and produced water and transportation and terminaling services of crude oil via the Omega Gathering Pipeline. Transportation and terminaling of crude oil is also conducted utilizing our Omega Gathering Pipeline, which is an approximately forty-five (45) mile integrated crude oil gathering and pipeline in Blaine County, Oklahoma, in the heart of the STACK play. The line is tied into the Cushing, Oklahoma storage hub via the Plains STACK Pipeline. We also own and operate fifteen (15) crude oil pipeline injection truck stations, primarily centered in the Permian Basin.
The terminaling and storage segment generates revenue from two operational major crude oil terminaling facilities for crude oil and natural gas liquid gathering and storage. One facility is located in Colorado City, Texas, and the other facility is located in Delhi, Louisiana. Both facilities are located at the junction of several major interstate pipelines, receive various grades of crude oil from our customers. These crude oil terminals are industrial facilities that serve as hubs for the storage, handling and distribution of crude oil and petroleum products.
For information purposes, we have reported separately “Corporate and Other”, which is not determined to be an operating segment, but allows for analysis of non-operating entities and shared services and personnel that support both of the operating segments. Corporate and Other contains expenses for the corporate entity and non-operating entities, such as corporate overhead payroll expenses, stock-based compensation, corporate legal and audit expenses, impairment expense not related to operating segments, interest expense from loans at the corporate level, and amortization of intangible assets held at corporate and non-operating entities.
Our chief operating decision maker (CODM) is our Chief Executive Officer, James Ballengee. The CODM uses segment income/(loss) from operations before income taxes for purposes of allocating resources and evaluating financial performance predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a quarterly basis using the segment income/(loss) before taxes measure when making decisions about allocating capital and personnel to the segments. The CODM does not review assets in evaluating the results of the operating segments, and therefore, such information is not presented. Segment revenue, significant segment expenses, income/(loss) from operations, other income/(expense) and income/(loss) before income tax for the years ended December 31, 2024 and 2023 are as follows :
F-41
Year ended December 31, 2024
| Transportation Logistics Segment |
Terminaling and Storage Segment |
Corporate and other |
Total Consolidated |
|||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Revenues- related party | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Impairment expense | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense): | ||||||||||||||||
| Unrealized gain (loss) on marketable securities | ||||||||||||||||
| Gain on disposition of asset | ||||||||||||||||
| Gain on deconsolidation of subsidiary | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest expense- related parties | ( |
) | ( |
) | ||||||||||||
| Other income | ||||||||||||||||
| Total other income (expense) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss before provision for income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income taxes | ( |
) | ( |
) | ||||||||||||
| Consolidated net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Less: Net loss attributable to noncontrolling interests | ( |
) | ( |
) | ||||||||||||
| Net loss attributable to Vivakor, Inc. | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
F-42
Year ended December 31, 2023
| Transportation Logistics Segment |
Terminaling and Storage Segment |
Corporate and other |
Total Consolidated |
|||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Revenues- related party | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Unrealized gain (loss) on marketable securities | ( |
) | ( |
) | ||||||||||||
| Gain on deconsolidation of variable interest entity | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ||||||||||
| Interest expense- related parties | ( |
) | ( |
) | ||||||||||||
| Other income | ||||||||||||||||
| Total other income (expense) | ( |
) | ( |
) | ( |
) | ||||||||||
| Loss before provision for income taxes | ( |
) | ( |
) | ||||||||||||
| Provision for income taxes | ( |
) | ( |
) | ||||||||||||
| Consolidated net loss | ( |
) | ( |
) | ||||||||||||
| Less: Net loss attributable to noncontrolling interests | ( |
) | ( |
) | ||||||||||||
| Net loss attributable to Vivakor, Inc. | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||
F-43
Note 20. Income Tax
Provision for income taxes is as follows:
| Schedule of components of income tax | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Current: | ||||||||
| State | $ | $ | ||||||
| Total current | ||||||||
| Deferred: | ||||||||
| Federal | ||||||||
| State | ( |
) | ||||||
| Total Deferred | ||||||||
| Net provision | $ | $ | ||||||
The differences between the expected income tax provision based on the statutory Federal United States income tax rates and the Company’s effective tax rates are summarized below:
| Schedule reconciliation of income tax | ||||||||
| December 31, 2024 |
||||||||
| Tax Computed At The Federal Statutory Rate | $ | ( |
) | % | ||||
| State Tax, Net Of Fed Tax Benefit | ( |
) | % | |||||
| Nondeductible Expenses | - |
% | ||||||
| Flowthrough Entity not Subject to Tax | - |
% | ||||||
| Foreign Corporation - Minority Interest | % | |||||||
| Non-controlling Interest | ( |
) | % | |||||
| Valuation Allowance | - |
% | ||||||
| Stock compensation | ( |
) | % | |||||
| Rate Change | - |
% | ||||||
| Other/Prior Year True-Up | ( |
) | % | |||||
| Benefit from income taxes | $ | - |
% | |||||
| December 31, 2023 |
||||||||
| Tax Computed At The Federal Statutory Rate | $ | ( |
) | % | ||||
| State Tax, Net Of Fed Tax Benefit | ( |
) | % | |||||
| Nondeductible Expenses | - |
% | ||||||
| Flowthrough Entity not Subject to Tax | ( |
) | % | |||||
| Foreign Corporation - Minority Interest | - |
% | ||||||
| Non-controlling Interest | ( |
) | % | |||||
| Valuation Allowance | - |
% | ||||||
| Rate Change | % | |||||||
| R&D Credits | - |
% | ||||||
| Other/Prior Year True-Up | - |
% | ||||||
| Benefit from income taxes | $ | - |
% | |||||
F-44
Significant components of the Company’s deferred tax assets and liabilities are as follows:
| Schedule of deferred tax assets and liabilities | ||||
| December 31, 2024 |
||||
| Deferred Tax Assets: | ||||
| Net Operating Losses | $ | |||
| Stock Compensation | ||||
| Reserves | ||||
| Leases Liability | ||||
| Inventory | ||||
| Fixed Assets | ||||
| Accrued Liabilities | ||||
| Other | ||||
| Total Deferred Tax Assets | ||||
| Deferred Tax Liabilities: | ||||
| ROU Asset | ( |
) | ||
| Intangibles | ( |
) | ||
| Total Deferred Tax Liabilities | ( |
) | ||
| Less: Valuation Allowance | ( |
) | ||
| Net deferred tax liability: | $ | ( |
) | |
| December 31, 2023 |
||||
| Deferred Tax Assets: | ||||
| Net Operating Losses | $ | |||
| Stock Compensation | ||||
| Reserves | ||||
| Leases Liability | ||||
| Inventory | ||||
| Fixed Assets | ||||
| Accrued Liabilities | ||||
| Other | ||||
| Total Deferred Tax Assets | ||||
| Deferred Tax Liabilities: | ||||
| ROU Asset | ( |
) | ||
| Intangibles | ( |
) | ||
| Total Deferred Tax Liabilities | ( |
) | ||
| Less: Valuation Allowance | ( |
) | ||
| Net deferred tax liability: | $ | ( |
) | |
In determining the possible future realization of deferred tax assets, the Company has considered future taxable income from the following sources: (a) reversal of taxable temporary differences; and (b) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire.
F-45
Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Based on our review of the deferred tax assets the Company has concluded that a valuation allowance is necessary on the net operating loss balance, as realization of this asset does not meet the more likely than not threshold.
As of December 31, 2024 and 2023, the Company had estimated net operating losses for federal and state purposes of $
We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize potential interest and penalties related to unrecognized tax benefits in the general and administrative expense in the statement of operations of the Company.
The Company is in the process of filing back income tax returns from 2010 through the current year and subject to IRS examination for these years. The Company has booked a reserve for potential penalties associated with non-filing of certain foreign information reports related to its subsidiary in the Middle East. Penalties and interest have been reported in the general and administrative section of the statement of operations. The reserve balance at December 31, 2024 and 2023 was $
Note 21. Related Party Transactions
In 2023 we subleased office space to Spectra Global Cuisine, LLC (Spectra), which shares officers with WealthSpace, LLC (the Fund Manager of VWFI). For the year ended December 31, 2024, we realized $
On May 25, 2023, we entered into a Consulting Agreement with Matthew Nicosia, a shareholder, affiliate via beneficial ownership, and our former Chief Executive Officer. Under the terms of the agreement, Mr. Nicosia is assisting our current Chief Executive Officer regarding transitioning certain projects Mr. Nicosia was working on to our new Chief Executive Officer, primarily those operations related to our business in Kuwait and our attempt to sell some operations that we have impaired. The agreement is for an initial term of three months, and we have paid Mr. Nicosia a total of $
In May 2023, we entered into a Consulting Agreement with Trent Staggs, who is a current shareholder of the Company and one of our former directors. The agreement was for a term of four months and has been terminated as of September 30, 2023. For the year ended December 31, 2024, we paid Mr. Staggs a total of $
F-46
On June 15, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Jorgan Development, LLC, (“Jorgan”) and JBAH Holdings, LLC, (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Silver Fuels Delhi, LLC (“SFD”) and White Claw Colorado City, LLC (“WCCC”) whereby, at closing, which occurred on August 1, 2022, we acquired all of the issued and outstanding membership interests where the consideration included secured three-year promissory notes issued by us in favor of the Sellers (the “Notes”). At the time of the closing of these transactions Jorgan, JBAH, and our newly hired CEO, James Ballengee were not considered related parties. As James Ballengee is now our Chief Executive Officer and is the beneficiary of Jorgan and JBAH, and the Sellers are significant shareholders, certain transactions, as noted below, related to Jorgan, JBAH, and James Ballengee are now considered related party transactions. The consideration for the membership interests included the Notes in the amount of $
In the business combination of acquiring WCCC we also acquired WCCC’s Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $
In the business combination of acquiring SFD, we acquired an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies volumes of Crude Petroleum to SFD, which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires on December 31, 2031. For the year ended December 31, 2024 and 2023, we made crude oil purchases from WC Crude of $
In the business combination of acquiring SFD and WCCC we also entered into a Shared Services Agreement with Endeavor Crude, LLC (“Endeavor”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, we have the right, but not the obligation to use Endeavor for consulting services. For the years ended December 31, 2023, Endeavor rendered services in the amount of $
We have an existing note payable issued to Triple T, which is owned by Dr. Khalid Bin Jabor Al Thani, the
F-47
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 consolidated financial statements of the Endeavor Entities for the nine months ended September 30, 2024 and for the years ended December 31, 2023 and 2022 are attached hereto as Exhibits 99.1 and 99.2.
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 pipeline and exclusive connected blending and processing facility in Blaine County, Oklahoma.
The purchase price for the Membership Interests is $116.3 million (the “Purchase Price”), after post-closing adjustments, including a reduction for assumed debt and a possible increase for 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 number of shares of Common Stock for the Purchase Price is 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 remaining Purchase Price is due to the Sellers in 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 ($1.00) 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.
On December 2, 2024, the Company issued 6,724,291 shares of Common Stock to the Sellers, or their assignees, with 4,999,500 shares issued to Jorgan and 50,500 shares issued to JBAH. The remaining shares were issued to two non-related parties as part of the consideration for the Purchase Price at the instruction of the Sellers. The Company issued 107,789 shares of Series A Preferred Stock to the Sellers, or their assignees, as part of the Purchase Price.
Upon the Closing of our acquisition of the Endeavor Entities, the parties of that certain Membership Interest Purchase Agreement dated June 15, 2022, and the Amendment of Transaction Documents Related to Threshold Payment dated March 31, 2024 (together, the “2022 MIPA”), agreed that Section 8.7 Unwinding of the 2022 MIPA expired and is no longer enforceable. As a result, the selling entities in the 2022 MIPA no longer have the right to unwind our acquisitions of White Claw Colorado City and Silver Fuels Delhi.
In connection with the Closing of the Endeavor Entities on October 1, 2024, a certain Repair and Maintenance Subscription Plan dated October 1, 2024 was entered into between Horizon Truck and Trailer, LLC, which is a related party as our Chief Executive Officer is the beneficiary, and Meridian Equipment Leasing, LLC (“MEL”) for the maintenance and repairs of all commercial trailers and tractors owned, leased, or controlled by MEL, which includes a $100,000 monthly retainer that is credited against open monthly charges and invoices.
F-48
Upon the Closing of our acquisition of the Endeavor Entities, we acquired Trucking Transportation Agreement & Addendum with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must, through its own operations or source for the Company, a minimum volume of 75,000 bbls per day for our trucking logistics services. The agreement expires on December 31, 2034. For the year ended December 31, 2024, we realized related party trucking revenue related to this agreements of $
Upon the Closing of our acquisition of the Endeavor Entities, we acquired a Station Throughput Agreement with Posse Wasson, LLC (Posse Monroe, LLC) (“Possee”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, Possee must source for the Company, a minimum volume of 230,000 bbls per month through our storage facility at $0.275 per barrel, guaranteeing $759,000 of throughput revenue on an annual basis. The agreement expires on December 31, 2034. For the year ended December 31, 2024, we realized related party revenue related to this agreements of $
Upon the Closing of our acquisition of the Endeavor Entities, we acquired a Station Throughput Agreement with WC Crude, who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must source for the Company, a minimum volume of 200,000 bbls per month through our storage Omega Gathering Pipeline at $1.00 per barrel, guaranteeing $2,400,000 of throughput revenue on an annual basis. The agreement expires on December 31, 2034. For the year ended December 31, 2024, we realized related party revenue related to this agreements of $
On October 17 2024, our newly acquired subsidiaries under the Endeavor Entities, received funding of $530,000 under our May 14, 2024 promissory note between Vivakor, Inc. and Ballengee Holdings, LLC, of which our Chief Executive Officer is the beneficial owner. The Company also made payments of $530,000 on this promissory note in October 2024. See Note 6 for further information regarding the promissory note between Ballengee Holdings, LLC and Vivakor, Inc.
On May 14, 2024, we issued a promissory note, to James Ballengee, in the principal amount of up to $
On June 13, 2024, we owed our Chief Financial Officer $
On July 5, 2024, the Company received a loan from Ballengee Holdings, LLC, 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
F-49
Note 22. Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were available to issue.
On February 11, 2025, the Company filed a Certificate of Amendment (the “Amendment to Articles”) to the Company’s Amended and Restated Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada in order to withdraw all previously designated series of preferred stock.
On February 11, 2025, we entered into a Consulting Agreement with WSGS, LLC for management consulting services. Under the terms of the Consulting Agreement, we will pay the consultant up to $
On February 10, 2025, we entered into a Side Letter related to our Executive Employment Agreement with Tyler Nelson, a Director and our Chief Financial Officer, and dated June 13, 2024 and the Promissory Note issued to Mr. Nelson dated June 13, 2024, under which we amended and clarified Mr. Nelson’s Employment Agreement and the Promissory Note to (i) clarify that effective October 1, 2024, Mr. Nelson’s Employment Agreement is with Vivakor Administration, LLC with all material obligations guaranteed by us, (ii) confirming the Promissory Note is still our primary obligation; (iii) confirming the payment obligations of the company are triggered but not just fund raising by the company but also fundraising by our subsidiaries, that the maturity date under the Promissory Note is extended until June 30, 2025, and that a 5% fee will be assessed on the outstanding principal and interest due under the Promissory Note as of December 31, 2024 as a result of the Promissory Note not being paid by December 31, 2024, and (iv) to clarify that no taxable event will occur related to amounts due under the Promissory Note until those amounts are actually paid by the Company to Mr. Nelson.
On July 5, 2024, we issued a convertible promissory note to Ballengee Holdings, LLC (“Ballengee Holdings”), whose beneficial owner is our Chief Executive Officer, in the principal amount of $500,000, in exchange for $500,000 and in connection therewith, we agreed to issue 21,552 ($50,000) restricted shares of our common stock to Ballengee Holdings (the “BH Shares”). On February 12, 2025, we issued the BH Shares to Ballengee Holdings.
On July 8, 2024, we issued a convertible promissory note to Justin Ellis (“Ellis”) in the principal amount of $350,000, in exchange for $350,000 and in connection therewith, we agreed to issue 15,982 ($35,000) restricted shares of our common stock to Ellis (the “Ellis Shares”). On February 12, 2025, we issued the Ellis Shares to Ellis.
On February 13, 2025, we issued Tysadco Partners, LLC shares for payment of $
On February 12, 2025, we issued James Ballengee, our Chairman, Chief Executive Officer and principal shareholder, shares of our common stock (net of tax withholdings) under the terms of the Ballengee Employment Agreement for his services rendered from October 28, 2024 to January 27, 2025. The shares were issued as unrestricted shares under our Equity Incentive Plan registered under a Registration Statement on Form S-8. Based on the Ballengee Employment Agreement, we owe Mr. Ballengee 688,891 shares of Common Stock for his employment period beginning October 28, 2024 through October 27, 2025, to be paid in three equal quarterly installments of 172,222 shares of Common Stock, and one installment of 172,225 shares (prior to tax withholdings).
F-50
Under our Employment Agreement with Tyler Nelson, our
On March 17, 2025, the Company issued a junior secured convertible promissory note (the “Note”) due as described below, to J.J. Astor & Co. (the “Lender”), in the principal amount of $
The Note is payable to the
Under the terms of a Registration Rights Agreement (the “RRA”), the Company is obligated to file a resale registration statement with the SEC registering any shares of its common stock issuable under the Note (the “Conversion Shares”) as well as the Commitment Shares by a date which shall be not later than sixty (60) days after closing.
On April 9, 2025, a Side Letter (the “Cedarvew Side Letter”) with Cedarview Capital Management LLC (“Cedarview”) went effective which amended the terms of that certain Loan and Security Agreement we issued to Cedarview dated October 31, 2024 (the “Cedarview Loan”). Under the terms of the Side Letter, we agreed to pay the remaining amounts we owe under the Cedarview Loan as follows: (i) $589,890.37 on or before April 9, 2025, (ii) payments of $150,000 on each of April 30, 2025 and May 31, 2025, and (iii) four monthly payments of $645,684.69 until the Cedarivew Loan has been paid in full. In exchange for Cedarview agreeing to the extended repayment terms under the Side Letter for the Cedarview Loan we agreed we would (a) pay Cedarview 30% of any net amounts we receive from drawdowns from any equity lines of credit we do in the future as payments on the Cedarview Loan, (b) pay Cedarview 30% of any net proceeds received from the sale of any assets in the future as payments on the Cedarview Loan, and (c) issue Cedarview, or its assignees, 300,000 shares of our restricted common stock. We paid the $
On March 18, 2025, the Company received a deficiency notification letter from the Listing Qualifications Staff of the Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Company’s common stock had closed below $1.00 per share for the previous 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company can regain compliance with the minimum bid price requirement at any time within the 180 calendar day period following receipt of the Nasdaq notice, or until September 15, 2025. To regain compliance, the bid price for the Company’s common stock must close at $1.00 per share or more for a minimum of 10 consecutive business days. Nasdaq’s written notice has no effect on the listing or trading of the Company’s common stock at this time. The Company intends to actively monitor the closing bid price of its common stock and, as appropriate, will consider available options to resolve this listing deficiency.
F-51
EXHIBIT INDEX
61
62
63
| * | Management contract or compensatory plan or arrangement. |
| ** | These exhibits are being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. |
64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Vivakor, Inc. | ||
| Date: April 15, 2025 | By: | /s/ James Ballengee |
| James Ballengee | ||
| Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ James Ballengee | Chief Executive Officer and Director | April 15, 2025 | ||
| James Ballengee | (Principal Executive Officer) | |||
| /s/ Tyler Nelson | Chief Financial Officer and Director | April 15, 2025 | ||
| Tyler Nelson | (Principal Accounting Officer and Principal Financial Officer) | |||
| /s/ John Harris | Director | April 15, 2025 | ||
| John Harris | ||||
| /s/ Albert Johnson | Director | April 15, 2025 | ||
| Albert Johnson | ||||
| /s/ Michael Thompson | Director | April 15, 2025 | ||
| Michael Thompson |
65
Exhibit 4.5
DESCRIPTION OF SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Vivakor, Inc. (the “Company,” “we,” “us,” and “our”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is the Company’s common stock, par value $0.001 per share (the “Common Stock”). The Common Stock is registered under Section 12(b) of the Exchange Act.
General
The following is a description of the material terms of the Company’s Common Stock. This is a summary only and does not purport to be complete. It is subject to and qualified in its entirety by reference to the Company’s Articles of Incorporation (the “Articles of Incorporation”) and the Company’s Bylaws (the “Bylaws”), each of which are incorporated by reference as an exhibit to its Annual Report on Form 10-K of which this Exhibit is a part. The Company encourages you to read its Articles of Incorporation, its Bylaws and the applicable provisions of Nevada Revised Statutes (the “NRS”), for additional information.
Description of Common Stock
Our Common Stock is listed on The Nasdaq Capital Market under the trading symbol “VIVK.”
Authorized Shares of Common Stock
The authorized number of shares of Common Stock is 200,000,000 shares of Common Stock.
Voting Rights
The holders of Common Stock have the unlimited right to vote for the election of directors and on all other matters requiring stockholder action, each share being entitled to one vote.
Dividend Rights
Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of Common Stock are entitled to receive dividends, if any, as may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Company legally available for the payment of dividends
Liquidation Rights
Upon the voluntary or involuntary liquidation, dissolution or winding-up of the Company the net assets of the Company available for distribution shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests.
Other Rights and Preferences
The holders of the Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of the Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that is currently outstanding and that it may designate and issue in the future.
Fully Paid and Nonassessable
All of the outstanding shares of Common Stock are fully paid and non-assessable.
Exhibit 21.1
Subsidiaries
| 1. | Vivakor Operating, LLC, a Texas limited liability company. |
| 2. | Vivakor Administration, LLC, a Texas limited liability company. |
| 3. | Vivakor Midstream, LLC, a Texas limited liability company. |
| 4. | VivaVentures Management Company, Inc., a Nevada corporation. |
| 5. | VM Facilities, LLC, a Texas limited liability company. |
| 6. | Vivakor Transportation, LLC, a Texas limited liability company. |
| 7. | Vivakor Supply & Trading, LLC, a Texas limited liability company. |
| 8. | Silver Fuels Processing, LLC, a Texas limited liability company. |
| 9. | Silver Fuels Delhi, LLC, a Texas limited liability company. |
| 10. | White Claw Colorado City, LLC, a Texas limited liability company. |
| 11. | VivaVentures Remediation Corp., a Texas corporation. |
| 12. | Meridian Equipment Leasing, LLC, a Texas limited liability company. |
| 13. | Endeavor Crude, LLC, a Texas limited liability company. |
| 14. | CPE Gathering Midcon, LLC, a Delaware limited liability company. |
| 15. | Equipment Transport, LLC, a Pennsylvania limited liability company. |
| 16. | ET EmployeeCo, LLC, a Delaware limited liability company. |
| 17. | VivaVentures Energy Group, Inc., a Nevada corporation. |
| 18. | VivaVentures Oil Sands, Inc., a Utah corporation. |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, James Ballengee, Chief Executive Officer of Vivakor, Inc. (the “Company”), certify that:
(1) I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2024;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;
(4) The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
(5) The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
April 15, 2025
| /s/ James Ballengee | |
| James Ballengee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Tyler Nelson, Chief Financial Officer of Vivakor, Inc. (the “Company”), certify that:
(1) I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2024;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;
(4) The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
(5) The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
April 15, 2025
| /s/ Tyler Nelson | |
| Tyler Nelson | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Vivakor, Inc. (the “Company”) for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, James Ballengee, Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ James Ballengee | |
| James Ballengee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
April 15, 2025
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Vivakor, Inc. (the “Company”) for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Tyler Nelson, Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Tyler Nelson | |
| Tyler Nelson | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
April 15, 2025