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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2023

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from _________ to _________

 

Commission file number: 000-41286

 

VIVAKOR, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   26-2178141
(State or other Jurisdiction of
Incorporation or Organization)		   (I.R.S. Employer
Identification No.)

 

5220 Spring Valley Road, Suite LL20
Dallas, TX		   75242
(Address of Principal Executive Offices)   (Zip Code)

 

(949) 281-2606

(Registrant’s telephone number, including area code)

 

4101 North Thanksgiving Way, Lehi UT 84043

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of exchange on which registered
Common Stock, $0.001 par value   VIVK   The Nasdaq Stock Market LLC
(Nasdaq Capital Market)

 

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. Yes ☒   No ☐

 

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” a “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-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 7(a)(2)(B) of the Securities Act: ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

 

As of November 13, 2023, there were 26,220,508 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 

VIVAKOR, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

 

TABLE OF CONTENTS

 

        Page
PART I. FINANCIAL INFORMATION   1
         
ITEM 1.   Financial Statements   1
         
    Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022   1
         
    Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2023 and 2022 (unaudited)   2
         
    Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months ended September 30, 2023 and 2022 (unaudited)   3
         
    Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2023 and 2022 (unaudited)   4
         
    Notes to Condensed Consolidated Financial Statements (unaudited)   5
         
ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   19
         
ITEM 3.   Quantitative and Qualitative Disclosures about Market Risk   25
         
ITEM 4.   Controls and Procedures   26
         
PART II. OTHER INFORMATION   27
         
ITEM 1.   Legal Proceedings   27
         
ITEM 1A.   Risk Factors   27
         
ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds   28
         
ITEM 3.   Defaults Upon Senior Securities   28
         
ITEM 4.   Mine Safety Disclosures   28
         
ITEM 5.   Other Information   28
         
ITEM 6.   Exhibits   29
         
SIGNATURES   30

 

i

 

 

EXPLANATORY NOTE

 

On February 14, 2022, we effected a 1-for-30 reverse split of our authorized and outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State, which was filed simultaneously with the close of an underwritten public offering of our common stock and the commencement of the trading of our common stock on the Nasdaq Capital Market, LLC. As a result of the Reverse Stock Split, all authorized and outstanding common stock, preferred stock, and per share amounts in this Quarterly Report on Form 10-Q, including, but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.

 

ii

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

VIVAKOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

                 
    September 30,
2023		     December 31,
2022		  
    (Unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 1,018,039     $ 3,101,186  
Cash and cash equivalents attributed to variable interest entity     181,058       81,607  
Accounts receivable     3,831,930       2,615,354  
Accounts receivable- related party     174,083       948,352  
Prepaid expenses     67,345       31,523  
Marketable securities     661,102       1,652,754  
Inventories     63,680       47,180  
Other assets     1,049,241       700,298  
Total current assets     7,046,478       9,178,254  
                 
Other investments     4,000       4,000  
Property and equipment, net     26,691,972       22,578,876  
Right of use assets- operating leases     1,622,770       1,880,056  
License agreements, net     1,675,406       1,772,153  
Intellectual property, net     24,089,856       28,251,053  
Goodwill     14,984,768       12,678,108  
Total assets   $ 76,115,250     $ 76,342,500  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable and accrued expenses   $ 6,093,010     $ 3,242,667  
Accounts payable and accrued expenses- related parties     3,799,730       4,142,978  
Accrued compensation     1,246,579       1,302,890  
Operating lease liabilities, current     535,960       471,991  
Finance lease liabilities, current     963,900       963,900  
Loans and notes payable, current     529,366       542,374  
Loans and notes payable, current- related parties     12,554,172       342,830  
Loans and notes payable, current attributed to variable interest entity     -       1,325,000  
Loans and notes payable, current attributed to variable interest entity- related parties     300,000       599,500  
Long-term debt (working interest royalty programs), current     7,902       9,363  
Total current liabilities     26,030,619       12,943,493  
                 
Operating lease liabilities, long term     1,181,389       1,457,483  
Finance lease liabilities, long term     1,998,967       2,298,960  
Loans and notes payable, long term     1,867,721       406,246  
Loans and notes payable, long term- related parties     15,330,729       27,977,704  
Loans and notes payable attributed to variable interest entity- related party     1,351,845       300,000  
Long-term debt (working interest royalty programs)     4,451,587       3,897,553  
Total liabilities     52,212,857       49,281,439  
                 
Stockholders’ equity:                
Convertible preferred stock, $0.001 par value; 3,400,000 shares authorized, none outstanding                
Common stock, $0.001 par value; 41,666,667 shares authorized; 18,219,582 and 18,064,838 were issued and outstanding as September 30, 2023 and December 31, 2022, respectively     18,220       18,065  
Additional paid-in capital     75,973,993       74,026,163  
Treasury stock, at cost     (20,000 )     (20,000 )
Accumulated deficit     (62,066,420 )     (55,169,781 )
Total Vivakor, Inc. stockholders’ equity     13,905,793       18,854,447  
Noncontrolling interest     9,996,600       8,206,614  
Total stockholders’ equity     23,902,393       27,061,061  
Total liabilities and stockholders’ equity   $ 76,115,250     $ 76,342,500  

 

See accompanying notes to consolidated financial statements

 

1

 

 

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

                                 
    Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
    2023     2022     2023     2022  
Revenues                                
Product revenue - third parties   $ 12,849,613     $ 8,882,105     $ 35,614,821     $ 8,882,105  
Product revenue - related party     3,463,793       2,883,870       9,834,095       2,883,870  
Total revenues     16,313,406       11,765,975       45,448,916       11,765,975  
Cost of revenues     14,766,494       10,553,375       41,174,082       10,553,375  
Gross profit     1,546,912       1,212,600       4,274,834       1,212,600  
Operating expenses:                                
Sales and marketing     1,240       50,174       2,457       360,765  
General and administrative     1,473,728       2,373,615       4,710,852       6,609,175  
Amortization and depreciation     817,058       1,119,737       2,269,445       2,053,550  
Total operating expenses     2,292,026       3,543,526       6,982,754       9,023,490  
Loss from operations     (745,114 )     (2,330,926 )     (2,707,920 )     (7,810,890 )
Other income (expense):                                
Unrealized gain (loss) on marketable securities     (661,101 )     1,074,290       (991,652 )     661,101  
Gain on disposition of asset     -       -       -       2,456  
Interest income     -       5,782       -       18,243  
Interest expense     (516,357 )     (85,924 )     (1,426,730 )     (191,765 )
Interest expense- related parties     (828,739 )     (426,293 )     (2,387,523 )     (435,398 )
Other income     99,420       50       123,536       40,134  
Total other income (expense)     (1,906,777 )     567,905       (4,682,369 )     94,771  
Loss before provision for income taxes     (2,651,891 )     (1,763,021 )     (7,390,289 )     (7,716,119 )
Provision for income taxes     -       -       (800 )     (800 )
Consolidated net loss     (2,651,891 )     (1,763,021 )     (7,391,089 )     (7,716,919 )
Less: Net loss attributable to noncontrolling interests     (134,517 )     (183,008 )     (494,450 )     (630,706 )
Net loss attributable to Vivakor, Inc.   $ (2,517,374 )   $ (1,580,013 )   $ (6,896,639 )   $ (7,086,213 )
                                 
Basic and diluted net loss per share   $ (0.14 )   $ (0.09 )   $ (0.38 )   $ (0.46 )
                                 
Basic weighted average common shares outstanding     18,120,344       17,047,489       18,083,543       15,284,240  

 

See accompanying notes to consolidated financial statements

 

2

 

 

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

                                                                         
   

Series A

Preferred Stock

     Common Stock     Additional
Paid-in		     Treasury     Accumulated     Non-controlling     Total Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Stock     Deficit     Interest     Equity  
June 30, 2023 (unaudited)     -     $ -       18,064,838     $ 18,065     $ 74,493,672     $ (20,000 )   $ (59,549,046 )   $ 8,575,445     $ 23,518,136  
Issuance of common stock for a reduction of liabilities     -       -       154,744       155       219,845       -       -       -       220,000  
Distributions to noncontrolling interest     -       -       -       -       -       -       -       (414,328 )     (414,328 )
Issuance of noncontrolling interest for a reduction of debt     -       -       -       -       -       -       -       1,970,000       1,970,000  
Stock based compensation     -       -       -       -       1,260,476       -       -       -       1,260,476  
Net loss     -       -       -       -       -       -       (2,517,374 )     (134,517 )     (2,651,891 )
September 30, 2023 (unaudited)     -     $ -       18,219,582     $ 18,220     $ 75,973,993     $ (20,000 )   $ (62,066,420 )   $ 9,996,600     $ 23,902,393  

 

    Series A
Preferred Stock		     Common Stock     Additional
Paid-in		     Treasury     Accumulated     Non-controlling     Total Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Stock     Deficit     Interest     Equity  
December 31, 2022     -     $ -       18,064,838     $ 18,065     $ 74,026,163     $ (20,000 )   $ (55,169,781 )   $ 8,206,614     $ 27,061,061  
Issuance of common stock for a reduction of liabilities     -       -       154,744       155       219,845       -       -       -       220,000  
Distributions to noncontrolling interest     -       -       -       -       -       -       -       (1,020,564 )     (1,020,564 )
Issuance of noncontrolling interest for a reduction of debt     -       -       -       -       -       -       -       3,305,000       3,305,000  
Non-qualified stock options issued to third party     -       -       -       -       467,509       -       -       -       467,509  
Stock based compensation     -       -       -       -       1,260,476       -       -       -       1,260,476  
Net loss     -       -       -       -       -       -       (6,896,639 )     (494,450 )     (7,391,089 )
September 30, 2023 (unaudited)     -     $ -       18,219,582     $ 18,220     $ 75,973,993     $ (20,000 )   $ (62,066,420 )   $ 9,996,600     $ 23,902,393  

 

    Series A
Preferred Stock		     Common Stock     Additional
Paid-in		     Treasury     Accumulated     Non-controlling     Total Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Stock     Deficit     Interest     Equity  
June 30, 2022 (unaudited)     -     $ -       15,038,619     $ 15,039     $ 67,857,646     $ (20,000 )   $ (41,237,559 )   $ 7,245,917     $ 33,861,043  
Common Stock issued for stock awards     0       0       16,667       16       (16 )     -       -       -       -  
Common stock issued as part consideration for the purchase of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC     0       0       3,009,552       3,010       4,284,645       -       -       -       4,287,655  
Stock options issued for services     -       -       -       -       317,500       -       -       -       317,500  
Stock based compensation     -       -       -       -       844,912       -       -       -       844,912  
Distributions to noncontrolling interest     -       -       -       -       -       -       -       (249,198 )     (249,198 )
Issuance of noncontrolling interest for a reduction of debt     -       -       -       -       -       -       -       375,000       375,000  
Net loss     -       -       -       -       -       -       (1,580,013 )     (183,008 )     (1,763,021 )
September 30, 2022 (unaudited)     -     $ -       18,064,838     $ 18,065     $ 73,304,687     $ (20,000 )   $ (42,817,572 )   $ 7,188,711     $ 37,673,891  

 

    Series A
Preferred Stock		     Common Stock     Additional
Paid-in		     Treasury     Accumulated     Non-controlling     Total Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Stock     Deficit     Interest     Equity  
December 31, 2021(1)      66,667     $ 67       12,330,859     $ 12,331     $ 58,279,590     $ (20,000 )   $ (35,731,359 )   $ 5,012,504     $ 27,553,133  
Common Stock issued for stock awards     -       -       16,667       16       (16 )     -       -       -       -  
Common Stock issued for a reduction of liabilities     -       -       272,156       273       1,144,719       -       -       -       1,144,992  
Conversion of Series A Preferred Stock to Common Stock     (66,667 )     (67 )     833,333       833       (766 )     -       -       -       -  
Common Stock issued for cash     -       -       1,600,000       1,600       6,238,400       -       -       -       6,240,000  
Common stock issued for fractional shares from reverse stock split     -       -       2,271       2       -       -       -       -       2  
Common stock issued as part consideration for the purchase of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC     -       -       3,009,552       3,010       4,284,645       -       -       -       4,287,655  
Stock options issued for services     -       -       -       -       1,172,500       -       -       -       1,172,500  
Stock based compensation     -       -       -       -       2,185,615       -       -       -       2,185,615  
Distributions to noncontrolling interest     -       -       -       -       -       -       -       (593,087 )     (593,087 )
Issuance of noncontrolling interest for a reduction of debt     -       -       -       -       -       -       -       3,400,000       3,400,000  
Net loss     -       -       -       -       -       -       (7,086,213 )     (630,706 )     (7,716,919 )
September 30, 2022 (unaudited)     -     $ -       18,064,838     $ 18,065     $ 73,304,687     $ (20,000 )   $ (42,817,572 )   $ 7,188,711     $ 37,673,891  

 

 
(1) Share and per share amounts have been retroactively adjusted to reflect the one-for-thirty reverse stock split effective February 14, 2022. See Note 1 – Organization and Basis of Presentation for additional information.

 

See accompanying notes to consolidated financial statements

 

3

 

 

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

                 
    Nine Months Ended
September 30,		  
    2023     2022  
OPERATING ACTIVITIES:                
Consolidated net loss   $ (7,391,089 )   $ (7,716,919 )
Adjustments to reconcile net income to net cash used in operating activities:                
Depreciation and amortization     2,269,445       2,053,550  
Forgiveness of liabilties     (40,584 )     -  
Common stock options issued for services     -       1,172,500  
Stock-based compensation     1,260,476       2,185,615  
Unrealized (gain)/loss- marketable securities     991,652       (661,101 )
Gain on disposal of asset     -       (2,456 )
Changes in operating assets and liabilities:                
Accounts receivable     (442,307 )     652,851  
Prepaid expenses     (35,822 )     23,960  
Inventory     (16,500 )     147,719  
Other assets     (348,943 )     (164,919 )
Right of use assets- finance leases     785,817       -  
Right of use assets- operating leases     257,286       15,090  
Operating lease liabilities     (257,286 )     (16,177 )
Accounts payable and accrued expenses     (929,360 )     (1,751,613 )
Interest on notes receivable     -       (18,243 )
Interest on notes payable     3,058,522       627,163  
Net cash used in operating activities     (838,693 )     (3,452,980 )
                 
INVESTING ACTIVITIES:                
Proceeds from notes receivable     -       55,952  
Acquisition of assets     -       96,466  
Proceeds from disposal of equipment     -       6,000  
Purchase of equipment     (3,841,589 )     (1,807,140 )
Net cash used in investing activities     (3,841,589 )     (1,648,722 )
                 
FINANCING ACTIVITIES:                
Payment on financing lease liabilities     (299,993 )     (160,650 )
Proceeds from loans and notes payable     3,723,458       3,177,622  
Proceeds from loans and notes payable- related party     776,500       -  
Proceeds from sale of common stock     -       6,240,000  
Payment of notes payable     -       (534,111 )
Payment of notes payable- related party     (482,815 )     -  
Distributions to noncontrolling interest     (1,020,564 )     (593,087 )
Net cash provided by financing activities     2,696,586       8,129,774  
                 
Net increase (decrease) in cash and cash equivalents     (1,983,696 )     3,028,072  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     3,182,793       1,493,719  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 1,199,097     $ 4,521,791  
                 
SUPPLEMENTAL CASHFLOW INFORMATION:                
Cash paid during the year for:                
Interest   $ 2,485,211     $ 480,605  
Income taxes   $ -     $ -  
                 
Noncash transactions:                
Conversion of Series A, B, B-1, and C-1 Preferred Stock to Common Stock   $ -     $ 1,200,000  
Common stock issued for a reduction in liabilities   $ 220,000     $ 1,144,992  
Accounts payable on purchase of equipment   $ 432,857     $ 586,717  
Noncontrolling interest issued for a reduction in liabilities   $ 3,305,000     $ 3,400,000  
Capitalized interest on construction in process   $ 735,919     $ 499,537  
Common stock issued in the acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC   $ -     $ 4,287,655  
Non-qualified stock options issued with debt   $ 467,509     $ -  

 

See accompanying notes to consolidated financial statements

 

4

 

 

VIVAKOR, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 

Note 1. Basis of Presentation

 

On February 14, 2022, we effected a 1-for-30 reverse split of our outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State which was effective at the commencement of trading of our Common Stock. No fractional shares of the Company’s common stock were issued as a result of the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share. All issued and outstanding common stock, preferred stock, and per share amounts in the consolidated financial statements and footnotes included herein have been retroactively adjusted to reflect this reverse stock split for all periods presented.

 

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic had a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries issued policies intended to stop or slow the spread of the disease.

 

In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have since resumed site preparations for operations. Additionally, we continue to experience supply chain disruptions related to building our Remediation Processing Centers (“RPC”), completing certain refurbishment, and in relation to our other operations.

 

Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2022. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.

 

Long Lived Assets

 

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. During the nine months ended September 30, 2023, the Company entered into an agreement to move the Vernal RPC plant to Kuwait to service the contract with DIC for a scaled up RPC, as the Vernal plant was not producing product toward the off-take agreement, which further delayed scaled operations. The Company evaluated these events, and determined that there was no trigger event, and therefore there was no impairment incurred during the nine months ended September 30, 2023. There can be no assurance that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

 

5

 

 

Intangible Assets and Goodwill:

 

We account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We performed an analysis and assessed no triggering event has occurred, and no impairment for the nine months ended September 30, 2023.

 

Revenue Recognition

 

In August 2022, we acquired Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, from which approximately 99% of the Company’s revenue is derived. For the nine months ended September 30, 2023, our sales consist of storage services and the sale of crude oil or like products. For the nine months ended September 30, 2023, disaggregated revenue by customer type was as follows: $35,564,821 in crude oil sales and $8,118,549 in product related to natural gas liquids sales.

 

Related Party Revenues

 

We sell crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC. These contracts were entered into in the normal course of our business. Our revenue from related parties for the nine months ended September 30, 2023 and 2022 was $9,834,095 and $2,883,870.

 

Major Customers and Concentration of Credit Risk

 

The Company has two major customers, which account for approximately 97% of the balance of accounts receivable as of September 30, 2023 and December 31, 2022.

 

Advertising Expense

 

Advertising costs are expensed as incurred. The Company did not incur advertising expense for the nine months ended September 30, 2023 and 2022.

 

Net Income/Loss Per Share

 

Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of September 30, 2023 and December 31, 2022 include the following: convertible notes payable convertible into approximately 214,560 and 14,560 shares of common stock, stock options and unissued stock awards granted to current or previous employees of 2,590,968 and 1,421,760 shares of common stock, stock options and unissued awards granted to Board members or consultants of 680,274 and 395,139 shares of common stock. The Company issued free standing stock options to purchase 1,000,000 shares of our common stock to a third party in a bundled transaction with debt during the nine months ended September 30, 2023 (see Note 9). The Company also has a warrant outstanding to purchase 80,000 shares of common stock as of September 30, 2023.

 

6

 

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes, effective interest rates related to long-term debt, marketable securities, cost basis investments, lease assets and liabilities, valuation of stock used to acquire assets, derivatives, and fair values of the intangible assets and goodwill related to business combinations.

 

While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

 

Fair Value of Financial Instruments

 

The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures.

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the consolidated balance sheets for marketable securities are classified as Level 1 assets due to observable quoted prices for identical assets in active markets. The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their estimated fair market values based on the short-term maturity of these instruments. The recorded values of notes payable approximate their current fair values because of their nature, rates, and respective maturity dates or durations.

 

7

 

 

Note 2. Liquidity

 

We have historically suffered net losses and cumulative negative cash flows from operations, and as of September 30, 2023, we had an accumulated deficit of approximately $62.1 million. As of September 30, 2023 and December 31, 2022, we had a working capital deficit of approximately $19 million and $3.7 million, respectively. Subsequent to September 30, 2023, $10 million of the working capital deficit was paid with an issuance of common stock for a reduction in noted payable to a related party, of which our CEO is a beneficiary (see Note 12). As of September 30, 2023, we had cash of approximately $1.2 million, and we had obligations to pay approximately $14.4 million (of which approximately $10 million was satisfied through the issuance of our common stock under the terms of the debt subsequent to September 30, 2023 (see Note 12)) of debt in cash within one year of the issuance of these financial statements. Our CEO has also committed to provide credit support through December 2024, as necessary, for an amount up to $8 million to provide the Company sufficient cash resources, if required, to execute its plans for the next twelve months. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. We believe the liquid assets and CEO commitment give us adequate working capital to finance our day-to-day operations for at least twelve months through November 2024.

 

The Company has prepared the consolidated financial statements on a going concern basis. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Management cannot provide any assurance that the Company will raise additional capital if needed.

 

Note 3. Accounts Receivable

 

As of September 30, 2023 and December 31, 2022, accounts receivable with related parties was $174,083 and $948,352 and is made up of the following:

 

As of September 30, 2023 and December 31, 2022, trade accounts receivable of $112,083 and $948,352 are with a vendor of which our CEO is a beneficiary. In 2023 we began subleasing office space to a tenant where the officers of WealthSpace, LLC, Fund Manager of Viva Wealth Fund I, LLC, also manage the tenant of our sublease. The tenant owes rent of $62,000 to the Company as of September 30, 2023.

 

Note 4. Property and Equipment

 

The following table sets forth the components of the Company’s property and equipment at September 30, 2023 and December 31, 2022:

 

                                               
    September 30,
2023		     December 31,
2022		  
    Gross
Carrying
Amount		     Accumulated
Depreciation		     Net Book
Value		     Gross
Carrying
Amount		     Accumulated
Depreciation		     Net Book
Value		  
Office furniture   $ 14,998     $ 7,345     $ 7,653     $ 14,998     $ 5,912     $ 9,086  
Vehicles     36,432       31,575       4,857       36,432       26,110       10,322  
Equipment     942,880       400,409       542,471       942,880       295,855       647,025  
Property     17,000       -       17,000       17,000       -       17,000  
Finance lease- Right of use assets     3,579,544       1,135,070       2,444,474       3,579,544       349,253       3,230,291  
                                                 
Construction in process:                                                
Wash Plant Facilities     2,337,477       -       2,337,477       199,800       -       199,800  
Cavitation device     72,201       -       72,201       44,603       -       44,603  
Remediation Processing Unit 1     4,483,971       -       4,483,971       4,396,753       -       4,396,753  
Remediation Processing Unit 2     8,285,744       -       8,285,744       6,285,547       -       6,285,547  
Remediation Processing Unit System A     4,209,947       -       4,209,947       3,893,051       -       3,893,051  
Remediation Processing Unit System B     4,286,177       -       4,286,177       3,845,398       -       3,845,398  
Total fixed assets   $ 28,266,371     $ 1,574,399     $ 26,691,972     $ 23,256,006     $ 677,130     $ 22,578,876  

 

8

 

 

For the nine months ended September 30, 2023 and 2022 depreciation expense was $111,452 and $500,352. For the nine months ended September 30, 2023 and 2022 capitalized interest to equipment from debt financing was $735,919 and $499,537. Equipment that is currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into service. Equipment that is temporarily not in service is not depreciated until placed into service.

 

The operations surrounding our precious metals extraction services were temporarily suspended until 2022, although due to these suspended activities and a shift in 2022 of the Company’s focus to the oil and gas industry, we realized an impairment loss of $6,269,998 surrounding the extraction machinery for the year ended December 31, 2022.

 

As of December 31, 2022 we continued to pursue a test facility or third party reactor for our nano catalyst technology that facilitates chemical manufacturing, with a focus on the production of ammonia, which includes our bioreactor equipment. The Company received quotes for testing or building our own test facilities with new partners for this venture. After taking into consideration this new information, we noted that the newly requested capital expenditure to test and scale the business triggered an impairment loss of assets related to our ammonia synthesis assets, including our bioreactors. The impairment loss related to our bioreactors was $1,440,000 for the year ended December 31, 2022.

 

There was no impairment loss during the nine months ended September 30, 2023.

 

Note 5. Intellectual Property, Net and Goodwill

 

The following table sets forth the components of the Company’s intellectual property at September 30, 2023 and December 31, 2022:

 

                                               
    September 30,
2023		     December 31,
2022		  
    Gross
Carrying
Amount		     Accumulated
Amortization		     Net Book
Value		     Gross
Carrying
Amount		     Accumulated
Amortization		     Net Book
Value		  
Extraction Technology patents   $ 113,430     $ 17,237     $ 96,193     $ 113,430     $ 12,233     $ 101,197  
Extraction Technology     16,385,157       7,100,235       9,284,922       16,385,157       6,485,791       9,899,366  
Acquired crude oil contracts     16,788,760       2,080,019       14,708,741       19,095,420       844,930       18,250,490  
Total Intellectual property   $ 33,287,347     $ 9,197,491     $ 24,089,856     $ 35,594,007     $ 7,342,954     $ 28,251,053  

 

The changes in the carrying amount of goodwill are as follows:

 

       
    Goodwill  
January 1, 2021   $ -  
Acquisition     14,984,768  
September 30, 2023   $ 14,984,768  

 

There were no changes in goodwill for the nine months ended September 30, 2023.

 

On August 1, 2022, the Company closed a Membership Interest Purchase Agreement, (the “MIPA”), with Jorgan Development, LLC, and JBAH Holdings, LLC, as the equity holders of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”) and White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) whereby, the Company acquired all of the issued and outstanding membership interests in each of SFD and WCCC making SFD and WCCC wholly owned subsidiaries of the Company. The purchase price for the Membership Interests is approximately $32.9 million, after post-closing adjustments.

 

Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill. Based on the valuation study, the fair values of goodwill and the acquired contracts were $14,984,768 and $16,788,760 on August 1, 2022.

 

Amortization expense for the nine months ended September 30, 2023 and 2022 was $2,157,993 and $1,553,198.

 

9

 

 

Note 6. Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consist of the following:

 

               
    September 30,     December 31,  
    2023     2022  
Accounts payable   $ 3,749,916     $ 910,002  
Office access deposits     -       235  
Unearned revenue     -       20,936  
Accrued interest (various notes and loans payable)     241,585       349,497  
Accrued interest (working interest royalty programs)     1,546,673       1,437,711  
Accrued tax penalties and interest     554,836       524,286  
Accounts payable and accrued expenses   $ 6,093,010     $ 3,242,667  

 

    September 30,     December 31,  
    2023     2022  
Accounts payable- related parties   $ 3,507,834     $ 4,112,300  
Accrued interest (notes payable)- related parties     291,896       30,678  
Accounts payable and accrued expenses   $ 3,799,730     $ 4,142,978  
Accrued compensation   $ 1,246,579     $ 1,302,890  

 

As of September 30, 2023 and December 31, 2022, our accounts payable are primarily made up of trade payables for the purchase of crude oil. As of September 30, 2023 and December 31, 2022, trade accounts payables in the amount of $2,842,979 and $4,000,681 is with a vendor who our CEO is a beneficiary of. As of September 30, 2023 and December 31, 2022, $250,526 and $37,685 of accounts payable is related to services rendered, which are not trade payables, with a vendor of which our CEO is a beneficiary.

 

In March 2023, the Compensation Committee reviewed the Company’s 2022 results, including, but not limited to, the progress of the Company’s historic business and certain acquisitions completed by the Company during 2022, and approved discretionary bonuses, which have been accrued as of December 31, 2022, for the Chief Financial Officer, and an acquisition consultant, in the amounts of $505,467 (included in accrued compensation) and $421,222 (included in accounts payable), respectively.

 

As of September 30, 2023, accrued compensation to current employees includes $71,005 in accrued vacation pay due to our Chief Executive Officer, which may be payable in cash or stock if unused, and $720,145 due to our Chief Financial Officer, with $54,183 in accrued sick and vacation pay that may be payable in cash if unused, and the remainder paid in cash.

 

On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease (see Note 8) for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement. During the construction phase of this agreement, the Company controls the asset with construction costs funded by Maxus recorded as a liability. As of September 30, 2023 the Company has recorded a $1,564,771 liability in accounts payable related to the construction related to this agreement that has been funded by Maxus.

 

In July 2023, the Fund Manager, WealthSpace, LLC, of Viva Wealth Fund I, LLC (VWF), paid distributions to LLC unit holders in the amount of $414,329. The Company recorded this payment in behalf of VWF in accounts payable as of September 30, 2023. Subsequent to September 30, 2023, the $414,329 payable to WealthSpace, LLC was reimbursed by VWF and the payable was eliminated.

 

10

 

 

Note 7. Loans and Notes Payable

 

Loans and notes payable and their maturities consist of the following:

 

               
    September 30,     December 31,  
    2023     2022  
Various promissory notes and convertible notes   $ 50,960     $ 50,960  
Novus Capital Group LLC Note (a)     171,554       171,554  
National Buick GMC     15,786       16,006  
Blue Ridge Bank     410,200       410,200  
Small Business Administration     299,900       299,900  
Al Dali International for Gen. Trading & Cont. Co.(b)     948,687       -  
RSF, LLC (c)     500,000       -  
Various variable interest promissory notes (d)     -       1,325,000  
Total Notes Payable   $ 2,397,087     $ 2,273,620  
                 
Loans and notes payable, current   $ 529,366     $ 542,374  
Loans and notes payable, current attributed to variable interest entity     -       1,325,000  
Loans and notes payable, long term   $ 1,867,721     $ 406,246  

 

               
    September 30,     December 31,  
    2023     2022  
Various variable interest promissory notes- related parties (c)   $ 1,651,845     $ 899,500  
Jorgan Development, LLC     27,519,044       27,977,704  
Triple T Notes     365,857       342,830  
Total Notes Payable- related parties   $ 29,536,746     $ 29,220,034  
                 
Loans and notes payable, current- related parties   $ 12,554,172     $ 342,830  
Loans and notes payable, current attributed to variable interest entity- related parties     300,000       599,500  
Loans and notes payable attributed to variable interest entity- related parties     1,351,845       300,000  
Loans and notes payable, long term- related parties   $ 15,330,729     $ 27,977,704  

 

The following table sets forth the estimated payment schedule of long-term debt (net of debt discount) as of September 30, 2023:

 

       
2023   $ 529,366  
2024     13,872,226  
2025     17,260,449  
2026     33,640  
2027     17,232  
Thereafter     220,920  
Total   $ 31,933,833  

 

 
(a) In 2017, the Company acquired assets, including patents, in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt in the amount of $334,775. The debt currently accrues interest at 10% per annum. In November 2021, the lender agreed to extend the maturity of the note to April 1, 2022. On April 1, 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid. As of the date of this report, we are currently renegotiating the terms of this debt.
(b) On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $1,950,000. As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method. We also granted DIC a security interest in our Trial Remediation Processing Center (“RPC”) that is currently on-site at the DIC facility in Kuwait. We will repay the amounts due under the note from the operations of the RPC. In order to repay the amounts due under the note, DIC will deduct $12 per ton of material we process from the amounts due to us until all amounts due under the note have been repaid.
(c) On July 25, 2023, RSF, LLC loaned the Company $500,000 under the terms of a 10% Convertible Promissory Note. Under the terms of the note, interest accrues at 10% per annum, and matures two years from the date of issuance. The note is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.
(d) The balance of these various promissory notes are related to the special purchase vehicle, Viva Wealth Fund I, LLC (VWFI) of which the balance primarily related to an offering up to $25,000,000 in convertible notes in a private offering, which was closed on March 31, 2023. During the nine months ended September 30, 2023, an additional $1,980,000 has been raised in relation this offering, and $3,305,000 of this debt has been converted into units of the LLC. VWFI has also entered into various master revolving notes outside of the offering: an additional $765,000, was raised from a related party as of September 30, 2023, which accrues 6% interest per annum, has a maturity date of October 11, 2024, where no payments are made prior to the maturity date unless at the option of the fund. For the nine months ended September 30, 2023, we made a cash payment of $12,655 on the principal of the revolving note.

 

11

 

 

Note 8. Commitments and Contingencies

 

Finance Leases

 

We acquired Silver Fuels Delhi, LLC (SFD) and White Claw Colorado City, LLC (WCCC) in a business combination in August 2022, in which we acquired certain finance lease contracts and liabilities as described below:

 

On March 17, 2020, SFD entered into two sale and leaseback transactions with Maxus Capital Group, LLC (“Maxus”). The first transaction involved the Company assigning twelve storage tanks and other equipment and the second transaction involved the Company assigning the remaining property at the oil gathering facility with the exception of land, to Maxus Future minimum lease payments for each of the next three years under the Maxus lease obligations is as follows: 2023 $123,036, 2024 $492,144, and 2025 $123,036.

 

On December 28, 2021, WCCC entered into a sale and leaseback transaction with Maxus, where WCCC assigned the crude oil, natural gas liquids, condensate, and liquid hydrocarbon receipt, throughput, processing, gathering, and delivery terminal, commonly known as the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus. Future minimum lease payments for each of the next four years under the Maxus lease obligation are as follows: 2023 $117,939, 2024 $471,756, 2025 $471,756, and 2026 $471,756.

 

On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement. We expect our lease payments to Maxus under the supplement to be approximately $57,962 per month over 4 years, with an early buyout option of approximately $685,000 or lease-end option to purchase the facilities for the fair market value. We anticipate that the lease will commence in the fourth quarter of 2023 at which time the final amount funded and lease payments will be determined. During the construction phase the Company controls the asset with construction costs funded by Maxus recorded as a liability (see Note 6).

 

The following table reconciles the undiscounted cash flows for the finance leases as of September 30, 2023 to the finance lease liability recorded on the balance sheet:

 

       
2023   $ 240,975  
2024     963,900  
2025     594,792  
2026     471,756  
Total undiscounted lease payments     2,271,423  
Less: Imputed interest     1,061,556  
Present value of lease payments     1,209,867  
Add: carrying value of lease obligation at end of lease term     1,753,000  
Total finance lease obligations   $ 2,962,867  
         
Finance lease liabilities, current   $ 963,900  
Finance lease liabilities, long-term   $ 1,998,967  
         
Weighted-average discount rate     18.00 %
Weighted-average remaining lease term (months)     32.17  

 

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Operating Leases

 

Commencing on September 15, 2019, the Company entered into a five-year lease with Jamboree Center 1 & 2 LLC covering approximately 6,961 square feet of office space in Irvine, CA. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $21,927, Year 2 $22,832, Year 3 $23,737, Year 4 $24,712, Year 5 $25,686. As a condition of the lease, we were required to provide a $51,992 security deposit.

 

On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $2,258, Year 2 $2,336, Year 3 $2,418. As a condition of the lease, we were required to provide a $2,418 security deposit.

 

On March 28, 2022, the Company entered into a lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 is comprised of April to May 2022 $857, June 2022 to March 2023 $3,550, Year 2 $3,657, Year 3 $3,766. As a condition of the lease, we were required to provide a $3,766 security deposit.

 

On 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 June 26, 2023, our subsidiary VivaVentures Remediation Corp., entered into a five year RPC Equipment Lease Agreement with Viva Wealth Fund I, LLC (“VWF”), under which VivaVentures Remediation Corp. agreed to lease the Remediation Processing Center (“RPC”) owned by VWF. VWF previously raised approximately $13.7 million and used the funds to have our subsidiary, RPC Design and Manufacturing, LLC, build an RPC, which we are now leasing from VWF in exchange for 25% of the gross proceeds from the RPC’s oil extraction production services, with a minimum $400,000 annual payment beginning nine months after the RPC is fully operational as defined in the RPC Equipment Lease Agreement. We anticipate that the RPC will be fully operational in the fourth quarter of 2023 at which time the minimum annual lease payment of $400,000 and could increase to an amount equal to 25% of the gross proceeds from the RPC’s oil extraction production services.

 

In July and August 2023, the Company entered into two six month lease agreements with Regus Management Group, LLC for individual offices and shared amenities located in Laguna Hills, California. The leases require an aggregate monthly lease payment of $3,080.

 

13

 

 

The following table reconciles the undiscounted cash flows for the leases as of September 30, 2023 to the operating lease liability recorded on the balance sheet:

 

       
2023   $ 130,245  
2024     435,906  
2025     162,545  
2026     136,975  
2027     153,089  
Thereafter     2,931,500  
Total undiscounted lease payments     3,950,260  
Less: Imputed interest     2,232,911  
Present value of lease payments   $ 1,717,349  
         
Operating lease liabilities, current   $ 535,960  
Operating lease liabilities, long-term   $ 1,181,389  
         
Weighted-average remaining lease term     213.47  
Weighted-average discount rate     10.13 %

 

Employment Agreement

 

On July 1, 2023, we hired a Vice President of Operations & Construction. In this position, Mr. Patterson is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $150,000 in annual salary, shares of our common stock equal to $25,000 annually, and two one-time bonuses of shares of our common stock equal to $125,000 each, with the first bonus payable on the one year anniversary of his employment, and the second bonus payable on the eighteen month anniversary of his employment agreement. Mr. Patterson is entitled to other bonuses and benefits on par with our general employment policies.

 

Note 9. Share-Based Compensation & Warrants

 

Options

 

Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.

 

The Company has granted stock-based compensation to employees, including the issuance of 1,872,918 employee stock options granted in June 2022 that were to vest over a period of two years, for which 451,158 of these options were cancelled with the resignation without cause in October 2022 of our prior Chief Executive Officer. For the nine months ended September 30, 2023 and 2022, employee stock-based compensation was $1,260,476 and $1,340,703. On October 24, 2022, the Compensation Committee resolved to increase their compensation including the issuance of 100,000 stock options per independent board member, exercisable at $2.50 per share, vesting immediately. Non-statutory or independent Board of Director stock-based compensation was none and $855,000 for the nine months ended September 30, 2023 and 2022. In 2022, the Company closed on its underwritten public offering in which the Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), a 45-day option to purchase up to an additional 240,000 shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments, if any. These options were not exercised and expired. On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”). As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method.

 

There were no other options granted during the nine months ended September 30, 2023 and 2022, respectively.

 

14

 

 

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:

 

     
    December 31, 2021
through
September 30,
2023		  
Risk-free interest rate   0.24 - 5.23%  
Expected dividend yield   None  
Expected life   2.1 - 10 years  
Expected volatility rate   142 - 273%  

 

The following table summarizes all stock option activity of the Company for the nine months ended September 30, 2023 and 2022:

 

                       
    Number
of Shares		     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contractual
Life (Years)		  
Outstanding, December 31, 2022     1,833,566     $ 2.59       6.47  
Granted     1,000,000       1.18       1.75  
Exercised     -       -       -  
Forfeited     (16,667 )     12.00       -  
Outstanding, September 30, 2023     2,816,899     $ 2.03       4.33  
                         
Outstanding, December 31, 2021     650,000     $ 12.00       7.53  
Granted     2,112,919       2.24       6.60  
Exercised     (16,667 )     11.1       -  
Forfeited     (740,000 )     10.00       -  
Outstanding, September 30, 2022     2,006,252     $ 2.56       6.93  
                         
Exercisable, December 31, 2022     1,526,869     $ 2.65       5.94  
Exercisable, September 30, 2023     2,671,883     $ 2.05       4.10  
                         
Exercisable, December 31, 2021     180,000     $ 12.00       7.01  
Exercisable, September 30, 2022     1,175,059     $ 2.67       7.09  

 

As of September 30, 2023 and 2022, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

 

Warrants

 

As of September 30, 2023 and 2022, the Company had 80,000 warrants outstanding. On February 14, 2022, the Company closed on its underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share. In addition, the Company has issued the underwriter, EF Hutton, a 5-year warrant to purchase 80,000 shares of common stock at an exercise price equal $5.75 and were valued with a fair market value of $374,000. The impact of these warrants has no effect on stockholder’s equity, as they are considered equity-like instruments, and are considered a direct expense of the offering.

 

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Note 10. Income Tax

 

The Company calculates its quarterly tax provision pursuant to the guidelines in ASC 740 Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year ordinary income. In calculating the effective tax rate, permanent differences between financial reporting and taxable income are factored into the calculation, and temporary differences are not. The estimated annual effective tax rate represents the Company’s estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision.

 

The Company recorded a provision for income taxes of $800 for the nine months ended September 30, 2023 and 2022, respectively. The Company is projecting a 0.01% effective tax rate for the year ending December 31, 2023, which is primarily the result of projected provision from book loss incurred for the year offset by additional valuation allowance on the net operating losses. The Company’s effective tax rate for 2022 was 18.69% which was, which was primarily the result of a change in the Company's valuation allowance on deferred tax assets.

 

As of December 31, 2022, the Company had estimated federal and state net operating loss (NOL) carryforwards of approximately $23.7 million. Federal NOL carryforwards begin to expire in 2028.

 

Note 11. Related Party Transactions

 

As of September 30, 2023, VWFI has paid $2,266,964 to Dzign Pro Enterprises, LLC (Dzign Pro) for engineering services related to our RPCs, site planning, and infrastructure, which Dzign Pro shares a common executive with VWFI. As of September 30, 2023, VWFI also entered into a master revolving note payable to Dzign Pro in the amount of $300,000, which accrues 5% interest per annum, has a maturity date of July 14, 2024, where no payments are made prior to the maturity date unless at the option of the fund. VWFI also entered into a master revolving note payable to Van Tran Family LP, which is an affiliate of WealthSpace, LLC, the VWFI Fund Manager, in the amount of $1,351,845, which accrues 6% interest per annum, has a maturity that has been amended to October 11, 2024, where no payments are made prior to the maturity date unless at the option of the fund. For the nine months ended September 30, 2023, we made cash payments of $50,000 on the Van Tran Family LP revolving note.

 

As of September, 2023 we are subleasing office space to Spectra Global Cuisine, LLC (Spectra), which shares officers with WealthSpace, LLC (the Fund Manager of VWFI). For the nine months ended September 30, 2023 we realized $62,000 in office sublease lease revenue from Spectra. As of September 30, 2023, the Company is carrying accounts receivable of $62,000 related to this sublease.

 

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 $25,000 in cash and accrued $30,000, to be paid in common stock. We also advanced Mr. Nicosia $21,000 for a business expenses related to a trip to Kuwait for the Company and have requested evidence of his business expenses. We have received evidence of business expenses of approximately $16,254 to date and are awaiting documents and evidence for the remaining expense amount.

 

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 nine months ended September 30, 2023, we paid Mr. Staggs a total of $48,000 in cash under the terms of the agreement.

 

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On June 15, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Jorgan Development, LLC, (“Jorgan”) and JBAH Holdings, LLC, (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Silver Fuels Delhi, LLC (“SFD”) and White Claw Colorado City, LLC (“WCCC”) whereby, at closing, which occurred on August 1, 2022, we acquired all of the issued and outstanding membership interests in each of SFD and WCCC (the “Membership Interests”), making SFD and WCCC our wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $32.9 million paid for by us with a combination of shares of our common stock, amount equal to 19.99% of the number of issued and outstanding shares of our common stock immediately prior to issuance, and secured three-year promissory notes issued by us in favor of the Sellers (the “Notes”). As of September 30, 2023 we have accrued interest of approximately $232,745 and for the nine months ended September 30, 2023, we made cash payments of $2,807,032 on the Notes.

 

In the business combination of acquiring WCCC we also acquired WCCC’s Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $150,000 per month even if the storage space is not used. The agreement expires on December 31, 2031. For the nine months ended September 30, 2023 we have received tank storage revenue related to this contract of approximately $1,351,237.

 

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 nine months ended September 30, 2023, we have made crude oil purchases from WC Crude of $26,373,647 and received deficiency payments of $364,309. In addition, SFD renewed a sales agreement in April 2023 with WC Crude to sell a natural gas liquid product to WC Crude. For the three months ended March 2023, SFD sold the NGL stream at cost to WC Crude. On April 1, 2023 sold the NGL stream at a profit to WC Crude. We produced and sold natural gas liquids and crude oil to WC Crude in the amount of $9,599,740 for the nine months ended September 30, 2023.

 

In the business combination of acquiring SFD and WCCC we also entered into a Shared Services Agreement with Endeavor Crude, LLC (“Endeavor”), who shares a beneficiary, James Ballengee (the Company’s CEO), with Jorgan and JBAH. Under this agreement, we have the right, but not the obligation to use Endeavor for consulting services. For the nine months ended September 30, 2023, Endeavor rendered services in the amount of $254,946.

 

In September 2020, we entered into a consulting contract with LBL Professional Consulting, Inc. (“LBL”), of which our Chief Financial Officer is also an officer. For the nine months ended September 30, 2023, the Company was carrying, until recently paid, accounts payable of $20,413 owed to LBL for outstanding invoices from 2022.

 

We have an existing note payable issued to Triple T, which is owned by Dr. Khalid Bin Jabor Al Thani, the 51% majority-owner of Vivakor Middle East LLC. The note is interest free, has no fixed maturity date and will be repaid from revenues generated by Vivakor Middle East LLC. As of September 30, 2023 the balance owed was $365,857. In March 2023 the parties agreed to extend the maturity date of the loan to March 10, 2024.

 

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Note 12. Subsequent Events

 

On November 10, 2023, we held a special meeting of our stockholders for the purpose of approving certain business items, namely:

 

1. To approve, pursuant to Nasdaq Listing Rule 5635(d), the issuance of a number of shares of the Company’s common stock pursuant to Membership Interest Purchase Agreement (the “Acquisition Agreement”) entered into on June 15, 2022, by and among the Company and 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”), including the issuance of such shares upon the conversion of promissory notes issued pursuant to the Acquisition Agreement, as amended on October 28, 2022, which could, under certain circumstances that may occur in the future, exceeding 19.99% of the number of shares of the Company’s common stock outstanding as of the date of the Acquisition Agreements (the “Acquisition Stock Issuance”);

 

2. To approve, pursuant to Nasdaq Listing Rule 5635(c) and 5635(d), the annual compensation of $1,000,000 payable in shares of the Company’s common stock to James Ballengee (the “CEO Compensation Shares”) pursuant to an executive employment agreement (the “Employment Agreement”) entered into on October 28, 2022, by and among the Company and James Ballengee with respect to the Company’s appointment of Mr. Ballengee as Chief Executive Officer and Chairman of the board of directors of the Company; the CEO Compensation Shares will be priced at the volume weighted average price (VWAP) for the five trading days preceding the date of the Employment Agreement and each anniversary thereof (the “CEO Compensation Shares Issuance”), subject to satisfaction of Nasdaq rules, the provisions of the Company’s equity incentive plan and other applicable requirements and shall be accrued if such issuance is due prior to satisfaction of such requirements;

 

3. To approve the Vivakor, Inc. 2023 Equity and Incentive Plan (the “Plan”), which provides equity-based incentive awards, in a total of 40,000,000 authorized shares of the Company’s common stock, to the Company’s and its subsidiaries’ employees, directors and consultants, thereby continuing to align the interests of such individuals with those of the stockholders;

 

4. To approve an amendment to the Articles of Incorporation of the Company (the “Amendment to Articles”) with respect to the forum selection provisions, to amend the Articles of Incorporation to provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.; and

 

5. To approve the increase of the number of common shares the Company is authorized to issue to 200 million in the proposed Amendment to Articles.

 

Each of these agenda items were approved by the holders of a majority of our common stock. Additional information regarding the agenda items can be found in our Schedule 14A Proxy Statement filed with the Commission on September 26, 2023. The exact result of our shareholder vote on the agenda items can be found in our Current Report on Form 8-K filed with the Commission on November 16, 2023.

 

All of the agenda items were approved by the shareholders on November 10, 2023. As a result of these approvals, on November 10, 2023, the Company issued 7,042,254 restricted shares of the Company’s Common Stock in exchange for the forgiveness and cancellation of $10,000,000 of principal under the Notes on a pro rata basis, reflecting a conversion price of $1.42 per share, as well as 923,672 restricted shares of the Company’s Common Stock pursuant to the Ballengee employment agreement, whereas James Ballengee now beneficially owns approximately 41.86% 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. Due to Mr. Ballengee’s change in ownership, certain change of control provisions in the Company’s agreements were triggered, including within the Chief Financial Officer’s employment agreement, which pays the executive a bonus, which is calculated at the executive’s base salary multiplied by two.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that reflect management’s current views with respect to future events and financial performance. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report. The forward-looking statements made in this report are based only on events or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

 

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As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to Vivakor, Inc., its wholly owned and majority-owned active subsidiaries, or joint ventures (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are eliminated. Vivakor has the following wholly and majority-owned subsidiaries: Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, RPC Design and Manufacturing LLC (“RDM”), a Utah limited liability company, Vivaventures Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivasphere, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a Utah corporation. 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 noncontrolling interest investment from Vivaopportunity Fund, LLC, which is also managed by Vivaventures Management Company, Inc. Vivakor has common officers with and consolidates Viva Wealth Fund I, LLC.

 

Business Overview

 

Vivakor, Inc. 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.

 

One of our facilities sells crude oil in amounts up to 60,000 barrels per month under agreements with a large energy company. A different facility owns a 120,000 barrel crude oil storage tank near Colorado City, Texas. The storage tank is presently connected to the Lotus pipeline system and we plan to further connect the tank to major pipeline systems.

 

Our soil remediation services specialize in the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and other hydrocarbon-based substances utilizing our Remediation Processing Centers (RPCs). Our patented process allows us to successfully recover the hydrocarbons which we believe could then be used to produce asphaltic cement and/or other petroleum-based products. We are currently focusing our soil remediation efforts on our project in Kuwait and our upcoming project in the Houston, Texas area.

 

Reclassifications

 

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

 

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic had a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries issued policies intended to stop or slow the further spread of the disease.

 

In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have since resumed site preparations for operations. We have experienced supply chain disruptions in building our Remediation Processing Centers (“RPC”) and completing certain refurbishment on our precious metal extraction machines. These suspensions had a negative impact on our business and there can be no guaranty that we will not need to suspend operations again in the future as a result of the pandemic.

 

COVID-19 and the U.S. response to the pandemic significantly affected the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have in the long-term, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.

 

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Recent Developments

 

DIC Note Proceeds

 

In conjunction with our Services Agreement we signed with DIC on December 14, 2021, on June 20, 2023, we issued a 15% secured promissory note (the “Note”) due as described below, to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $1,950,000 (the “Principal Amount”). We are using the proceeds of the Note to relocate, refurbish, and fully install our RPC to DIC’s location in Kuwait. The installation of this RPC in Kuwait will allow us to perform under the Services Agreement. During the nine months ended September 30, 2023 we received note proceeds of $1,220,651.

 

Maxus Proceeds

 

On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease (see Note 8) for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement. During the construction phase of this agreement, the Company controls the asset with construction costs funded by Maxus recorded as a liability. As of September 30, 2023 the Company has recorded a $1,564,771 liability in accounts payable related to the construction related to this agreement that has been funded by Maxus.

 

Hiring Vice President, Operations and Construction

 

On July 1, 2023, we hired Leslie D. Patterson to be our Vice President, Operations & Construction. In this position, Mr. Patterson is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $150,000 in annual salary, shares of our common stock equal to $25,000 annually, and a one-time bonus of shares of our common stock equal to $125,000, payable on the one year anniversary of his employment. Mr. Patterson is entitled to other bonuses and benefits on par with our general employment policies.

 

Convertible Promissory Note

 

On July 25, 2023, a non-affiliated investor loaned us $500,000 under the terms of a 10% Convertible Promissory Note dated July 6, 2023 (the “Investor Note”). Under the terms of the Investor Note, the loan is at a 10% per annum interest rate, matures two years from the date of issuance, and is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.

 

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

 

Revenue

 

For the three months ended September 30, 2023 and 2022 we realized revenues of $16,313,406 and 11,765,975, respectively, representing an increase of $4,547,431 or 38.65%. For the nine months ended September 30, 2023 and 2022 we realized revenues of $45,448,916 and $11,765,975, respectively, representing an increase of $33,682,941 or 286.27%. The increase in revenue is primarily attributed to our oil and natural gas liquid sales which have been realized through the operations from SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

 

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Cost of Revenue

 

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

 

For the three months ended September 30, 2023 and 2022 costs of revenue were $14,766,494 and $10,553,375, respectively, representing an increase of $4,213,119 or 39.92%. For the nine months ended September 30, 2023 and 2022 costs of revenue were $41,174,082 and $10,553,375, respectively, representing an increase of $30,620,707 or 290.15%. The increase in the cost of revenue is primarily attributed to the cost of goods sold for our oil and natural gas liquid products realized through the operations from our newly acquired businesses in SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

 

Gross Profit and Gross Margin

 

For the three months ended September 30, 2023 and 2022 we realized gross profit of $1,546,912 and $1,212,600, respectively, representing an increase of $334,312 or 27.57%. For the nine months ended September 30, 2023 and 2022 we realized gross profit of $4,274,834 and $1,212,600, respectively, representing an increase of $3,062,234 or 252.53%. For the nine months ended September 30, 2023, the gross profit increased in proportion to the revenue and costs of revenue related to the purchase and sale of our oil and natural gas liquid products.

 

Operating Expenses

 

For the three months ended September 30, 2023 and 2022, we realized operating expenses of $2,292,026 and $3,543,526, which represents a decrease of $1,251,500, or 35.32%. For the nine months ended September 30, 2023 and 2022, we realized operating expenses of $6,982,754 and $9,023,490, which represents a decrease of $2,040,736, or 22.62%. The decrease in operating expenses is attributed to the net effect of the following:

 

For the nine months ended September 30, 2023 and 2022, we realized amortization and depreciation expense of $2,269,445 and $2,053,550, which represents an increase of $215,895 or 10.51%. The increase in amortization and depreciation expense is primarily attributed to the amortization of our newly acquired contracts and depreciation from our newly acquired property, plant and equipment held by SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.

 

For the nine months ended September 30, 2023 and 2022, we realized an aggregate decrease in sales and marketing expense and general and administrative expense of $2,256,631 or 32.38% due to the net effect of a decrease in stock compensation expense and marketing expenses in 2023. For the nine months ended September 30, 2023 and 2022, we realized employee stock option expense of $1,260,476 and $2,185,615, which represents a decrease of $925,139, or a 42.33% decrease. New management and board of director compensation agreements were entered into in June 2022, October 2022, and January 2023. The new compensation agreements included stock option agreements for $2,096,247 for the nine months ended September 30, 2022 as a result of the previous executive management being significantly undercompensated prior to the underwritten public offering and uplist to Nasdaq in 2022. In October 2022, our previous CEO resigned and the remainder of his stock options were forfeited. For the nine months ended September 30, 2023 and 2022, non-qualified stock options for services were $467,409 and $1,172,500, which represents a decrease of $704,991 or 60.13% related to certain stock options with consultants that were forfeited or cancelled in 2022. For the nine months ended September 30, 2023 and 2022, we realized marketing expense of $2,457 and $360,765, which represents a decrease of $358,308 or 99.32%, which such expenses related to the expenses associated with the uplist to Nasdaq in 2022.

 

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Interest Expense

 

For the three months ended September 30, 2023 and 2022, we realized interest expense of $1,345,096 and $512,217, which represents an increase of $832,879, or 162.60%. For the nine months ended September 30, 2023 and 2022, we realized interest expense of $3,814,253 and $627,163, which represents an increase of $3,187,090, or 508.18%. The increase in interest expense is mainly attributable to the $28,664,284 in notes payable issued as consideration for our newly acquired entities, SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022. The notes accrue interest of prime plus 3% on the outstanding balance of the notes.

 

Unrealized Gain or Loss on Marketable Securities

 

For the three months ended September 30, 2022, we reported an unrealized gain of $1,074,290. For the three months ended September 30, 2023, we reported an unrealized loss of $661,101, which represents a decrease of $1,735,391, or 161.54%. For the nine months ended September 30, 2022, we reported an unrealized gain of $661,101. For the nine months ended September 30, 2023, we reported an unrealized loss of $991,652, which represents a decrease of $1,652,753, or 250.00%. Our marketable securities were considered to be traded on an active market and were accounted for at a fair value based on the quoted prices in the active markets resulting in aggregate unrealized gains or losses as noted above.

 

Cash flows

 

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

 

    September 30,  
    2023     2022  
Net cash used in operating activities   $ (838,693 )   $ (3,452,980 )
Net cash used in investing activities     (3,841,589 )     (1,648,722 )
Net cash provided by financing activities     2,696,586       8,129,774  

 

Liquidity and Capital Resources

 

We have historically suffered net losses and cumulative negative cash flows from operations and, as of September 30, 2023 and December 31, 2022, we had an accumulated deficit of approximately $62.1 million and $55.2 million. As of September 30, 2023 and December 31, 2022, we had a working capital deficit of approximately $19 million and $3.77 million, respectively. Subsequent to September 30, 2023 $10 million of the working capital deficit was paid with an issuance of common stock.

 

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

 

To date we have financed our operations primarily through debt financing, private equity offerings and our working interest agreements, although on February 14, 2022, the Company closed an underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share, for aggregate net proceeds of $6.2 million, after deducting underwriting discounts, commissions, and other offering expenses. The Company’s Common Stock began trading on the Nasdaq Capital Market under the symbol “VIVK”.

 

For the nine months ended September 30, 2023 and 2022, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $7,391,089 and $7,716,919, and our depreciation and amortization of $2,269,445 and $2,053,550. For the nine months ended September 30, 2023 and 2022, non-qualified stock option expense for services of none and $1,172,500, and stock-based compensation employees of $1,260,476 and $2,185,615 in lieu of using cash. We also realized interest expense on loans and notes payable of $3,058,522 and $627,163, and an unrealized loss of $991,652 and an unrealized gain of $661,101 on marketable securities as described above.

 

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

 

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

 

For the nine months ended September 30, 2023 and 2022, and we received proceeds of $4,499,958 and $3,177,622 related to the issuance of notes and other loans. We also received proceeds of $6,240,000 from our February 14, 2022 underwritten public offering of 1,600,000 shares of common stock. For the nine months ended September 30, 2023 and 2022, we paid down notes payable by $482,815 and $534,111 and made distributions to Viva Wealth Fund I, LLC unit holders of $1,020,564 and $593,087.

 

We have historically suffered net losses and cumulative negative cash flows from operations, and as of September 30, 2023, we had an accumulated deficit of approximately $62.1 million. As of September 30, 2023 and December 31, 2022, we had a working capital deficit of approximately $19 million and $3.7 million, respectively. Subsequent to September 30, 2023 $10 million of the working capital deficit was paid with an issuance of common stock. As of September 30, 2023 we had cash of approximately $1.2 million. In addition, we have obligations to pay approximately $14.4 million (of which approximately $10 million was satisfied through the issuance of our common stock under the terms of the debt subsequent to September 30, 2023) of debt in cash within one year of the issuance of these financial statements. Our CEO has also committed to provide credit support through December 2024, as necessary, for an amount up to $8 million to provide the Company sufficient cash resources, if required, to execute its plans for the next twelve months. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. We believe the liquid assets and CEO commitment give it adequate working capital to finance our day-to-day operations for at least twelve months through November 2024.

 

Capitalized interest on construction in process was $735,919 and $499,537 for the nine months ended September 30, 2023 and 2022. There are no further existing firm obligations; however, we anticipate further construction costs of approximately $1 million in connection with our construction of our Texas remediation and wash plant facilities; and construction for each Nanosponge costs approximately $200,000, and we intend to manufacture and add a Nanosponge to our current and future RPCs.

 

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 case, we may need to suspend site and plant construction or further acquisitions until market conditions improve.

 

Contractual Obligations

 

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

 

2023   $ 240,975  
2024     963,900  
2025     594,792  
2026     471,756  
Total   $ 2,271,423  

 

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

 

2023   $ 130,245  
2024     435,906  
2025     162,545  
2026     136,975  
2027     153,089  
Thereafter     2,931,500  
Total   $ 3,950,260  

 

Interest Rate and Market 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 arrangements that were issued on August 1, 2022 as consideration for the business combination and acquisition of SFD and WCCC, in which the three year 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

 

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

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

25

 

 

Item 4. Controls and Procedures

 

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our 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 there are resource constraints and management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

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 September 30, 2023, 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 Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

 

a) 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 the current year, we were not able to achieve adequate controls surrounding the review and dual authorization of certain treasury transactions and fixed assets. 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 September 30, 2023, we have continued to hire 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 have also begun to implement further review controls and processes surrounding treasury and fixed assets.

 

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.

 

Changes in Internal Control Over Financial Reporting

 

As noted above, we continue to contract with additional external accounting staff in order to attempt to remediate our material weaknesses. Such changes include multiple additional reviewers of financial information before it is submitted for filing with the SEC. There were no other changes in our internal controls 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 three months ended September 30, 2023 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

26

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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 1A. RISK FACTORS

 

Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K and our other filings with the SEC, except as follows:

 

We are in the process of moving an RPC from Vernal, Utah to Kuwait. If we are unable to complete this move or unable to properly refurbish the RPC to operate in Kuwait we could incur substantial losses.

 

In connection with our Services Agreement with Al Dali International for Gen. Trading & Cont. Co. (“DIC”), we are in the process of relocating, refurbishing, and installing an RPC from Vernal, Utah to DIC’s location in Kuwait. The installation of this RPC in Kuwait will allow us to perform our obligations under the Services Agreement. In the event we are unable to successfully transfer the RPC to Kuwait and/or refurbish the RPC to operate in Kuwait we could incur substantial losses related to our loan with DIC and in potentially moving the RPC to another location.

 

We are building a new facility near Houston, Texas to place an RPC and perform wash plant services. If we are not successful in installing our RPC and/or building out the wash plant facility we could incur substantial 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 place on RPC at the facility and/or are unable to build out the facility to perform wash plant services, 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.

 

Although the current Israeli/Hamas conflict is currently contained in Israel and the Gaza Strip, any escalation of the conflict involving additional Middle East countries could impact our ability to operate our Remediation Processing Centers 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 41.86% 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.

 

27

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

The following sets forth information regarding all unregistered securities sold by us in transactions that were exempt from the requirements of the Securities Act. Except where noted, all of the securities discussed in this Item 2 were all issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

 

On August 29, 2023, the Company issued 154,744 shares of common stock at approximately $1.42 per share for a $220,000 reduction of liabilities.

 

On October 6, 2023, the Company issued 35,000 shares of common stock at approximately $1.00 per share for a $35,000 reduction of liabilities.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

Special Meeting of Stockholders

 

On November 10, 2023 we held a special meeting of our stockholders for the purpose of approving certain business items, namely:

 

1. To approve, pursuant to Nasdaq Listing Rule 5635(d), the issuance of a number of shares of the Company’s common stock pursuant to Membership Interest Purchase Agreement (the “Acquisition Agreement”) entered into on June 15, 2022, by and among the Company and 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”), including the issuance of such shares upon the conversion of promissory notes issued pursuant to the Acquisition Agreement, as amended on October 28, 2022, which could, under certain circumstances that may occur in the future, exceeding 19.99% of the number of shares of the Company’s common stock outstanding as of the date of the Acquisition Agreements (the “Acquisition Stock Issuance”);

 

2. To approve, pursuant to Nasdaq Listing Rule 5635(c) and 5635(d), the annual compensation of $1,000,000 payable in shares of the Company’s common stock to James Ballengee (the “CEO Compensation Shares”) pursuant to an executive employment agreement (the “Employment Agreement”) entered into on October 28, 2022, by and among the Company and James Ballengee with respect to the Company’s appointment of Mr. Ballengee as Chief Executive Officer and Chairman of the board of directors of the Company; the CEO Compensation Shares will be priced at the volume weighted average price (VWAP) for the five trading days preceding the date of the Employment Agreement and each anniversary thereof (the “CEO Compensation Shares Issuance”), subject to satisfaction of Nasdaq rules, the provisions of the Company’s equity incentive plan and other applicable requirements and shall be accrued if such issuance is due prior to satisfaction of such requirements;

 

3. To approve the Vivakor, Inc. 2023 Equity and Incentive Plan (the “Plan”), which provides equity-based incentive awards, in a total of 40,000,000 authorized shares of the company’s common stock, to the Company’s and its subsidiaries’ employees, directors and consultants, thereby continuing to align the interests of such individuals with those of the stockholders;

 

4. To approve amendment to the Articles of Incorporation of the Company (the “Amendment to Articles”) with respect to the forum selection provisions; and

 

5. To approve the increase of the number of common shares the Company is authorized to issue to 200 million in the proposed Amendment to Articles.

 

Each of these agenda items were approved by the holders of a majority of our common stock. Additional information regarding the agenda items can be found in our Schedule 14A Proxy Statement filed with the Commission on September 26, 2023. The exact result of our shareholder vote on the agenda items can be found in our Current Report on Form 8-K filed with the Commission on November 16, 2023.

 

28

 

 

ITEM 6. EXHIBITS

 

        Incorporated by
Reference		   Filed or
Furnished
Exhibit No.   Exhibit Description   Form   Date   Number   Herewith
4.1   Promissory Note with Al Dali International for Gen. Trading & Cont. Co. dated June 20, 2023   8-K   6/23/23   4.1    
4.2   Stock Option Agreement with Al Dali International for Gen. Trading & Cont. Co. dated June 20, 2023   8-K   6/23/23   4.2    
4.3   Form of Convertible Promissory Note with Third Party Investor dated July 6, 2023   10-Q   7/28/23   4.3    
10.1   Executive Employment Agreement with Leslie D. Patterson   10-Q   7/28/23   10.1    
10.2   Consulting Agreement with Matthew Nicosia   10-Q   7/28/23   10.2    
10.3   Consulting Agreement with Trent Staggs   10-Q   7/28/23   10.3    
10.4   Equipment Lease Agreement with Viva Wealth Fund, LLC dated June 26, 2023   10-Q   7/28/23   10.4    
10.5   Schedule No. 2 to Master Agreement between Maxus Capital Group, LLC and White Claw Colorado City, LLC dated May 23, 2023   10-Q   7/28/23   10.5    
31.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               Filed
31.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               Filed
32.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               Furnished**
32.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               Furnished**
101.INS   Inline XBRL Instance Document               Filed
101.SCH   Inline XBRL Taxonomy Extension Schema Document               Filed
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document               Filed
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document               Filed
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document               Filed
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document               Filed
104   Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101).                

 

 
** 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.

 

29

 

 

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, thereunto duly authorized.

 

VIVAKOR, INC.  
   
By: /s/ James Ballengee  
  James Ballengee  
  Chief Executive Officer (Principal Executive Officer)  
     
Date: November 20, 2023  
   
VIVAKOR, INC.  
   
By: /s/ Tyler Nelson  
  Tyler Nelson  
  Chief Financial Officer (Principal Financial and Accounting Officer)  
     
Date: November 20, 2023  

 

30

 

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 Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2023;

 

(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.

 

November 20, 2023 /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 Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2023;

 

(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.

 

November 20, 2023 /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 Quarterly Report on Form 10-Q of Vivakor, Inc. (the “Company”) for the period ended September 30, 2023, 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)  
   
November 20, 2023  

 

 

 

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 Quarterly Report on Form 10-Q of Vivakor, Inc. (the “Company”) for the period ended September 30, 2023, 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)  
   
November 20, 2023  

 

 

v3.23.3
Cover - shares
 9 Months Ended
Sep. 30, 2023
Nov. 13, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2023  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-41286  
Entity Registrant Name VIVAKOR, INC  
Entity Central Index Key 0001450704  
Entity Tax Identification Number 26-2178141  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 5220 Spring Valley Road  
Entity Address, Address Line Two Suite LL20  
Entity Address, City or Town Dallas  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75242  
City Area Code 949  
Local Phone Number 281-2606  
Title of 12(b) Security Common Stock, $0.001 par value  
Trading Symbol VIVK  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   26,220,508
v3.23.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Current assets:    
Cash and cash equivalents $ 1,018,039 $ 3,101,186
Cash and cash equivalents attributed to variable interest entity 181,058 81,607
Accounts receivable 3,831,930 2,615,354
Accounts receivable- related party 174,083 948,352
Prepaid expenses 67,345 31,523
Marketable securities 661,102 1,652,754
Inventories 63,680 47,180
Other assets 1,049,241 700,298
Total current assets 7,046,478 9,178,254
Other investments 4,000 4,000
Property and equipment, net 26,691,972 22,578,876
Right of use assets- operating leases 1,622,770 1,880,056
License agreements, net 1,675,406 1,772,153
Intellectual property, net 24,089,856 28,251,053
Goodwill 14,984,768 12,678,108
Total assets 76,115,250 76,342,500
Current liabilities:    
Accounts payable and accrued expenses 6,093,010 3,242,667
Accounts payable and accrued expenses- related parties 3,799,730 4,142,978
Accrued compensation 1,246,579 1,302,890
Operating lease liabilities, current 535,960 471,991
Finance lease liabilities, current 963,900 963,900
Loans and notes payable, current 529,366 542,374
Loans and notes payable, current- related parties 12,554,172 342,830
Loans and notes payable, current attributed to variable interest entity 1,325,000
Loans and notes payable, current attributed to variable interest entity- related parties 300,000 599,500
Long-term debt (working interest royalty programs), current 7,902 9,363
Total current liabilities 26,030,619 12,943,493
Operating lease liabilities, long term 1,181,389 1,457,483
Finance lease liabilities, long term 1,998,967 2,298,960
Loans and notes payable, long term 1,867,721 406,246
Loans and notes payable, long term- related parties 15,330,729 27,977,704
Loans and notes payable attributed to variable interest entity- related party 1,351,845 300,000
Long-term debt (working interest royalty programs) 4,451,587 3,897,553
Total liabilities 52,212,857 49,281,439
Stockholders’ equity:    
Common stock, $0.001 par value; 41,666,667 shares authorized; 18,219,582 and 18,064,838 were issued and outstanding as September 30, 2023 and December 31, 2022, respectively 18,220 18,065
Additional paid-in capital 75,973,993 74,026,163
Treasury stock, at cost (20,000) (20,000)
Accumulated deficit (62,066,420) (55,169,781)
Total Vivakor, Inc. stockholders’ equity 13,905,793 18,854,447
Noncontrolling interest 9,996,600 8,206,614
Total stockholders’ equity 23,902,393 27,061,061
Total liabilities and stockholders’ equity $ 76,115,250 $ 76,342,500
v3.23.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Dec. 31, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock shares authorized 3,400,000 3,400,000
Preferred stock shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 41,666,667 41,666,667
Common stock, shares issued 18,219,582 18,064,838
Common stock, shares outstanding 18,219,582 18,064,838
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Revenues        
Total revenues $ 16,313,406 $ 11,765,975 $ 45,448,916 $ 11,765,975
Cost of revenues 14,766,494 10,553,375 41,174,082 10,553,375
Gross profit 1,546,912 1,212,600 4,274,834 1,212,600
Operating expenses:        
Sales and marketing 1,240 50,174 2,457 360,765
General and administrative 1,473,728 2,373,615 4,710,852 6,609,175
Amortization and depreciation 817,058 1,119,737 2,269,445 2,053,550
Total operating expenses 2,292,026 3,543,526 6,982,754 9,023,490
Loss from operations (745,114) (2,330,926) (2,707,920) (7,810,890)
Other income (expense):        
Unrealized gain (loss) on marketable securities (661,101) 1,074,290 (991,652) 661,101
Gain on disposition of asset 2,456
Interest income 5,782 18,243
Interest expense (516,357) (85,924) (1,426,730) (191,765)
Interest expense- related parties (828,739) (426,293) (2,387,523) (435,398)
Other income 99,420 50 123,536 40,134
Total other income (expense) (1,906,777) 567,905 (4,682,369) 94,771
Loss before provision for income taxes (2,651,891) (1,763,021) (7,390,289) (7,716,119)
Provision for income taxes (800) (800)
Consolidated net loss (2,651,891) (1,763,021) (7,391,089) (7,716,919)
Less: Net loss attributable to noncontrolling interests (134,517) (183,008) (494,450) (630,706)
Net loss attributable to Vivakor, Inc. $ (2,517,374) $ (1,580,013) $ (6,896,639) $ (7,086,213)
Basic net loss per share $ (0.14) $ (0.09) $ (0.38) $ (0.46)
Diluted net loss per share $ (0.14) $ (0.09) $ (0.38) $ (0.46)
Basic weighted average common shares outstanding 18,120,344 17,047,489 18,083,543 15,284,240
Product Revenue Third Parties [Member]        
Revenues        
Total revenues $ 12,849,613 $ 8,882,105 $ 35,614,821 $ 8,882,105
Product Revenue Related Party [Member]        
Revenues        
Total revenues $ 3,463,793 $ 2,883,870 $ 9,834,095 $ 2,883,870
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
Series A Preferred Stocks [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Treasury Stocks [Member]
Retained Earnings [Member]
Noncontrolling Interest [Member]
Total
Beginning balance, value at Dec. 31, 2021 [1] $ 67 $ 12,331 $ 58,279,590 $ (20,000) $ (35,731,359) $ 5,012,504 $ 27,553,133
Beginning balance, shares at Dec. 31, 2021 [1] 66,667 12,330,859          
Common Stock issued for stock awards $ 16 (16)
Common Stock issued for stock awards, shares   16,667          
Common Stock issued for a reduction of liabilities $ 273 1,144,719 1,144,992
Common Stock issued for a reduction in liabilities, shares   272,156          
Conversion of Series A Preferred Stock to Common Stock $ (67) $ 833 (766)
Conversion of Series A Preferred Stock to Common Stock, shares (66,667) 833,333          
Common Stock issued for cash $ 1,600 6,238,400 6,240,000
Common Stock issued for cash, shares   1,600,000          
Common stock issued for fractional shares from reverse stock split $ 2 2
Common stock issued for fractional shares from reverse stock split, shares   2,271          
Common stock issued as part consideration for the purchase of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC $ 3,010 4,284,645 4,287,655
Common stock issued as part consideration for the purchase of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, shares   3,009,552          
Distributions to noncontrolling interest (593,087) (593,087)
Issuance of noncontrolling interest for a reduction of debt 3,400,000 3,400,000
Stock options issued for services 1,172,500 1,172,500
Stock based compensation 2,185,615 2,185,615
Net loss (7,086,213) (630,706) (7,716,919)
Ending balance, value at Sep. 30, 2022 $ 18,065 73,304,687 (20,000) (42,817,572) 7,188,711 37,673,891
Ending balance, shares at Sep. 30, 2022 18,064,838          
Beginning balance, value at Jun. 30, 2022 $ 15,039 67,857,646 (20,000) (41,237,559) 7,245,917 33,861,043
Beginning balance, shares at Jun. 30, 2022 15,038,619          
Common Stock issued for stock awards $ 0 $ 16 (16)
Common Stock issued for stock awards, shares 0 16,667          
Common stock issued as part consideration for the purchase of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC $ 0 $ 3,010 4,284,645 4,287,655
Common stock issued as part consideration for the purchase of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, shares 0 3,009,552          
Distributions to noncontrolling interest (249,198) (249,198)
Issuance of noncontrolling interest for a reduction of debt 375,000 375,000
Stock options issued for services 317,500 317,500
Stock based compensation 844,912 844,912
Net loss (1,580,013) (183,008) (1,763,021)
Ending balance, value at Sep. 30, 2022 $ 18,065 73,304,687 (20,000) (42,817,572) 7,188,711 37,673,891
Ending balance, shares at Sep. 30, 2022 18,064,838          
Beginning balance, value at Dec. 31, 2022 $ 18,065 74,026,163 (20,000) (55,169,781) 8,206,614 27,061,061
Beginning balance, shares at Dec. 31, 2022 18,064,838          
Non-qualified stock options issued to third party 467,509 467,509
Issuance of common stock for a reduction of liabilities 155 219,845 220,000
Distributions to noncontrolling interest (1,020,564) (1,020,564)
Issuance of noncontrolling interest for a reduction of debt 3,305,000 3,305,000
Stock based compensation 1,260,476 1,260,476
Net loss (6,896,639) (494,450) (7,391,089)
Ending balance, value at Sep. 30, 2023 $ 18,220 75,973,993 (20,000) (62,066,420) 9,996,600 23,902,393
Ending balance, shares at Sep. 30, 2023 18,219,582          
Beginning balance, value at Jun. 30, 2023 $ 18,065 74,493,672 (20,000) (59,549,046) 8,575,445 23,518,136
Beginning balance, shares at Jun. 30, 2023 18,064,838          
Issuance of common stock for a reduction of liabilities $ 155 219,845 220,000
Issuance of common Stock issued for a reduction of liabilities, shares   154,744          
Distributions to noncontrolling interest (414,328) (414,328)
Issuance of noncontrolling interest for a reduction of debt 1,970,000 1,970,000
Stock based compensation 1,260,476 1,260,476
Net loss (2,517,374) (134,517) (2,651,891)
Ending balance, value at Sep. 30, 2023 $ 18,220 $ 75,973,993 $ (20,000) $ (62,066,420) $ 9,996,600 $ 23,902,393
Ending balance, shares at Sep. 30, 2023 18,219,582          
[1] Share and per share amounts have been retroactively adjusted to reflect the one-for-thirty reverse stock split effective February 14, 2022. See Note 1 – Organization and Basis of Presentation for additional information.
v3.23.3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
OPERATING ACTIVITIES:    
Consolidated net loss $ (7,391,089) $ (7,716,919)
Adjustments to reconcile net income to net cash used in operating activities:    
Depreciation and amortization 2,269,445 2,053,550
Forgiveness of liabilties (40,584)
Common stock options issued for services 1,172,500
Stock-based compensation 1,260,476 2,185,615
Unrealized (gain)/loss- marketable securities 991,652 (661,101)
Gain on disposal of asset (2,456)
Changes in operating assets and liabilities:    
Accounts receivable (442,307) 652,851
Prepaid expenses (35,822) 23,960
Inventory (16,500) 147,719
Other assets (348,943) (164,919)
Right of use assets- finance leases 785,817
Right of use assets- operating leases 257,286 15,090
Operating lease liabilities (257,286) (16,177)
Accounts payable and accrued expenses (929,360) (1,751,613)
Interest on notes receivable (18,243)
Interest on notes payable 3,058,522 627,163
Net cash used in operating activities (838,693) (3,452,980)
INVESTING ACTIVITIES:    
Proceeds from notes receivable 55,952
Acquisition of assets 96,466
Proceeds from disposal of equipment 6,000
Purchase of equipment (3,841,589) (1,807,140)
Net cash used in investing activities (3,841,589) (1,648,722)
FINANCING ACTIVITIES:    
Payment on financing lease liabilities (299,993) (160,650)
Proceeds from loans and notes payable 3,723,458 3,177,622
Proceeds from loans and notes payable- related party 776,500
Proceeds from sale of common stock 6,240,000
Payment of notes payable (534,111)
Payment of notes payable- related party (482,815)
Distributions to noncontrolling interest (1,020,564) (593,087)
Net cash provided by financing activities 2,696,586 8,129,774
Net increase (decrease) in cash and cash equivalents (1,983,696) 3,028,072
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,182,793 1,493,719
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,199,097 4,521,791
Cash paid during the year for:    
Interest 2,485,211 480,605
Income taxes
Noncash transactions:    
Conversion of Series A, B, B-1, and C-1 Preferred Stock to Common Stock 1,200,000
Common stock issued for a reduction in liabilities 220,000 1,144,992
Accounts payable on purchase of equipment 432,857 586,717
Noncontrolling interest issued for a reduction in liabilities 3,305,000 3,400,000
Capitalized interest on construction in process 735,919 499,537
Common stock issued in the acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC 4,287,655
Non-qualified stock options issued with debt $ 467,509
v3.23.3
Basis of Presentation
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

Note 1. Basis of Presentation

 

On February 14, 2022, we effected a 1-for-30 reverse split of our outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State which was effective at the commencement of trading of our Common Stock. No fractional shares of the Company’s common stock were issued as a result of the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share. All issued and outstanding common stock, preferred stock, and per share amounts in the consolidated financial statements and footnotes included herein have been retroactively adjusted to reflect this reverse stock split for all periods presented.

 

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic had a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries issued policies intended to stop or slow the spread of the disease.

 

In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have since resumed site preparations for operations. Additionally, we continue to experience supply chain disruptions related to building our Remediation Processing Centers (“RPC”), completing certain refurbishment, and in relation to our other operations.

 

Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2022. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.

 

Long Lived Assets

 

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. During the nine months ended September 30, 2023, the Company entered into an agreement to move the Vernal RPC plant to Kuwait to service the contract with DIC for a scaled up RPC, as the Vernal plant was not producing product toward the off-take agreement, which further delayed scaled operations. The Company evaluated these events, and determined that there was no trigger event, and therefore there was no impairment incurred during the nine months ended September 30, 2023. There can be no assurance that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

 

Intangible Assets and Goodwill:

 

We account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We performed an analysis and assessed no triggering event has occurred, and no impairment for the nine months ended September 30, 2023.

 

Revenue Recognition

 

In August 2022, we acquired Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, from which approximately 99% of the Company’s revenue is derived. For the nine months ended September 30, 2023, our sales consist of storage services and the sale of crude oil or like products. For the nine months ended September 30, 2023, disaggregated revenue by customer type was as follows: $35,564,821 in crude oil sales and $8,118,549 in product related to natural gas liquids sales.

 

Related Party Revenues

 

We sell crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC. These contracts were entered into in the normal course of our business. Our revenue from related parties for the nine months ended September 30, 2023 and 2022 was $9,834,095 and $2,883,870.

 

Major Customers and Concentration of Credit Risk

 

The Company has two major customers, which account for approximately 97% of the balance of accounts receivable as of September 30, 2023 and December 31, 2022.

 

Advertising Expense

 

Advertising costs are expensed as incurred. The Company did not incur advertising expense for the nine months ended September 30, 2023 and 2022.

 

Net Income/Loss Per Share

 

Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of September 30, 2023 and December 31, 2022 include the following: convertible notes payable convertible into approximately 214,560 and 14,560 shares of common stock, stock options and unissued stock awards granted to current or previous employees of 2,590,968 and 1,421,760 shares of common stock, stock options and unissued awards granted to Board members or consultants of 680,274 and 395,139 shares of common stock. The Company issued free standing stock options to purchase 1,000,000 shares of our common stock to a third party in a bundled transaction with debt during the nine months ended September 30, 2023 (see Note 9). The Company also has a warrant outstanding to purchase 80,000 shares of common stock as of September 30, 2023.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes, effective interest rates related to long-term debt, marketable securities, cost basis investments, lease assets and liabilities, valuation of stock used to acquire assets, derivatives, and fair values of the intangible assets and goodwill related to business combinations.

 

While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

 

Fair Value of Financial Instruments

 

The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures.

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the consolidated balance sheets for marketable securities are classified as Level 1 assets due to observable quoted prices for identical assets in active markets. The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their estimated fair market values based on the short-term maturity of these instruments. The recorded values of notes payable approximate their current fair values because of their nature, rates, and respective maturity dates or durations.

 
v3.23.3
Liquidity
 9 Months Ended
Sep. 30, 2023
Liquidity  
Liquidity

Note 2. Liquidity

 

We have historically suffered net losses and cumulative negative cash flows from operations, and as of September 30, 2023, we had an accumulated deficit of approximately $62.1 million. As of September 30, 2023 and December 31, 2022, we had a working capital deficit of approximately $19 million and $3.7 million, respectively. Subsequent to September 30, 2023, $10 million of the working capital deficit was paid with an issuance of common stock for a reduction in noted payable to a related party, of which our CEO is a beneficiary (see Note 12). As of September 30, 2023, we had cash of approximately $1.2 million, and we had obligations to pay approximately $14.4 million (of which approximately $10 million was satisfied through the issuance of our common stock under the terms of the debt subsequent to September 30, 2023 (see Note 12)) of debt in cash within one year of the issuance of these financial statements. Our CEO has also committed to provide credit support through December 2024, as necessary, for an amount up to $8 million to provide the Company sufficient cash resources, if required, to execute its plans for the next twelve months. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. We believe the liquid assets and CEO commitment give us adequate working capital to finance our day-to-day operations for at least twelve months through November 2024.

 

The Company has prepared the consolidated financial statements on a going concern basis. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Management cannot provide any assurance that the Company will raise additional capital if needed.

 
v3.23.3
Accounts Receivable
 9 Months Ended
Sep. 30, 2023
Credit Loss [Abstract]  
Accounts Receivable

Note 3. Accounts Receivable

 

As of September 30, 2023 and December 31, 2022, accounts receivable with related parties was $174,083 and $948,352 and is made up of the following:

 

As of September 30, 2023 and December 31, 2022, trade accounts receivable of $112,083 and $948,352 are with a vendor of which our CEO is a beneficiary. In 2023 we began subleasing office space to a tenant where the officers of WealthSpace, LLC, Fund Manager of Viva Wealth Fund I, LLC, also manage the tenant of our sublease. The tenant owes rent of $62,000 to the Company as of September 30, 2023.

 
v3.23.3
Property and Equipment
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Property and Equipment

Note 4. Property and Equipment

 

The following table sets forth the components of the Company’s property and equipment at September 30, 2023 and December 31, 2022:

 

                                               
    September 30,
2023		     December 31,
2022		  
    Gross
Carrying
Amount		     Accumulated
Depreciation		     Net Book
Value		     Gross
Carrying
Amount		     Accumulated
Depreciation		     Net Book
Value		  
Office furniture   $ 14,998     $ 7,345     $ 7,653     $ 14,998     $ 5,912     $ 9,086  
Vehicles     36,432       31,575       4,857       36,432       26,110       10,322  
Equipment     942,880       400,409       542,471       942,880       295,855       647,025  
Property     17,000       -       17,000       17,000       -       17,000  
Finance lease- Right of use assets     3,579,544       1,135,070       2,444,474       3,579,544       349,253       3,230,291  
                                                 
Construction in process:                                                
Wash Plant Facilities     2,337,477       -       2,337,477       199,800       -       199,800  
Cavitation device     72,201       -       72,201       44,603       -       44,603  
Remediation Processing Unit 1     4,483,971       -       4,483,971       4,396,753       -       4,396,753  
Remediation Processing Unit 2     8,285,744       -       8,285,744       6,285,547       -       6,285,547  
Remediation Processing Unit System A     4,209,947       -       4,209,947       3,893,051       -       3,893,051  
Remediation Processing Unit System B     4,286,177       -       4,286,177       3,845,398       -       3,845,398  
Total fixed assets   $ 28,266,371     $ 1,574,399     $ 26,691,972     $ 23,256,006     $ 677,130     $ 22,578,876  

 

 

For the nine months ended September 30, 2023 and 2022 depreciation expense was $111,452 and $500,352. For the nine months ended September 30, 2023 and 2022 capitalized interest to equipment from debt financing was $735,919 and $499,537. Equipment that is currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into service. Equipment that is temporarily not in service is not depreciated until placed into service.

 

The operations surrounding our precious metals extraction services were temporarily suspended until 2022, although due to these suspended activities and a shift in 2022 of the Company’s focus to the oil and gas industry, we realized an impairment loss of $6,269,998 surrounding the extraction machinery for the year ended December 31, 2022.

 

As of December 31, 2022 we continued to pursue a test facility or third party reactor for our nano catalyst technology that facilitates chemical manufacturing, with a focus on the production of ammonia, which includes our bioreactor equipment. The Company received quotes for testing or building our own test facilities with new partners for this venture. After taking into consideration this new information, we noted that the newly requested capital expenditure to test and scale the business triggered an impairment loss of assets related to our ammonia synthesis assets, including our bioreactors. The impairment loss related to our bioreactors was $1,440,000 for the year ended December 31, 2022.

 

There was no impairment loss during the nine months ended September 30, 2023.

 
v3.23.3
Intellectual Property, Net and Goodwill
 9 Months Ended
Sep. 30, 2023
Intellectual Property Net And Goodwill  
Intellectual Property, Net and Goodwill

Note 5. Intellectual Property, Net and Goodwill

 

The following table sets forth the components of the Company’s intellectual property at September 30, 2023 and December 31, 2022:

 

                                               
    September 30,
2023		     December 31,
2022		  
    Gross
Carrying
Amount		     Accumulated
Amortization		     Net Book
Value		     Gross
Carrying
Amount		     Accumulated
Amortization		     Net Book
Value		  
Extraction Technology patents   $ 113,430     $ 17,237     $ 96,193     $ 113,430     $ 12,233     $ 101,197  
Extraction Technology     16,385,157       7,100,235       9,284,922       16,385,157       6,485,791       9,899,366  
Acquired crude oil contracts     16,788,760       2,080,019       14,708,741       19,095,420       844,930       18,250,490  
Total Intellectual property   $ 33,287,347     $ 9,197,491     $ 24,089,856     $ 35,594,007     $ 7,342,954     $ 28,251,053  

 

The changes in the carrying amount of goodwill are as follows:

 

       
    Goodwill  
January 1, 2021   $ -  
Acquisition     14,984,768  
September 30, 2023   $ 14,984,768  

 

There were no changes in goodwill for the nine months ended September 30, 2023.

 

On August 1, 2022, the Company closed a Membership Interest Purchase Agreement, (the “MIPA”), with Jorgan Development, LLC, and JBAH Holdings, LLC, as the equity holders of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”) and White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) whereby, the Company acquired all of the issued and outstanding membership interests in each of SFD and WCCC making SFD and WCCC wholly owned subsidiaries of the Company. The purchase price for the Membership Interests is approximately $32.9 million, after post-closing adjustments.

 

Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill. Based on the valuation study, the fair values of goodwill and the acquired contracts were $14,984,768 and $16,788,760 on August 1, 2022.

 

Amortization expense for the nine months ended September 30, 2023 and 2022 was $2,157,993 and $1,553,198.

 
v3.23.3
Accounts Payable and Accrued Expenses
 9 Months Ended
Sep. 30, 2023
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Expenses

Note 6. Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consist of the following:

 

               
    September 30,     December 31,  
    2023     2022  
Accounts payable   $ 3,749,916     $ 910,002  
Office access deposits     -       235  
Unearned revenue     -       20,936  
Accrued interest (various notes and loans payable)     241,585       349,497  
Accrued interest (working interest royalty programs)     1,546,673       1,437,711  
Accrued tax penalties and interest     554,836       524,286  
Accounts payable and accrued expenses   $ 6,093,010     $ 3,242,667  

 

    September 30,     December 31,  
    2023     2022  
Accounts payable- related parties   $ 3,507,834     $ 4,112,300  
Accrued interest (notes payable)- related parties     291,896       30,678  
Accounts payable and accrued expenses   $ 3,799,730     $ 4,142,978  
Accrued compensation   $ 1,246,579     $ 1,302,890  

 

As of September 30, 2023 and December 31, 2022, our accounts payable are primarily made up of trade payables for the purchase of crude oil. As of September 30, 2023 and December 31, 2022, trade accounts payables in the amount of $2,842,979 and $4,000,681 is with a vendor who our CEO is a beneficiary of. As of September 30, 2023 and December 31, 2022, $250,526 and $37,685 of accounts payable is related to services rendered, which are not trade payables, with a vendor of which our CEO is a beneficiary.

 

In March 2023, the Compensation Committee reviewed the Company’s 2022 results, including, but not limited to, the progress of the Company’s historic business and certain acquisitions completed by the Company during 2022, and approved discretionary bonuses, which have been accrued as of December 31, 2022, for the Chief Financial Officer, and an acquisition consultant, in the amounts of $505,467 (included in accrued compensation) and $421,222 (included in accounts payable), respectively.

 

As of September 30, 2023, accrued compensation to current employees includes $71,005 in accrued vacation pay due to our Chief Executive Officer, which may be payable in cash or stock if unused, and $720,145 due to our Chief Financial Officer, with $54,183 in accrued sick and vacation pay that may be payable in cash if unused, and the remainder paid in cash.

 

On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease (see Note 8) for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement. During the construction phase of this agreement, the Company controls the asset with construction costs funded by Maxus recorded as a liability. As of September 30, 2023 the Company has recorded a $1,564,771 liability in accounts payable related to the construction related to this agreement that has been funded by Maxus.

 

In July 2023, the Fund Manager, WealthSpace, LLC, of Viva Wealth Fund I, LLC (VWF), paid distributions to LLC unit holders in the amount of $414,329. The Company recorded this payment in behalf of VWF in accounts payable as of September 30, 2023. Subsequent to September 30, 2023, the $414,329 payable to WealthSpace, LLC was reimbursed by VWF and the payable was eliminated.

 
v3.23.3
Loans and Notes Payable
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Loans and Notes Payable

Note 7. Loans and Notes Payable

 

Loans and notes payable and their maturities consist of the following:

 

               
    September 30,     December 31,  
    2023     2022  
Various promissory notes and convertible notes   $ 50,960     $ 50,960  
Novus Capital Group LLC Note (a)     171,554       171,554  
National Buick GMC     15,786       16,006  
Blue Ridge Bank     410,200       410,200  
Small Business Administration     299,900       299,900  
Al Dali International for Gen. Trading & Cont. Co.(b)     948,687       -  
RSF, LLC (c)     500,000       -  
Various variable interest promissory notes (d)     -       1,325,000  
Total Notes Payable   $ 2,397,087     $ 2,273,620  
                 
Loans and notes payable, current   $ 529,366     $ 542,374  
Loans and notes payable, current attributed to variable interest entity     -       1,325,000  
Loans and notes payable, long term   $ 1,867,721     $ 406,246  

 

               
    September 30,     December 31,  
    2023     2022  
Various variable interest promissory notes- related parties (c)   $ 1,651,845     $ 899,500  
Jorgan Development, LLC     27,519,044       27,977,704  
Triple T Notes     365,857       342,830  
Total Notes Payable- related parties   $ 29,536,746     $ 29,220,034  
                 
Loans and notes payable, current- related parties   $ 12,554,172     $ 342,830  
Loans and notes payable, current attributed to variable interest entity- related parties     300,000       599,500  
Loans and notes payable attributed to variable interest entity- related parties     1,351,845       300,000  
Loans and notes payable, long term- related parties   $ 15,330,729     $ 27,977,704  

 

The following table sets forth the estimated payment schedule of long-term debt (net of debt discount) as of September 30, 2023:

 

       
2023   $ 529,366  
2024     13,872,226  
2025     17,260,449  
2026     33,640  
2027     17,232  
Thereafter     220,920  
Total   $ 31,933,833  

 

 
(a) In 2017, the Company acquired assets, including patents, in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt in the amount of $334,775. The debt currently accrues interest at 10% per annum. In November 2021, the lender agreed to extend the maturity of the note to April 1, 2022. On April 1, 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid. As of the date of this report, we are currently renegotiating the terms of this debt.
(b) On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $1,950,000. As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method. We also granted DIC a security interest in our Trial Remediation Processing Center (“RPC”) that is currently on-site at the DIC facility in Kuwait. We will repay the amounts due under the note from the operations of the RPC. In order to repay the amounts due under the note, DIC will deduct $12 per ton of material we process from the amounts due to us until all amounts due under the note have been repaid.
(c) On July 25, 2023, RSF, LLC loaned the Company $500,000 under the terms of a 10% Convertible Promissory Note. Under the terms of the note, interest accrues at 10% per annum, and matures two years from the date of issuance. The note is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.
(d) The balance of these various promissory notes are related to the special purchase vehicle, Viva Wealth Fund I, LLC (VWFI) of which the balance primarily related to an offering up to $25,000,000 in convertible notes in a private offering, which was closed on March 31, 2023. During the nine months ended September 30, 2023, an additional $1,980,000 has been raised in relation this offering, and $3,305,000 of this debt has been converted into units of the LLC. VWFI has also entered into various master revolving notes outside of the offering: an additional $765,000, was raised from a related party as of September 30, 2023, which accrues 6% interest per annum, has a maturity date of October 11, 2024, where no payments are made prior to the maturity date unless at the option of the fund. For the nine months ended September 30, 2023, we made a cash payment of $12,655 on the principal of the revolving note.

 
v3.23.3
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 8. Commitments and Contingencies

 

Finance Leases

 

We acquired Silver Fuels Delhi, LLC (SFD) and White Claw Colorado City, LLC (WCCC) in a business combination in August 2022, in which we acquired certain finance lease contracts and liabilities as described below:

 

On March 17, 2020, SFD entered into two sale and leaseback transactions with Maxus Capital Group, LLC (“Maxus”). The first transaction involved the Company assigning twelve storage tanks and other equipment and the second transaction involved the Company assigning the remaining property at the oil gathering facility with the exception of land, to Maxus Future minimum lease payments for each of the next three years under the Maxus lease obligations is as follows: 2023 $123,036, 2024 $492,144, and 2025 $123,036.

 

On December 28, 2021, WCCC entered into a sale and leaseback transaction with Maxus, where WCCC assigned the crude oil, natural gas liquids, condensate, and liquid hydrocarbon receipt, throughput, processing, gathering, and delivery terminal, commonly known as the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus. Future minimum lease payments for each of the next four years under the Maxus lease obligation are as follows: 2023 $117,939, 2024 $471,756, 2025 $471,756, and 2026 $471,756.

 

On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement. We expect our lease payments to Maxus under the supplement to be approximately $57,962 per month over 4 years, with an early buyout option of approximately $685,000 or lease-end option to purchase the facilities for the fair market value. We anticipate that the lease will commence in the fourth quarter of 2023 at which time the final amount funded and lease payments will be determined. During the construction phase the Company controls the asset with construction costs funded by Maxus recorded as a liability (see Note 6).

 

The following table reconciles the undiscounted cash flows for the finance leases as of September 30, 2023 to the finance lease liability recorded on the balance sheet:

 

       
2023   $ 240,975  
2024     963,900  
2025     594,792  
2026     471,756  
Total undiscounted lease payments     2,271,423  
Less: Imputed interest     1,061,556  
Present value of lease payments     1,209,867  
Add: carrying value of lease obligation at end of lease term     1,753,000  
Total finance lease obligations   $ 2,962,867  
         
Finance lease liabilities, current   $ 963,900  
Finance lease liabilities, long-term   $ 1,998,967  
         
Weighted-average discount rate     18.00 %
Weighted-average remaining lease term (months)     32.17  

 

Operating Leases

 

Commencing on September 15, 2019, the Company entered into a five-year lease with Jamboree Center 1 & 2 LLC covering approximately 6,961 square feet of office space in Irvine, CA. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $21,927, Year 2 $22,832, Year 3 $23,737, Year 4 $24,712, Year 5 $25,686. As a condition of the lease, we were required to provide a $51,992 security deposit.

 

On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $2,258, Year 2 $2,336, Year 3 $2,418. As a condition of the lease, we were required to provide a $2,418 security deposit.

 

On March 28, 2022, the Company entered into a lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 is comprised of April to May 2022 $857, June 2022 to March 2023 $3,550, Year 2 $3,657, Year 3 $3,766. As a condition of the lease, we were required to provide a $3,766 security deposit.

 

On 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 June 26, 2023, our subsidiary VivaVentures Remediation Corp., entered into a five year RPC Equipment Lease Agreement with Viva Wealth Fund I, LLC (“VWF”), under which VivaVentures Remediation Corp. agreed to lease the Remediation Processing Center (“RPC”) owned by VWF. VWF previously raised approximately $13.7 million and used the funds to have our subsidiary, RPC Design and Manufacturing, LLC, build an RPC, which we are now leasing from VWF in exchange for 25% of the gross proceeds from the RPC’s oil extraction production services, with a minimum $400,000 annual payment beginning nine months after the RPC is fully operational as defined in the RPC Equipment Lease Agreement. We anticipate that the RPC will be fully operational in the fourth quarter of 2023 at which time the minimum annual lease payment of $400,000 and could increase to an amount equal to 25% of the gross proceeds from the RPC’s oil extraction production services.

 

In July and August 2023, the Company entered into two six month lease agreements with Regus Management Group, LLC for individual offices and shared amenities located in Laguna Hills, California. The leases require an aggregate monthly lease payment of $3,080.

 

The following table reconciles the undiscounted cash flows for the leases as of September 30, 2023 to the operating lease liability recorded on the balance sheet:

 

       
2023   $ 130,245  
2024     435,906  
2025     162,545  
2026     136,975  
2027     153,089  
Thereafter     2,931,500  
Total undiscounted lease payments     3,950,260  
Less: Imputed interest     2,232,911  
Present value of lease payments   $ 1,717,349  
         
Operating lease liabilities, current   $ 535,960  
Operating lease liabilities, long-term   $ 1,181,389  
         
Weighted-average remaining lease term     213.47  
Weighted-average discount rate     10.13 %

 

Employment Agreement

 

On July 1, 2023, we hired a Vice President of Operations & Construction. In this position, Mr. Patterson is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $150,000 in annual salary, shares of our common stock equal to $25,000 annually, and two one-time bonuses of shares of our common stock equal to $125,000 each, with the first bonus payable on the one year anniversary of his employment, and the second bonus payable on the eighteen month anniversary of his employment agreement. Mr. Patterson is entitled to other bonuses and benefits on par with our general employment policies.

 
v3.23.3
Share-Based Compensation & Warrants
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Share-Based Compensation & Warrants

Note 9. Share-Based Compensation & Warrants

 

Options

 

Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.

 

The Company has granted stock-based compensation to employees, including the issuance of 1,872,918 employee stock options granted in June 2022 that were to vest over a period of two years, for which 451,158 of these options were cancelled with the resignation without cause in October 2022 of our prior Chief Executive Officer. For the nine months ended September 30, 2023 and 2022, employee stock-based compensation was $1,260,476 and $1,340,703. On October 24, 2022, the Compensation Committee resolved to increase their compensation including the issuance of 100,000 stock options per independent board member, exercisable at $2.50 per share, vesting immediately. Non-statutory or independent Board of Director stock-based compensation was none and $855,000 for the nine months ended September 30, 2023 and 2022. In 2022, the Company closed on its underwritten public offering in which the Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), a 45-day option to purchase up to an additional 240,000 shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments, if any. These options were not exercised and expired. On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”). As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method.

 

There were no other options granted during the nine months ended September 30, 2023 and 2022, respectively.

 

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the options on the date of issuance are as follows:

 

     
    December 31, 2021
through
September 30,
2023		  
Risk-free interest rate   0.24 - 5.23%  
Expected dividend yield   None  
Expected life   2.1 - 10 years  
Expected volatility rate   142 - 273%  

 

The following table summarizes all stock option activity of the Company for the nine months ended September 30, 2023 and 2022:

 

                       
    Number
of Shares		     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contractual
Life (Years)		  
Outstanding, December 31, 2022     1,833,566     $ 2.59       6.47  
Granted     1,000,000       1.18       1.75  
Exercised     -       -       -  
Forfeited     (16,667 )     12.00       -  
Outstanding, September 30, 2023     2,816,899     $ 2.03       4.33  
                         
Outstanding, December 31, 2021     650,000     $ 12.00       7.53  
Granted     2,112,919       2.24       6.60  
Exercised     (16,667 )     11.1       -  
Forfeited     (740,000 )     10.00       -  
Outstanding, September 30, 2022     2,006,252     $ 2.56       6.93  
                         
Exercisable, December 31, 2022     1,526,869     $ 2.65       5.94  
Exercisable, September 30, 2023     2,671,883     $ 2.05       4.10  
                         
Exercisable, December 31, 2021     180,000     $ 12.00       7.01  
Exercisable, September 30, 2022     1,175,059     $ 2.67       7.09  

 

As of September 30, 2023 and 2022, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

 

Warrants

 

As of September 30, 2023 and 2022, the Company had 80,000 warrants outstanding. On February 14, 2022, the Company closed on its underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share. In addition, the Company has issued the underwriter, EF Hutton, a 5-year warrant to purchase 80,000 shares of common stock at an exercise price equal $5.75 and were valued with a fair market value of $374,000. The impact of these warrants has no effect on stockholder’s equity, as they are considered equity-like instruments, and are considered a direct expense of the offering.

 
v3.23.3
Income Tax
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Tax

Note 10. Income Tax

 

The Company calculates its quarterly tax provision pursuant to the guidelines in ASC 740 Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year ordinary income. In calculating the effective tax rate, permanent differences between financial reporting and taxable income are factored into the calculation, and temporary differences are not. The estimated annual effective tax rate represents the Company’s estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision.

 

The Company recorded a provision for income taxes of $800 for the nine months ended September 30, 2023 and 2022, respectively. The Company is projecting a 0.01% effective tax rate for the year ending December 31, 2023, which is primarily the result of projected provision from book loss incurred for the year offset by additional valuation allowance on the net operating losses. The Company’s effective tax rate for 2022 was 18.69% which was, which was primarily the result of a change in the Company's valuation allowance on deferred tax assets.

 

As of December 31, 2022, the Company had estimated federal and state net operating loss (NOL) carryforwards of approximately $23.7 million. Federal NOL carryforwards begin to expire in 2028.

 
v3.23.3
Related Party Transactions
 9 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

Note 11. Related Party Transactions

 

As of September 30, 2023, VWFI has paid $2,266,964 to Dzign Pro Enterprises, LLC (Dzign Pro) for engineering services related to our RPCs, site planning, and infrastructure, which Dzign Pro shares a common executive with VWFI. As of September 30, 2023, VWFI also entered into a master revolving note payable to Dzign Pro in the amount of $300,000, which accrues 5% interest per annum, has a maturity date of July 14, 2024, where no payments are made prior to the maturity date unless at the option of the fund. VWFI also entered into a master revolving note payable to Van Tran Family LP, which is an affiliate of WealthSpace, LLC, the VWFI Fund Manager, in the amount of $1,351,845, which accrues 6% interest per annum, has a maturity that has been amended to October 11, 2024, where no payments are made prior to the maturity date unless at the option of the fund. For the nine months ended September 30, 2023, we made cash payments of $50,000 on the Van Tran Family LP revolving note.

 

As of September, 2023 we are subleasing office space to Spectra Global Cuisine, LLC (Spectra), which shares officers with WealthSpace, LLC (the Fund Manager of VWFI). For the nine months ended September 30, 2023 we realized $62,000 in office sublease lease revenue from Spectra. As of September 30, 2023, the Company is carrying accounts receivable of $62,000 related to this sublease.

 

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 $25,000 in cash and accrued $30,000, to be paid in common stock. We also advanced Mr. Nicosia $21,000 for a business expenses related to a trip to Kuwait for the Company and have requested evidence of his business expenses. We have received evidence of business expenses of approximately $16,254 to date and are awaiting documents and evidence for the remaining expense amount.

 

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 nine months ended September 30, 2023, we paid Mr. Staggs a total of $48,000 in cash under the terms of the agreement.

 

 

On June 15, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Jorgan Development, LLC, (“Jorgan”) and JBAH Holdings, LLC, (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Silver Fuels Delhi, LLC (“SFD”) and White Claw Colorado City, LLC (“WCCC”) whereby, at closing, which occurred on August 1, 2022, we acquired all of the issued and outstanding membership interests in each of SFD and WCCC (the “Membership Interests”), making SFD and WCCC our wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $32.9 million paid for by us with a combination of shares of our common stock, amount equal to 19.99% of the number of issued and outstanding shares of our common stock immediately prior to issuance, and secured three-year promissory notes issued by us in favor of the Sellers (the “Notes”). As of September 30, 2023 we have accrued interest of approximately $232,745 and for the nine months ended September 30, 2023, we made cash payments of $2,807,032 on the Notes.

 

In the business combination of acquiring WCCC we also acquired WCCC’s Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $150,000 per month even if the storage space is not used. The agreement expires on December 31, 2031. For the nine months ended September 30, 2023 we have received tank storage revenue related to this contract of approximately $1,351,237.

 

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 nine months ended September 30, 2023, we have made crude oil purchases from WC Crude of $26,373,647 and received deficiency payments of $364,309. In addition, SFD renewed a sales agreement in April 2023 with WC Crude to sell a natural gas liquid product to WC Crude. For the three months ended March 2023, SFD sold the NGL stream at cost to WC Crude. On April 1, 2023 sold the NGL stream at a profit to WC Crude. We produced and sold natural gas liquids and crude oil to WC Crude in the amount of $9,599,740 for the nine months ended September 30, 2023.

 

In the business combination of acquiring SFD and WCCC we also entered into a Shared Services Agreement with Endeavor Crude, LLC (“Endeavor”), who shares a beneficiary, James Ballengee (the Company’s CEO), with Jorgan and JBAH. Under this agreement, we have the right, but not the obligation to use Endeavor for consulting services. For the nine months ended September 30, 2023, Endeavor rendered services in the amount of $254,946.

 

In September 2020, we entered into a consulting contract with LBL Professional Consulting, Inc. (“LBL”), of which our Chief Financial Officer is also an officer. For the nine months ended September 30, 2023, the Company was carrying, until recently paid, accounts payable of $20,413 owed to LBL for outstanding invoices from 2022.

 

We have an existing note payable issued to Triple T, which is owned by Dr. Khalid Bin Jabor Al Thani, the 51% majority-owner of Vivakor Middle East LLC. The note is interest free, has no fixed maturity date and will be repaid from revenues generated by Vivakor Middle East LLC. As of September 30, 2023 the balance owed was $365,857. In March 2023 the parties agreed to extend the maturity date of the loan to March 10, 2024.

 
v3.23.3
Subsequent Events
 9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events

Note 12. Subsequent Events

 

On November 10, 2023, we held a special meeting of our stockholders for the purpose of approving certain business items, namely:

 

1. To approve, pursuant to Nasdaq Listing Rule 5635(d), the issuance of a number of shares of the Company’s common stock pursuant to Membership Interest Purchase Agreement (the “Acquisition Agreement”) entered into on June 15, 2022, by and among the Company and 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”), including the issuance of such shares upon the conversion of promissory notes issued pursuant to the Acquisition Agreement, as amended on October 28, 2022, which could, under certain circumstances that may occur in the future, exceeding 19.99% of the number of shares of the Company’s common stock outstanding as of the date of the Acquisition Agreements (the “Acquisition Stock Issuance”);

 

2. To approve, pursuant to Nasdaq Listing Rule 5635(c) and 5635(d), the annual compensation of $1,000,000 payable in shares of the Company’s common stock to James Ballengee (the “CEO Compensation Shares”) pursuant to an executive employment agreement (the “Employment Agreement”) entered into on October 28, 2022, by and among the Company and James Ballengee with respect to the Company’s appointment of Mr. Ballengee as Chief Executive Officer and Chairman of the board of directors of the Company; the CEO Compensation Shares will be priced at the volume weighted average price (VWAP) for the five trading days preceding the date of the Employment Agreement and each anniversary thereof (the “CEO Compensation Shares Issuance”), subject to satisfaction of Nasdaq rules, the provisions of the Company’s equity incentive plan and other applicable requirements and shall be accrued if such issuance is due prior to satisfaction of such requirements;

 

3. To approve the Vivakor, Inc. 2023 Equity and Incentive Plan (the “Plan”), which provides equity-based incentive awards, in a total of 40,000,000 authorized shares of the Company’s common stock, to the Company’s and its subsidiaries’ employees, directors and consultants, thereby continuing to align the interests of such individuals with those of the stockholders;

 

4. To approve an amendment to the Articles of Incorporation of the Company (the “Amendment to Articles”) with respect to the forum selection provisions, to amend the Articles of Incorporation to provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.; and

 

5. To approve the increase of the number of common shares the Company is authorized to issue to 200 million in the proposed Amendment to Articles.

 

Each of these agenda items were approved by the holders of a majority of our common stock. Additional information regarding the agenda items can be found in our Schedule 14A Proxy Statement filed with the Commission on September 26, 2023. The exact result of our shareholder vote on the agenda items can be found in our Current Report on Form 8-K filed with the Commission on November 16, 2023.

 

All of the agenda items were approved by the shareholders on November 10, 2023. As a result of these approvals, on November 10, 2023, the Company issued 7,042,254 restricted shares of the Company’s Common Stock in exchange for the forgiveness and cancellation of $10,000,000 of principal under the Notes on a pro rata basis, reflecting a conversion price of $1.42 per share, as well as 923,672 restricted shares of the Company’s Common Stock pursuant to the Ballengee employment agreement, whereas James Ballengee now beneficially owns approximately 41.86% 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. Due to Mr. Ballengee’s change in ownership, certain change of control provisions in the Company’s agreements were triggered, including within the Chief Financial Officer’s employment agreement, which pays the executive a bonus, which is calculated at the executive’s base salary multiplied by two.
v3.23.3
Basis of Presentation (Policies)
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
COVID-19

COVID-19

 

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic had a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries issued policies intended to stop or slow the spread of the disease.

 

In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have since resumed site preparations for operations. Additionally, we continue to experience supply chain disruptions related to building our Remediation Processing Centers (“RPC”), completing certain refurbishment, and in relation to our other operations.

 
Interim Financial Information

Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2022. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.

 
Long Lived Assets

Long Lived Assets

 

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. During the nine months ended September 30, 2023, the Company entered into an agreement to move the Vernal RPC plant to Kuwait to service the contract with DIC for a scaled up RPC, as the Vernal plant was not producing product toward the off-take agreement, which further delayed scaled operations. The Company evaluated these events, and determined that there was no trigger event, and therefore there was no impairment incurred during the nine months ended September 30, 2023. There can be no assurance that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

 
Intangible Assets and Goodwill:

Intangible Assets and Goodwill:

 

We account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We performed an analysis and assessed no triggering event has occurred, and no impairment for the nine months ended September 30, 2023.

 
Revenue Recognition

Revenue Recognition

 

In August 2022, we acquired Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, from which approximately 99% of the Company’s revenue is derived. For the nine months ended September 30, 2023, our sales consist of storage services and the sale of crude oil or like products. For the nine months ended September 30, 2023, disaggregated revenue by customer type was as follows: $35,564,821 in crude oil sales and $8,118,549 in product related to natural gas liquids sales.

 
Related Party Revenues

Related Party Revenues

 

We sell crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC. These contracts were entered into in the normal course of our business. Our revenue from related parties for the nine months ended September 30, 2023 and 2022 was $9,834,095 and $2,883,870.

 
Major Customers and Concentration of Credit Risk

Major Customers and Concentration of Credit Risk

 

The Company has two major customers, which account for approximately 97% of the balance of accounts receivable as of September 30, 2023 and December 31, 2022.

 
Advertising Expense

Advertising Expense

 

Advertising costs are expensed as incurred. The Company did not incur advertising expense for the nine months ended September 30, 2023 and 2022.

 
Net Income/Loss Per Share

Net Income/Loss Per Share

 

Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of September 30, 2023 and December 31, 2022 include the following: convertible notes payable convertible into approximately 214,560 and 14,560 shares of common stock, stock options and unissued stock awards granted to current or previous employees of 2,590,968 and 1,421,760 shares of common stock, stock options and unissued awards granted to Board members or consultants of 680,274 and 395,139 shares of common stock. The Company issued free standing stock options to purchase 1,000,000 shares of our common stock to a third party in a bundled transaction with debt during the nine months ended September 30, 2023 (see Note 9). The Company also has a warrant outstanding to purchase 80,000 shares of common stock as of September 30, 2023.

 
Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes, effective interest rates related to long-term debt, marketable securities, cost basis investments, lease assets and liabilities, valuation of stock used to acquire assets, derivatives, and fair values of the intangible assets and goodwill related to business combinations.

 

While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

 
Fair Value of Financial Instruments

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.

 
v3.23.3
Property and Equipment (Tables)
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment, net
                                               
    September 30,
2023		     December 31,
2022		  
    Gross
Carrying
Amount		     Accumulated
Depreciation		     Net Book
Value		     Gross
Carrying
Amount		     Accumulated
Depreciation		     Net Book
Value		  
Office furniture   $ 14,998     $ 7,345     $ 7,653     $ 14,998     $ 5,912     $ 9,086  
Vehicles     36,432       31,575       4,857       36,432       26,110       10,322  
Equipment     942,880       400,409       542,471       942,880       295,855       647,025  
Property     17,000       -       17,000       17,000       -       17,000  
Finance lease- Right of use assets     3,579,544       1,135,070       2,444,474       3,579,544       349,253       3,230,291  
                                                 
Construction in process:                                                
Wash Plant Facilities     2,337,477       -       2,337,477       199,800       -       199,800  
Cavitation device     72,201       -       72,201       44,603       -       44,603  
Remediation Processing Unit 1     4,483,971       -       4,483,971       4,396,753       -       4,396,753  
Remediation Processing Unit 2     8,285,744       -       8,285,744       6,285,547       -       6,285,547  
Remediation Processing Unit System A     4,209,947       -       4,209,947       3,893,051       -       3,893,051  
Remediation Processing Unit System B     4,286,177       -       4,286,177       3,845,398       -       3,845,398  
Total fixed assets   $ 28,266,371     $ 1,574,399     $ 26,691,972     $ 23,256,006     $ 677,130     $ 22,578,876  
v3.23.3
Intellectual Property, Net and Goodwill (Tables)
 9 Months Ended
Sep. 30, 2023
Intellectual Property Net And Goodwill  
Schedule of components of intellectual property
                                               
    September 30,
2023		     December 31,
2022		  
    Gross
Carrying
Amount		     Accumulated
Amortization		     Net Book
Value		     Gross
Carrying
Amount		     Accumulated
Amortization		     Net Book
Value		  
Extraction Technology patents   $ 113,430     $ 17,237     $ 96,193     $ 113,430     $ 12,233     $ 101,197  
Extraction Technology     16,385,157       7,100,235       9,284,922       16,385,157       6,485,791       9,899,366  
Acquired crude oil contracts     16,788,760       2,080,019       14,708,741       19,095,420       844,930       18,250,490  
Total Intellectual property   $ 33,287,347     $ 9,197,491     $ 24,089,856     $ 35,594,007     $ 7,342,954     $ 28,251,053  
Schedule of goodwill
       
    Goodwill  
January 1, 2021   $ -  
Acquisition     14,984,768  
September 30, 2023   $ 14,984,768  
v3.23.3
Accounts Payable and Accrued Expenses (Tables)
 9 Months Ended
Sep. 30, 2023
Payables and Accruals [Abstract]  
Schedule of accounts payable and accrued expenses
               
    September 30,     December 31,  
    2023     2022  
Accounts payable   $ 3,749,916     $ 910,002  
Office access deposits     -       235  
Unearned revenue     -       20,936  
Accrued interest (various notes and loans payable)     241,585       349,497  
Accrued interest (working interest royalty programs)     1,546,673       1,437,711  
Accrued tax penalties and interest     554,836       524,286  
Accounts payable and accrued expenses   $ 6,093,010     $ 3,242,667  
v3.23.3
Loans and Notes Payable (Tables)
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Schedule of loans and notes payable
               
    September 30,     December 31,  
    2023     2022  
Various promissory notes and convertible notes   $ 50,960     $ 50,960  
Novus Capital Group LLC Note (a)     171,554       171,554  
National Buick GMC     15,786       16,006  
Blue Ridge Bank     410,200       410,200  
Small Business Administration     299,900       299,900  
Al Dali International for Gen. Trading & Cont. Co.(b)     948,687       -  
RSF, LLC (c)     500,000       -  
Various variable interest promissory notes (d)     -       1,325,000  
Total Notes Payable   $ 2,397,087     $ 2,273,620  
                 
Loans and notes payable, current   $ 529,366     $ 542,374  
Loans and notes payable, current attributed to variable interest entity     -       1,325,000  
Loans and notes payable, long term   $ 1,867,721     $ 406,246  
Schedule of loans and notes payable related parties
               
    September 30,     December 31,  
    2023     2022  
Various variable interest promissory notes- related parties (c)   $ 1,651,845     $ 899,500  
Jorgan Development, LLC     27,519,044       27,977,704  
Triple T Notes     365,857       342,830  
Total Notes Payable- related parties   $ 29,536,746     $ 29,220,034  
                 
Loans and notes payable, current- related parties   $ 12,554,172     $ 342,830  
Loans and notes payable, current attributed to variable interest entity- related parties     300,000       599,500  
Loans and notes payable attributed to variable interest entity- related parties     1,351,845       300,000  
Loans and notes payable, long term- related parties   $ 15,330,729     $ 27,977,704  
Schedule of maturities of loans and notes payable
       
2023   $ 529,366  
2024     13,872,226  
2025     17,260,449  
2026     33,640  
2027     17,232  
Thereafter     220,920  
Total   $ 31,933,833  

 

 
(a) In 2017, the Company acquired assets, including patents, in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt in the amount of $334,775. The debt currently accrues interest at 10% per annum. In November 2021, the lender agreed to extend the maturity of the note to April 1, 2022. On April 1, 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid. As of the date of this report, we are currently renegotiating the terms of this debt.
(b) On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $1,950,000. As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method. We also granted DIC a security interest in our Trial Remediation Processing Center (“RPC”) that is currently on-site at the DIC facility in Kuwait. We will repay the amounts due under the note from the operations of the RPC. In order to repay the amounts due under the note, DIC will deduct $12 per ton of material we process from the amounts due to us until all amounts due under the note have been repaid.
(c) On July 25, 2023, RSF, LLC loaned the Company $500,000 under the terms of a 10% Convertible Promissory Note. Under the terms of the note, interest accrues at 10% per annum, and matures two years from the date of issuance. The note is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.
(d) The balance of these various promissory notes are related to the special purchase vehicle, Viva Wealth Fund I, LLC (VWFI) of which the balance primarily related to an offering up to $25,000,000 in convertible notes in a private offering, which was closed on March 31, 2023. During the nine months ended September 30, 2023, an additional $1,980,000 has been raised in relation this offering, and $3,305,000 of this debt has been converted into units of the LLC. VWFI has also entered into various master revolving notes outside of the offering: an additional $765,000, was raised from a related party as of September 30, 2023, which accrues 6% interest per annum, has a maturity date of October 11, 2024, where no payments are made prior to the maturity date unless at the option of the fund. For the nine months ended September 30, 2023, we made a cash payment of $12,655 on the principal of the revolving note.
v3.23.3
Commitments and Contingencies (Tables)
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Schedule of financing lease liability
       
2023   $ 240,975  
2024     963,900  
2025     594,792  
2026     471,756  
Total undiscounted lease payments     2,271,423  
Less: Imputed interest     1,061,556  
Present value of lease payments     1,209,867  
Add: carrying value of lease obligation at end of lease term     1,753,000  
Total finance lease obligations   $ 2,962,867  
         
Finance lease liabilities, current   $ 963,900  
Finance lease liabilities, long-term   $ 1,998,967  
         
Weighted-average discount rate     18.00 %
Weighted-average remaining lease term (months)     32.17  
Schedule of lessee operating lease liability
       
2023   $ 130,245  
2024     435,906  
2025     162,545  
2026     136,975  
2027     153,089  
Thereafter     2,931,500  
Total undiscounted lease payments     3,950,260  
Less: Imputed interest     2,232,911  
Present value of lease payments   $ 1,717,349  
         
Operating lease liabilities, current   $ 535,960  
Operating lease liabilities, long-term   $ 1,181,389  
         
Weighted-average remaining lease term     213.47  
Weighted-average discount rate     10.13 %
v3.23.3
Share-Based Compensation & Warrants (Tables)
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Schedule of assumptions
     
    December 31, 2021
through
September 30,
2023		  
Risk-free interest rate   0.24 - 5.23%  
Expected dividend yield   None  
Expected life   2.1 - 10 years  
Expected volatility rate   142 - 273%  
Schedule of option activity
                       
    Number
of Shares		     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contractual
Life (Years)		  
Outstanding, December 31, 2022     1,833,566     $ 2.59       6.47  
Granted     1,000,000       1.18       1.75  
Exercised     -       -       -  
Forfeited     (16,667 )     12.00       -  
Outstanding, September 30, 2023     2,816,899     $ 2.03       4.33  
                         
Outstanding, December 31, 2021     650,000     $ 12.00       7.53  
Granted     2,112,919       2.24       6.60  
Exercised     (16,667 )     11.1       -  
Forfeited     (740,000 )     10.00       -  
Outstanding, September 30, 2022     2,006,252     $ 2.56       6.93  
                         
Exercisable, December 31, 2022     1,526,869     $ 2.65       5.94  
Exercisable, September 30, 2023     2,671,883     $ 2.05       4.10  
                         
Exercisable, December 31, 2021     180,000     $ 12.00       7.01  
Exercisable, September 30, 2022     1,175,059     $ 2.67       7.09  
v3.23.3
Basis of Presentation (Details Narrative) - USD ($)
 1 Months Ended 9 Months Ended 12 Months Ended
Feb. 14, 2022
Aug. 31, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Product Information [Line Items]          
Stockholders' equity, reverse stock split 1-for-30 reverse split        
Revenue from related parties     $ 9,834,095 $ 2,883,870  
Advertising expense     $ 0 $ 0  
Warrants outstanding     80,000 80,000  
Third Party [Member]          
Product Information [Line Items]          
Stock option issued     1,000,000    
Convertible Notes Payable [Member]          
Product Information [Line Items]          
Antidilutive securities excluded from computation of earnings per share, amount     214,560   14,560
Stock Options And Unissued Stock Awards Granted To Current Or Previous Employees [Member]          
Product Information [Line Items]          
Antidilutive securities excluded from computation of earnings per share, amount     2,590,968   1,421,760
Stock Options And Unissued Awards Granted To Board Members Or Consultants [Member]          
Product Information [Line Items]          
Antidilutive securities excluded from computation of earnings per share, amount     680,274   395,139
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Crude Oil Revenue [Member]          
Product Information [Line Items]          
Concentration risk, percentage   99.00%      
Revenue recognition     $ 35,564,821    
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Natural Gas Liquids [Member]          
Product Information [Line Items]          
Revenue recognition     $ 8,118,549    
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customers [Member]          
Product Information [Line Items]          
Concentration risk, percentage     97.00%   97.00%
v3.23.3
Liquidity (Details Narrative) - USD ($)
 9 Months Ended
Sep. 30, 2023
Nov. 17, 2023
Dec. 31, 2022
Subsequent Event [Line Items]      
Accumulated deficit $ 62,066,420   $ 55,169,781
Working capital deficit 19,000,000   $ 3,700,000
Cash $ 1,200    
Obligations pay, description we had obligations to pay approximately $14.4 million (of which approximately $10 million was satisfied through the issuance of our common stock under the terms of the debt subsequent to September 30, 2023 (see Note 12)) of debt in cash within one year of the issuance    
Subsequent Event [Member]      
Subsequent Event [Line Items]      
Working capital deficit   $ 10,000,000  
v3.23.3
Accounts Receivable (Details Narrative) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]    
Accounts receivable with related parties $ 174,083 $ 948,352
Chief Executive Officer [Member]    
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]    
Trade accounts receivable 112,083 $ 948,352
Rent receivable $ 62,000  
v3.23.3
Property and Equipment (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount $ 28,266,371 $ 23,256,006
Accumulated Depreciation 1,574,399 677,130
Net Book Value 26,691,972 22,578,876
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 14,998 14,998
Accumulated Depreciation 7,345 5,912
Net Book Value 7,653 9,086
Vehicles [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 36,432 36,432
Accumulated Depreciation 31,575 26,110
Net Book Value 4,857 10,322
Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 942,880 942,880
Accumulated Depreciation 400,409 295,855
Net Book Value 542,471 647,025
Property [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 17,000 17,000
Accumulated Depreciation
Net Book Value 17,000 17,000
Finance lease- Right of use assets [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 3,579,544 3,579,544
Accumulated Depreciation 1,135,070 349,253
Net Book Value 2,444,474 3,230,291
Wash Plant Facilities [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 2,337,477 199,800
Accumulated Depreciation
Net Book Value 2,337,477 199,800
Cavitation Device [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 72,201 44,603
Accumulated Depreciation
Net Book Value 72,201 44,603
Remediation Processing Unit 1 [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 4,483,971 4,396,753
Accumulated Depreciation
Net Book Value 4,483,971 4,396,753
Remediation Processing Unit 2 [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 8,285,744 6,285,547
Accumulated Depreciation
Net Book Value 8,285,744 6,285,547
Remediation Processing Unit System A [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 4,209,947 3,893,051
Accumulated Depreciation
Net Book Value 4,209,947 3,893,051
Remediation Processing Unit System B [Member]    
Property, Plant and Equipment [Line Items]    
Gross Carrying Amount 4,286,177 3,845,398
Accumulated Depreciation
Net Book Value $ 4,286,177 $ 3,845,398
v3.23.3
Property and Equipment (Details Narrative) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Depreciation expense $ 111,452 $ 500,352  
Capitalized interest 735,919 $ 499,537  
Impairment loss $ 0    
Oil and Gas [Member]      
Impairment loss     $ 6,269,998
Bioreactor's [Member]      
Impairment loss     $ 1,440,000
v3.23.3
Intellectual Property, Net and Goodwill (Details0 - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, gross $ 33,287,347 $ 35,594,007
Accumulated amortization 9,197,491 7,342,954
Finite-lived intangible assets, net 24,089,856 28,251,053
Extraction Technology patents [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, gross 113,430 113,430
Accumulated amortization 17,237 12,233
Finite-lived intangible assets, net 96,193 101,197
Extraction Technology [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, gross 16,385,157 16,385,157
Accumulated amortization 7,100,235 6,485,791
Finite-lived intangible assets, net 9,284,922 9,899,366
Acquired Crude Oil Contracts [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, gross 16,788,760 19,095,420
Accumulated amortization 2,080,019 844,930
Finite-lived intangible assets, net $ 14,708,741 $ 18,250,490
v3.23.3
Intellectual Property, Net and Goodwill (Details 1)
 9 Months Ended
Sep. 30, 2023
USD ($)
Intellectual Property Net And Goodwill  
Balance at beginning
Acquisition 14,984,768
Balance at ending $ 14,984,768
v3.23.3
Intellectual Property, Net and Goodwill (Details Narrative) - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Aug. 02, 2022
Intellectual Property Net And Goodwill      
Goodwill $ 0    
Purchase price of membership interests     $ 32,900,000
Fair values of goodwill 14,984,768    
Acquired contracts 16,788,760    
Amortization expense $ 2,157,993 $ 1,553,198  
v3.23.3
Accounts Payable and Accrued Expenses (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Payables and Accruals [Abstract]    
Accounts payable $ 3,749,916 $ 910,002
Office access deposits 235
Unearned revenue 20,936
Accrued interest (various notes and loans payable) 241,585 349,497
Accrued interest (working interest royalty programs) 1,546,673 1,437,711
Accrued tax penalties and interest 554,836 524,286
Accounts payable and accrued expenses 6,093,010 3,242,667
Accounts payable- related parties 3,507,834 4,112,300
Accrued interest (notes payable)- related parties 291,896 30,678
Accounts payable and accrued expenses 3,799,730 4,142,978
Accrued compensation $ 1,246,579 $ 1,302,890
v3.23.3
Accounts Payable and Accrued Expenses (Details Narrative) - USD ($)
Nov. 17, 2023
Sep. 30, 2023
Dec. 31, 2022
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
Accounts payable related to services rendered   $ 250,526 $ 37,685
Accrued vacation   505,467  
Accounts payable   421,222  
White Claw Colorado City, LLC [Member]      
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
Accounts payable   1,564,771  
Viva Wealth Fund I, LLC [Member] | Subsequent Event [Member]      
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
Accounts payable $ 414,329    
Chief Executive Officer [Member]      
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
Accounts payable, trade payable   2,842,979 $ 4,000,681
Accrued vacation   71,005  
Chief Financial Officer [Member]      
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
[custom:DueToRelatedParty-0]   720,145  
Accrued Vacation   $ 54,183  
v3.23.3
Loans and Notes Payable (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Total Notes Payable $ 2,397,087 $ 2,273,620
Loans and notes payable, current 529,366 542,374
Loans and notes payable, current attributed to variable interest entity 1,325,000
Loans and notes payable, long term 1,867,721 406,246
Various Promissory Notes And Convertible Notes [Member]    
Debt Instrument [Line Items]    
Total Notes Payable 50,960 50,960
Novus Capital Group LLC Note [Member]    
Debt Instrument [Line Items]    
Total Notes Payable [1] 171,554 171,554
National Buick GMC [Member]    
Debt Instrument [Line Items]    
Total Notes Payable 15,786 16,006
Blue Ridge Bank [Member]    
Debt Instrument [Line Items]    
Total Notes Payable 410,200 410,200
Small Business Administration [Member]    
Debt Instrument [Line Items]    
Total Notes Payable 299,900 299,900
Al Dali International For Gen Trading And Cont Co [Member]    
Debt Instrument [Line Items]    
Total Notes Payable [2] 948,687
RSF, LLC [Member]    
Debt Instrument [Line Items]    
Total Notes Payable [3] 500,000
Various variable interest promissory notes [Member]    
Debt Instrument [Line Items]    
Total Notes Payable [4] $ 1,325,000
[1] In 2017, the Company acquired assets, including patents, in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt in the amount of $334,775. The debt currently accrues interest at 10% per annum. In November 2021, the lender agreed to extend the maturity of the note to April 1, 2022. On April 1, 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid. As of the date of this report, we are currently renegotiating the terms of this debt.
[2] On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $1,950,000. As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method. We also granted DIC a security interest in our Trial Remediation Processing Center (“RPC”) that is currently on-site at the DIC facility in Kuwait. We will repay the amounts due under the note from the operations of the RPC. In order to repay the amounts due under the note, DIC will deduct $12 per ton of material we process from the amounts due to us until all amounts due under the note have been repaid.
[3] On July 25, 2023, RSF, LLC loaned the Company $500,000 under the terms of a 10% Convertible Promissory Note. Under the terms of the note, interest accrues at 10% per annum, and matures two years from the date of issuance. The note is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.
[4] The balance of these various promissory notes are related to the special purchase vehicle, Viva Wealth Fund I, LLC (VWFI) of which the balance primarily related to an offering up to $25,000,000 in convertible notes in a private offering, which was closed on March 31, 2023. During the nine months ended September 30, 2023, an additional $1,980,000 has been raised in relation this offering, and $3,305,000 of this debt has been converted into units of the LLC. VWFI has also entered into various master revolving notes outside of the offering: an additional $765,000, was raised from a related party as of September 30, 2023, which accrues 6% interest per annum, has a maturity date of October 11, 2024, where no payments are made prior to the maturity date unless at the option of the fund. For the nine months ended September 30, 2023, we made a cash payment of $12,655 on the principal of the revolving note.
v3.23.3
Loans and Notes Payable (Details 1) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Total Notes Payable- related parties $ 29,536,746 $ 29,220,034
Loans and notes payable, current- related parties 12,554,172 342,830
Loans and notes payable, current attributed to variable interest entity- related parties 300,000 599,500
Loans and notes payable attributed to variable interest entity- related parties 1,351,845 300,000
Loans and notes payable, long term- related parties 15,330,729 27,977,704
Various Variable Interest Promissory Notes C Related Parties [Member]    
Debt Instrument [Line Items]    
Total Notes Payable- related parties [1] 1,651,845 899,500
Jorgan Development LLC [Member]    
Debt Instrument [Line Items]    
Total Notes Payable- related parties 27,519,044 27,977,704
Triple T [Member]    
Debt Instrument [Line Items]    
Total Notes Payable- related parties $ 365,857 $ 342,830
[1] On July 25, 2023, RSF, LLC loaned the Company $500,000 under the terms of a 10% Convertible Promissory Note. Under the terms of the note, interest accrues at 10% per annum, and matures two years from the date of issuance. The note is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.
v3.23.3
Loans and Notes Payable (Details 2)
Sep. 30, 2023
USD ($)
Debt Disclosure [Abstract]  
2023 $ 529,366
2024 13,872,226
2025 17,260,449
2026 33,640
2027 17,232
Thereafter 220,920
Total $ 31,933,833
v3.23.3
Commitments and Contingencies (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]    
2023 $ 240,975  
2024 963,900  
2025 594,792  
2026 471,756  
Total undiscounted lease payments 2,271,423  
Less: Imputed interest 1,061,556  
Present value of lease payments 1,209,867  
Add: carrying value of lease obligation at end of lease term 1,753,000  
Total finance lease obligations 2,962,867  
Finance lease liabilities, current 963,900 $ 963,900
Finance lease liabilities, long-term $ 1,998,967 $ 2,298,960
Weighted-average discount rate 18.00%  
Weighted-average remaining lease term (months) 32 months 5 days  
v3.23.3
Commitments and Contingencies (Details 1) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]    
2023 $ 130,245  
2024 435,906  
2025 162,545  
2026 136,975  
2027 153,089  
Thereafter 2,931,500  
Total undiscounted lease payments 3,950,260  
Less: Imputed interest 2,232,911  
Present value of lease payments 1,717,349  
Operating lease liabilities, current 535,960 $ 471,991
Operating lease liabilities, long-term $ 1,181,389 $ 1,457,483
Weighted-average remaining lease term 213 months 14 days  
Weighted-average discount rate 10.13%  
v3.23.3
Commitments and Contingencies (Details Narrative) - USD ($)
 1 Months Ended
Jul. 02, 2023
Feb. 01, 2022
Dec. 16, 2022
Mar. 28, 2022
Sep. 15, 2019
Dec. 28, 2021
Mar. 17, 2020
Executive Employment Agreement [Member] | Mr. Patterson [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Annual salary $ 150,000            
Maxus Capital Group, LLC [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Future minimum lease payments 2023           $ 117,939 $ 123,036
Future minimum lease payments 2024           471,756 492,144
Future minimum lease payments 2025           471,756 $ 123,036
Future minimum lease payments 2026           $ 471,756  
Jamboree Center 1 & 2 LLC [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Monthly payments year 1         $ 21,927    
Monthly payments year 2         22,832    
Monthly payments year 3         23,737    
Monthly payments year 4         24,712    
Monthly payments year 5         25,686    
Security deposit         $ 51,992    
Speedway Commerce Center, LLC [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Monthly payments year 1   $ 2,258          
Monthly payments year 2   2,336          
Monthly payments year 3   2,418          
Security deposit   $ 2,418          
Victory Holdings, LLC [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Security deposit       $ 3,766      
Monthly lease payments, description       Year 1 is comprised of April to May 2022 $857, June 2022 to March 2023 $3,550, Year 2 $3,657, Year 3 $3,766.      
Viva Ventures Remediation Corp. [Member] | Land Lease Agreement [Member]              
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]              
Monthly lease payments, description     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.        
v3.23.3
Share-Based Compensation & Warrants (Details)
 9 Months Ended
Sep. 30, 2023
Expected dividend yield 0.00%
Minimum [Member]  
Risk-free interest rate 0.24%
Expected life 2 years 1 month 6 days
Expected volatility rate 142.00%
Maximum [Member]  
Risk-free interest rate 5.23%
Expected life 10 years
Expected volatility rate 273.00%
v3.23.3
Share-Based Compensation & Warrants (Details 1) - Equity Option [Member] - $ / shares
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Dec. 31, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Shares outstanding - beginning 1,833,566 650,000 650,000  
Weighted average exercise price - beginning $ 2.59 $ 12.00 $ 12.00  
Weighted average contractural term 6 years 5 months 19 days 7 years 6 months 10 days    
Number of shares, granted 1,000,000 2,112,919    
Weighted average exercise price, granted $ 1.18 $ 2.24    
Weighted average contractural term, granted 1 year 9 months 6 years 7 months 6 days    
Number of shares, exercised (16,667)    
Weighted average exercise price, exercised $ 11.1    
Number of shares, forfeited (16,667) (740,000)    
Weighted average exercise price, forfeited $ 12.00 $ 10.00    
Shares outstanding - ending 2,816,899 2,006,252 1,833,566 650,000
Weighted average exercise price - ending $ 2.03 $ 2.56 $ 2.59 $ 12.00
Weighted average remaining contractual life (years) 4 years 3 months 29 days 6 years 11 months 4 days    
Shares exercisable - ending 1,526,869 180,000 180,000  
Weighted average exercise price - exercisable - ending $ 2.65 $ 12.00 $ 12.00  
Weighted average contractural term 4 years 1 month 6 days 7 years 1 month 2 days 5 years 11 months 8 days 7 years 3 days
Shares exercisable - ending 2,671,883 1,175,059 1,526,869 180,000
Weighted average exercise price - exercisable - ending $ 2.05 $ 2.67 $ 2.65 $ 12.00
v3.23.3
Share-Based Compensation & Warrants (Details Narrative) - USD ($)
 1 Months Ended 9 Months Ended 12 Months Ended
Jun. 20, 2023
Feb. 14, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Forfeitures in Period     451,158    
Share-Based Payment Arrangement, Noncash Expense     $ 1,260,476 $ 2,185,615  
Warrants outstanding     80,000 80,000  
Warrants issued     80,000    
Warrants exercise price     $ 5.75    
Fair value of warrants     $ 374,000    
Public Offering [Member]          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Underwritten public offering shares   1,600,000      
Al Dali International For Gen Trading And Cont Co [Member]          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Interest rate 15.00%        
Share purchased     1,000,000    
Amortization of debt discount     $ 467,509    
Benchmark Investments LLC [Member]          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Additional shares purchase         240,000
Board Of Directors [Member]          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Share-Based Payment Arrangement, Noncash Expense     $ 0 $ 855,000  
Employees [Member]          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Net of Forfeitures     1,872,918    
Share-Based Payment Arrangement, Noncash Expense     $ 1,260,476 $ 1,340,703  
v3.23.3
Income Tax (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Income Tax Disclosure [Abstract]          
Provision for income taxes $ 800 $ 800  
Effective tax rate     0.01% 18.69%  
Net Operating losses         $ 23,700,000
v3.23.3
Related Party Transactions (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
May 25, 2023
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Revenue   $ 16,313,406 $ 11,765,975 $ 45,448,916 $ 11,765,975  
Accounts receivable   3,831,930   3,831,930   $ 2,615,354
Accounts payable   3,749,916   3,749,916   910,002
Notes payable   2,397,087   2,397,087   $ 2,273,620
Notes [Member]            
Cash payments       2,807,032    
Accrued interest   232,745   232,745    
Triple T [Member]            
Notes payable   365,857   365,857    
Spectra [Member]            
Revenue       62,000    
Accounts receivable   62,000   62,000    
Mr. Nicosia [Member]            
Cash payments $ 25,000          
Accounts receivable 16,254          
Accrued interest 30,000          
Accounts payable $ 21,000          
Mr. Staggs [Member]            
Cash payments       48,000    
LBL Professional Consulting, Inc. [Member]            
Accounts payable   20,413   20,413    
Dzign Pro Enterprises LLC [Member]            
Payment for services       2,266,964    
Principal amount   $ 300,000   300,000    
Van Tran Family LP [Member]            
Cash payments       50,000    
WC Crude [Member]            
Payment for crude oil purchases       26,373,647    
Received deficiency payments       364,309    
Revenue from related parties       9,599,740    
WC Crude [Member] | Tank Storage [Member]            
Revenue       1,351,237    
Endeavor [Member]            
Consulting fees       $ 254,946    
v3.23.3
Subsequent Events (Details Narrative) - USD ($)
Nov. 13, 2023
Nov. 10, 2023
Dec. 31, 2023
Dec. 31, 2022
Subsequent Event [Line Items]        
Shares authorized     41,666,667 41,666,667
Subsequent Event [Member]        
Subsequent Event [Line Items]        
Restricted shares issued 7,042,254      
Stock issued for in exchange of forgiveness and cancellation $ 10,000,000      
Conversion price $ 1.42      
Number of resticted shares cancellation 923,672      
Subsequent Event [Member] | Chief Executive Officer [Member]        
Subsequent Event [Line Items]        
Compensation payable   $ 1,000,000    
Subsequent Event [Member] | Companys And Subsidiaries [Member]        
Subsequent Event [Line Items]        
Shares authorized   40,000,000    
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