Vivakor Inc
For the period ended Jun 30, 2024. Filed Aug 16, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 16, 2024
VIVK$0.50+34.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-20.
0001829126-24-003562
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-16.
0001829126-24-005612
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 129 previous paragraphs and 151 current paragraphs.
102 unchanged; 23 reworded; 26 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Reclassifications
Current report
Certain reclassifications may have been made to prior years’ amounts to conform to the 2024 presentation.
Current report
Finance Leases
Current report
On June 18, 2024, our subsidiary White Claw Colorado City, LLC (“WCCC”), entered into a supplement (“Supplement No. 3”) to an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”). Under Supplement No. 3, Maxus agreed to finance approximately $1 million for the build-out of certain equipment and facilities related to the wash plant we are in the process of constructing on land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. Once the relevant equipment is constructed Maxus will own the equipment and we will lease these additions to our wash plant facility from Maxus under the terms of Supplement No. 3. Under the terms of the lease, we expect our lease payments to Maxus to be approximately $58,595 per month over four years, with an early buyout option or option at the end of the base term to purchase the wash plant equipment for approximately $683,000, or lease-end option to purchase the facilities for the fair market value. We anticipate that the lease will commence in the fourth quarter of 2024.
Current report
As previously disclosed, on May 23, 2023 we entered into a supplement (“Supplement No. 2”) to the Master Agreement Maxus, under which Maxus funded approximately $2.2 million to finance the build-out of other Houston wash plant equipment additions, which such lease was anticipated to commence in the second quarter of 2024. As of June 30, 2024, we anticipate that this lease will now commence in the fourth quarter of 2024. Under the terms of this lease, we expect our lease payments to Maxus under the supplement to be approximately $57,962 per month over four years, with an early buyout option of approximately $685,000 or lease-end option to purchase the facilities for the fair market value.
Current report
Promissory Note with Related Party
Current report
As previously disclosed, on May 14, 2024, we issued a promissory note, to Ballengee Holdings, LLC, of which our Chief Executive Officer is the beneficiary, in the principal amount of up to $1,500,000, for which loan advances will be made to the Company as requested. The Company will use the proceeds of the promissory note for general working capital purposes and to repay certain indebtedness. The intent of the promissory note is to be short term in nature and be repaid in 30 days. Any amounts that are not repaid in 30 days will bear interest thereafter at a rate of 11% per annum. Each advance matures after six months from the date the Company receives the funds. On May 23, 2024, we issued a promissory note to Ballengee Holdings, LLC, of which our Chief Executive Officer is the beneficial owner, which replaced and rescinded the above referenced note with James Ballengee effective back to May 14, 2024, under the same terms such that all obligations under the notes are the responsibility of Ballengee Holdings, LLC and the prior note with James Ballengee is no longer enforceable. As of June 30, 2024, the balance of this note was $635,150.
Current report
Director Appointment
Current report
On June 3, 2024, the Board of Directors (the “Board”) of the Company appointed Mr. Michael Thompson as a member of the Board, effective immediately. Mr. Thompson has been determined by the Board to be an independent director consistent with Rule 5605(a)(2) of the NASDAQ listing standards. In addition to serving as an independent director, Mr. Thompson will serve as chair of the Audit Committee of the Board (the “Audit Committee”).
Current report
Executive Employment Agreement and Settlement Agreement with Chief Financial Officer
Current report
On June 9, 2022, the Company entered into an executive employment agreement (the “Original Agreement”) with Tyler Nelson, the Chief Financial Officer of the Company (the “Executive”), for a term of two years, and, on January 16, 2023, Mr. Nelson was appointed as member of the Company’s Board of Directors (the “Board”).
Current report
As previously disclosed, on February 26, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Empire Energy Acquisition Corp., a Delaware corporation, and wholly owned subsidiary, Empire Diversified Energy, Inc., a Delaware corporation (collectively “Empire”), whereby, at closing, subject to the conditions set forth in the Merger Agreement, Empire will become a wholly-owned subsidiary of the Company. On March 21, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Endeavor MIPA”), the equity holders of Endeavor Crude, LLC (“Endeavor”), whereby, at closing, subject to the conditions set forth in the Endeavor MIPA, the Company will acquire several entities that will become wholly-owned subsidiaries of the Company.
Current report
On June 13, 2024, the Company entered into a new Executive Employment Agreement (the “New Employment Agreement”) with Mr. Nelson, and, in connection therewith the Company and Mr. Nelson also entered into a settlement agreement with respect to compensation owed by the Company to Mr. Nelson (the “Settlement Agreement”).
Current report
New Employment Agreement
Current report
On June 13, 2024, the Company entered into the New Employment Agreement with Mr. with respect to the Company’s appointment of Mr. Nelson as Chief Financial Officer. Pursuant to the New Employment Agreement, Mr. Nelson will receive: (i) $450,000 annually (the “Base Salary”); (ii) an annual cash incentive bonus of a minimum of 50% of the Base Salary (a portion of which may be payable in the form of restricted common stock of the Company) and a maximum of 120% of the Base Salary; and (iii) an annual equity incentive bonus of a minimum of 25% of the Base Salary and a maximum of 120% of the Base Salary in shares of restricted stock. Mr. Nelson will also be eligible for a cash transaction bonus (the “Transaction Bonus”) for Qualified Transactions, as defined in the New Employment Agreement, of 0.5% of the enterprise value of the assets, equity or business sold or acquired or the listing value of the equity or debt being listed on a national exchange. For each of the closing of the Merger Agreement and Endeavor MIPA, Mr. Nelson will receive a bonus of $200,000, with $100,000 for each such bonus to be paid in cash and the remaining $100,000 for each such bonus to be paid in shares of the Company’s common stock, valued on the date of close of the Merger Agreement and the Endeavor MIPA, respectively. The foregoing bonuses are in lieu of a Transaction Bonus for either the Merger Agreement or the Endeavor MIPA. The New Employment Agreement is for an initial term of two years and will auto-renew for subsequent one-year terms if not terminated by either party at the end of a term, which requires 90 days prior notice. The New Employment Agreement may also be terminated under standard cause and without cause termination and resignation provisions.
Current report
Settlement Agreement and Promissory Note
Current report
At the time of the termination of the Original Agreement, the Company owed Mr. Nelson $1,167,750 in accrued salary and bonuses, plus interest (together, the “Accrued Compensation”), for serving as the Company’s Chief Financial Officer under the Original Agreement. Pursuant to the Settlement Agreement, the Company and Mr. Nelson agreed the Accrued Compensation would be paid to Mr. Nelson under of a straight promissory note in the principal amount of the Accrued Compensation (the “Note”). Under the terms of the Note, the amounts due under the Note will accrue interest at 8% per annum, and will be paid to Mr. Nelson by paying him 5% of any money received by the Company from closed future financings or acquisition/merger/sale transactions until the Note has been paid in full. In the event the Note has not been paid in full by December 31, 2024, the Note will mature and any amounts due thereunder will be due and payable in full in such date.
Current report
Stock Option
Current report
Under the terms of the Settlement Agreement, the Company issued Mr. Nelson a stock option agreement (the “Option Agreement”) setting forth the stock options Mr. Nelson were issued on June 9, 2022 (the “Grant Date”). Pursuant to the Option Agreement, as of the Grant Date, Mr. Nelson was granted 917,825 stock options (the “Options”) at an exercise price per share of $1.80. The Options shall vest as follows: (i) 360,145 shares on the Grant Date, (ii) 219,312 shares three (3) months after the Grant Date, (iii) 48,338 shares for each of the following six (6) quarters, and (iv) 48,340 shares following the eighth (8 th) quarter after the Grant Date. The Options were fully vested as of June 9, 2024.
Current report
Executive Employment Agreement with Executive Vice President, General Counsel and Secretary
Current report
On June 26, 2024 (the “Effective Date”), Vivakor, Inc. (the “Company”), pursuant to the approval of its Board of Directors (the “Board”), on the recommendation of the Compensation Committee of the Board entered into that certain Executive Employment Agreement with Patrick M. Knapp to join the Company as its Executive Vice President, General Counsel, & Secretary (the “Knapp Agreement”).
Current report
The Knapp Agreement provides for an annual base salary of $350,000, payable in equal installments every two weeks. In addition, the Knapp Agreement provides for annual incentive cash and equity compensation of up to $840,000 based on certain performance goals as further set forth therein. As an inducement to enter into the Knapp Agreement, Mr. Knapp shall receive a one-time signing grant of Company common stock equivalent in value to $250,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant (calculated to be 140,190 shares based on the effective date of the Knapp Agreement), subject to an eighteen (18)-month lockup period and a conditional clawback obligation concurrent therewith, which shall be granted within thirty (30) days after the Start Date, as defined therein. Pursuant to the Knapp Agreement, Mr. Knapp’s employment is at-will under Texas law, except as modified therein. Mr. Knapp’s employment with the Company began on June 26, 2024.
Current report
As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2024, the Company entered into that certain Agreement and Plan of Merger dated effective February 26, 2024 with Empire Energy Acquisition Corp. and Empire Diversified Energy, Inc. (the “Merger Agreement”). The Company obtained the consent of Empire Diversified Energy, Inc. with respect to the Knapp Agreement, as required under Section 5.02(iv) of the Merger Agreement.
Current report
Sale of Common Stock
Current report
On July 31, 2024, the Company entered into two stock purchase agreement under which the Company agreed to sell an aggregate of 1,300,000 shares of restricted common stock in exchange for $800,000.
Current report
For the three months ended June 30, 2024 and 2023, we realized operating expenses of $3,963,228 and $2,052,698, which represents an increase of $1,910,530, or 93.07%. For the six months ended June 30, 2024 and 2023, we realized operating expenses of $6,648,287 and $4,690,728, which represents an increase of $1,957,559, or 41.73%. The increase in operating expenses is attributed to the net effect of increased stock compensation expense related to new or renewed executive employment and board of director agreements, which issued immediate and vesting stock awards of $591,501, amortization expense of approximately $545,086 related to lease accounting interest, and increased professional services of approximately $571,000 related to merger, acquisition, and corporate governance services.
Removed paragraphs (4)
Previous report
To secure repayment of the Note, the Company issued the Lender a security interest in the assets of the Company and its subsidiaries. The Company also issued an irrevocable letter to its transfer agent to reserve 3,000,000 shares of its common stock until the Note is repaid. If the Company defaults on the repayment of the Note, then the transfer agent will transfer the shares to the Lender for the Lender to sell until the amounts due under the Note are repaid in full and return any remaining shares.
Previous report
The Company will repay the amounts due under the Note as follows: first three months are interest only payments, which the Company prepaid at Closing, and then twelve equal monthly installment payments of interest plus $250,000, which must be made on or before May 5, 2025 (the Maturity Date).
Previous report
The Company paid a finder $70,000 in relation to obtaining the loan and issued the Lender 300,000 shares of its common stock, restricted in accordance with Rule 144, as additional consideration for the loan.
Previous report
For the three months ended March 31, 2024 and 2023, we realized operating expenses of $2,685,059 and $2,638,030, which represents an increase of $47,029, or 1.78%. The increase in operating expenses is attributed to the net effect of increased amortization expense related to our leases and our transition in reducing consulting expense to hiring full-time employees.
Reworded paragraphs (23)
Previous wording
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, 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. In accordance with ASC 810, as of October 1, 2023, we deconsolidated Viva Wealth Fund I, LLC (VWFI), recognizing a gain on deconsolidation of $438,099 in the fourth quarter of fiscal year 2023, and as of February 15, 2024 we deconsolidated Vivasphere, Inc. (Vivasphere), recognizing a gain of $177,550 for the three months ended March 31, 2024. The assets, liabilities and equity related to VWFI and Vivasphere were removed from our financial statements on their respective deconsolidation dates, resulting in the gains on deconsolidation.
Current wording
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, 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. In accordance with ASC 810, as of October 1, 2023, we deconsolidated Viva Wealth Fund I, LLC (VWFI), recognizing a gain on deconsolidation of $438,099 for the year ended December 31, 2023, and as of February 15, 2024 we deconsolidated Vivasphere, Inc. (Vivasphere), recognizing a gain of $177,550 for the six months ended June 30, 2024. The assets, liabilities and equity related to VWFI and Vivasphere were removed from our financial statements on their respective deconsolidation dates, resulting in the gains on deconsolidation.
Previous wording
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.
Current wording
One of our facilities in Delhi, Louisiana sells crude oil in volumes up to 60,000 barrels per month under agreements with a large energy company. A different facility owns a 120,000 barrel crude oil storage tank near Colorado City, Texas. The storage tank is presently connected to the Lotus pipeline system and we plan to further connect the tank to major pipeline systems.
Previous wording
On February 5, 2024, we issued a secured promissory note (the “Note”) due as described below, to Cedarview Opportunities Master Fund LP (the “Lender”), in the principal amount of $3,000,000 (the “Principal Amount”), in relation to a Loan and Security Agreement by and between the Company, its subsidiaries, and the Lender (the “Agreement”). The Company will use the proceeds of the Note for general working capital purposes and to repay certain indebtedness. The Company received the funds on February 6, 2024, minus a 3% origination fee.
Current wording
As previously disclosed, on February 5, 2024, we issued a secured promissory note (the “Note”) due as described below, to Cedarview Opportunities Master Fund LP (the “Lender”), in the principal amount of $3,000,000 (the “Principal Amount”), in relation to a Loan and Security Agreement by and between the Company, its subsidiaries, and the Lender (the “Agreement”). The Company will use the proceeds of the Note for general working capital purposes and to repay certain indebtedness. The Company received the funds on February 6, 2024, minus a 3% origination fee. Through June 30, 2024, we have repaid $250,000 of principal due under the Note, as well as $220,000 in interest, and still owe $2,750,000 as of June 30, 2024.
Previous wording
On December 5, 2023, the Company received a loan from an individual lender in the principal amount of one million dollars ($1,000,000) (the “Loan”) and, in connection therewith, the Company and agreed to issue 100,000 restricted shares of the Company’s common stock. The Loan bears interest at the rate of 10% per annum, matures on December 31, 2024, has been personally guaranteed by James Ballengee, the Company’s Chief Executive Officer. The lender is not a related party or affiliate of the Company.
Current wording
On December 5, 2023, the Company received a loan from an individual lender in the principal amount of one million dollars ($1,000,000) (the “Loan”) and, in connection therewith, the Company and agreed to issue 100,000 restricted shares of the Company’s common stock. The Loan bears interest at the rate of 10% per annum, matures on December 31, 2024, has been personally guaranteed by James Ballengee, the Company’s Chief Executive Officer. The lender is not a related party or affiliate of the Company. On April 8, 2024, we executed an amended and restated convertible promissory note for the original promissory note (the “Amended Note”). The convertible promissory note replaces the original note, but maintains the same interest rate and maturity date of the Original Note, and the obligation to issue 100,000 shares of the Company’s restricted stock remains in effect. Pursuant to the terms of the Amended Note the holder can convert the outstanding principal and interest due under the Amended Note into shares of our common stock at price equal to 90% of the average closing price of the Company’s common stock for the previous three (3) trading days prior to the conversion date, with a floor conversion price of $0.75 per share. The holder may not convert amounts owed under the Amended Note if such conversion would cause him to own more than 4.99% of our common stock after giving effect to the issuance, which limitation may be raised to 9.99% upon no less than 61 days notice to us regarding his desire to increase the conversion limitation percentage. In May 2024, the lender converted all outstanding amounts ($1,048,493) into 903,095 shares of common stock at approximately $1.161 per share.
Previous wording
The foregoing is only a brief description of the material terms of and does not purport to be a complete description of the rights and obligations of the parties to the agreements in connection with the Loan (the “Agreements”), and such description is qualified in its entirety by reference to the full text of the Agreements, which are attached hereto as Exhibits 10.56 and 10.57.
Current wording
The foregoing is only a brief description of the material terms of and does not purport to be a complete description of the rights and obligations of the parties to the agreement in connection with the Loan (the “Loan Agreement”), and such description is qualified in its entirety by reference to the full text of the Agreement, which is attached hereto as Exhibit 10.13.
Previous wording
Effective March 21, 2024 (the “Execution Date”), Vivakor, Inc., (the “Company” or “Purchaser”) entered into a Membership Interest Purchase Agreement, a copy of which is filed herewith as Exhibit 2.3 (the “Endeavor MIPA”) and incorporated by reference herein, with Jorgan Development, LLC, a Louisiana limited liability company (“Jorgan”) and JBAH Holdings, LLC, a Texas limited liability company (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Endeavor Crude, LLC (f/k/a Meridian Transport, LLC), a Texas limited liability company (“Endeavor”), Equipment Transport, LLC, a Pennsylvania limited liability company (“ET”), Meridian Equipment Leasing, LLC, a Texas limited liability company (“MEL”), and Silver Fuels Processing, LLC, a Texas limited liability company (“SFP” and, together with Endeavor, ET, and MEL, the “Acquirees”) whereby, at closing, subject to the conditions set forth in the Endeavor MIPA, the Company will acquire all of the issued and outstanding membership interests in each of the Acquirees (the “Membership Interests”) making Endeavor, ET, MEL and SFP wholly owned subsidiaries of the Company. The purchase price for the Membership Interests is $120 million (the “Purchase Price”), subject to post-closing adjustments, payable by the Company in a combination of Company common stock, $0.001 par value per share (“Common Stock”) and Company Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The Preferred Stock will have the terms set forth in the Form of Series A Preferred Stock Certificate of Designations filed herewith as Exhibit 3.6 and incorporated by reference herein, including, but not limited to, the payment of a cumulative six percent (6%) annual dividend per share payable quarterly in arrears and conversion rights following the first anniversary of their issuance at a price of one dollar ($1) per share of Common Stock.. The Sellers are beneficially owned by James Ballengee, the Company’s chairman, chief executive officer and principal shareholder. At a meeting held on March 20, 2024 the Company’s board of directors authorized and approved the Endeavor MIPA and the transactions contemplated thereby. Mr. Ballengee recused himself from the vote. Subject to satisfaction of all closing conditions, the acquisitions are anticipated to be completed within approximately 90 days of the Execution Date.
Current wording
Effective March 21, 2024 (the “Execution Date”), Vivakor, Inc., (the “Company” or “Purchaser”) entered into a Membership Interest Purchase Agreement, a copy of which is filed herewith as Exhibit 2.2 (the “Endeavor MIPA”) and incorporated by reference herein, with Jorgan Development, LLC, a Louisiana limited liability company (“Jorgan”) and JBAH Holdings, LLC, a Texas limited liability company (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Endeavor Crude, LLC (f/k/a Meridian Transport, LLC), a Texas limited liability company (“Endeavor”), Equipment Transport, LLC, a Pennsylvania limited liability company (“ET”), Meridian Equipment Leasing, LLC, a Texas limited liability company (“MEL”), and Silver Fuels Processing, LLC, a Texas limited liability company (“SFP” and, together with Endeavor, ET, and MEL, the “Acquirees”) whereby, at closing, subject to the conditions set forth in the Endeavor MIPA, the Company will acquire all of the issued and outstanding membership interests in each of the Acquirees (the “Membership Interests”) making Endeavor, ET, MEL and SFP wholly owned subsidiaries of the Company. The purchase price for the Membership Interests is $120 million (the “Purchase Price”), subject to post-closing adjustments, payable by the Company in a combination of Company common stock, $0.001 par value per share (“Common Stock”) and Company Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The Preferred Stock will have the terms set forth in the Form of Series A Preferred Stock Certificate of Designations filed herewith as Exhibit 3.2 and incorporated by reference herein, including, but not limited to, the payment of a cumulative six percent (6%) annual dividend per share payable quarterly in arrears and conversion rights following the first anniversary of their issuance at a price of one dollar ($1) per share of Common Stock. The Sellers are beneficially owned by James Ballengee, the Company’s chairman, chief executive officer and principal shareholder. At a meeting held on March 20, 2024, the Company’s board of directors authorized and approved the Endeavor MIPA and the transactions contemplated thereby. Mr. Ballengee recused himself from the vote. Subject to satisfaction of all closing conditions, the acquisitions are anticipated to be completed on or before September 30, 2024.
Previous wording
The foregoing descriptions of the Endeavor MIPA and the related Exhibits do not purport to be complete and are subject to, and qualified by, the full text of the Endeavor MIPA and the Exhibits, copies of which are filed as Exhibits 2.3, 3.6, 10.53, 10.54 and 10.55 hereto and incorporated herein by reference.
Current wording
The foregoing descriptions of the Endeavor MIPA and the related Exhibits do not purport to be complete and are subject to, and qualified by, the full text of the Endeavor MIPA and the Exhibits, copies of which are filed as Exhibits 2.2, 3.2, 10.10, 10.11 and 10.12 hereto and incorporated herein by reference.
Previous wording
Results of Operations for the Three Months ended March 31, 2024 and 2023
Current wording
Results of Operations for the Three and Six Months ended June 30, 2024 and 2023
Previous wording
For the three months ended March 31, 2024 and 2023 we realized revenues of $16,021,391 and $15,544,872, respectively, representing an increase of $476,519 or 3.07%. The increase in revenue is primarily attributed to an average monthly increase in sales for our oil and natural gas liquid sales.
Current wording
For the three months ended June 30, 2024 and 2023 we realized revenues of $16,181,122 and $13,590,638, respectively, representing an increase of $2,590,484 or 19.06%. For the six months ended June 30, 2024 and 2023 we realized revenues of $32,202,513 and $29,135,510, respectively, representing an increase of $3,067,003 or 10.53%. The increase in revenue is primarily attributed to an average increase in market prices for our oil and natural gas liquid products since June 30, 2023.
Previous wording
For the three months ended March 31, 2024, our cost of revenues consisted primarily of costs associated with selling oil and natural gas liquid through the operations from our business in SFD and WCCC.
Current wording
For the three and six months ended June 30, 2024, our cost of revenues consisted primarily of costs associated with selling oil and natural gas liquid through the operations from our business in SFD and WCCC.
Previous wording
For the three months ended March 31, 2024 and 2023 costs of revenue were $14,953,254 and $14,031,714, respectively, representing an increase of $921,540 or 6.57%. The increase in the cost of revenue is primarily attributed to industry oil pricing increases in the cost of goods sold for our oil and natural gas liquid products.
Current wording
For the three months ended June 30, 2024 and 2023, costs of revenue were $15,070,308 and $12,375,874, respectively, representing an increase of $2,694,434 or 21.77%. For the six months ended June 30, 2024 and 2023, costs of revenue were $30,023,562 and $26,407,588, respectively, representing an increase of $3,615,974 or 13.69%. The increase in cost of revenues is primarily attributed to an average increase in market prices of for our oil and natural gas liquid inventory purchases since June 30, 2023.
Previous wording
For the three months ended March 31, 2024 and 2023 we realized gross profit of $1,068,137 and $1,513,158, respectively, representing a decrease of $445,021 or 29.41%. The gross profit decreased in proportion to the revenue and costs of revenue related to the purchase and sale of our oil and natural gas liquid products.
Current wording
For the three months ended June 30, 2024 and 2023 we realized gross profit of $1,110,814 and $1,214,764, respectively, representing a decrease of $103,950 or 8.56%. For the six months ended June 30, 2024 and 2023 we realized gross profit of $2,178,951 and $2,727,922, respectively, representing a decrease of $548,971 or 20.12%. The gross profit decreased in proportion to the revenue and costs of revenue related to the purchase and sale of our oil and natural gas liquid products.
Previous wording
For the three months ended March 31, 2024 and 2023, we realized interest expense of $444,040 and $1,205,669, which represents a decrease of $761,629, or 63.17%. The decrease in interest expense is mainly attributable to our amendment of our note issued as consideration in the MIPA approved by the shareholders on November 10, 2023. As the amendment was accounted for as a troubled debt restructuring under ASC 470 –Debt (“ASC 470”)*,*the note was thus written down to the amount of the undiscounted future cash flows on the note to maturity, and therefore no interest expense is realized for the remainder of the note to maturity.
Current wording
For the three months ended June 30, 2024 and 2023, we realized total interest expense of $479,947 and $1,263,488, which represents a decrease of $783,541, or 97.41%. For the six months ended June 30, 2024 and 2023, we realized interest expense of $923,987 and $2,469,157, which represents a decrease of $1,545,170, or 62.58%. The decrease in interest expense is mainly attributable to our amendment of our note issued as consideration in the MIPA approved by the shareholders on November 10, 2023. As the amendment was accounted for as a troubled debt restructuring under ASC 470 –Debt (“ASC 470”)*,*the note was thus written to the amount of the undiscounted future cash flows on the note to maturity, and therefore no interest expense is realized for the remainder of the note to maturity.
Previous wording
For the three months ended March 31, 2024 and 2023, we reported an unrealized loss of $82,638 and $495,826. Our marketable securities were considered to be traded on an active market and were accounted for at a fair value based on the quoted prices in the active markets resulting in aggregate unrealized gains or losses as noted above.
Current wording
For the three months ended June 30, 2024 and 2023, we reported an unrealized loss of none and an unrealized gain of $165,275, which represents a decrease of $165,275, or 100%. For the six months ended June 30, 2024 and 2023, we reported an unrealized loss of $82,638 and $330,551, which represents an increase of $247,193, or 75.00%. 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.
Previous wording
In accordance with ASC 810, as of February 15, 2024, we deconsolidated Vivasphere, Inc. (Vivasphere), recognizing a gain on deconsolidation of $177,550. The assets, liabilities, and equity related to Vivasphere was removed from our financial statements (Note 1), resulting in a gain on deconsolidation.
Current wording
In accordance with ASC 810, as of February 15, 2024, we deconsolidated Vivasphere, Inc. (Vivasphere), recognizing a gain on deconsolidation of $177,550. The assets, liabilities, and equity related to Vivapshere was removed from our financial statements (Note 1), resulting in a gain on deconsolidation.
Previous wording
The following table sets forth the primary sources and uses of cash and cash equivalents for the three months ended March 31, 2024 and 2023 as presented below:
Current wording
The following table sets forth the primary sources and uses of cash and cash equivalents for the six months ended June 30, 2024 and 2023 as presented below:
Previous wording
We have historically suffered net losses and cumulative negative cash flows from operations, and as of March 31, 2024, we had an accumulated deficit of approximately $67.8 million. As of March 31, 2024 and 2023, we had a working capital deficit of approximately $37 million and $6.4 million, respectively. As of March 31, 2024, we have current obligations to pay approximately $20.4 million of debt. Of the $20.4 million, $15.3 million can be satisfied through the issuance of registered common stock under the terms of the debt. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Current wording
We have historically suffered net losses and cumulative negative cash flows from operations, and as of June 30, 2024, we had an accumulated deficit of approximately $71.1 million. As of June 30, 2024 and 2023, we had a working capital deficit of approximately $38 million and $34.9 million, respectively. As of June 30, 2024, we have current obligations to pay approximately $20.74 million of debt. Of the $20.74 million, $14.5 million can be satisfied through the issuance of registered common stock under the terms of the debt. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Previous wording
As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $767,273 and $744,307, respectively.
Current wording
As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $94,970 and $744,307, respectively.
Previous wording
During the three months ended March 31, 2024, subject to available cash flows, we continued to develop our technologies, strategy to monetize our intellectual properties and execute our business plan. To date we have financed our operations primarily through debt financing, private and public equity offerings and our working interest agreements. For the fiscal year 2023 we raised approximately $3 million through debt financings with individual investors, $2.2 million through a sale lease back agreement, and during the three months ended March 31, 2024, we raised an additional $3 million through additional debt financing (Note 9). The Company entered into merger and acquisition agreements with anticipated closing dates in 2024. Even though these merger and acquisition transactions are projected to close in 2024 and yield substantial cash flow that may provide adequate working capital to finance its day-to-day operations and current obligations, these events were not considered probable as of March 31, 2024 because they have not closed as of the date of our filing.
Current wording
During the six months ended June 30, 2024, subject to available cash flows, we continued to develop our technologies, strategy to monetize our intellectual properties and execute our business plan. To date we have financed our operations primarily through debt financing, private and public equity offerings and our working interest agreements. For the fiscal year 2023 we raised approximately $3 million through debt financings with individual investors, $2.2 million through a sale lease back agreement, and during the six months ended June 30, 2024, we raised an additional $3.6 million through additional debt financing (Note 9). The Company entered into merger and acquisition agreements with anticipated closing dates in 2024. Even though these merger and acquisition transactions are projected to close in 2024 and yield substantial cash flow that may provide adequate working capital to finance its day-to-day operations and current obligations, these events were not considered probable as of June 30, 2024 because they have not closed as of the date of our filing.
Previous wording
For the three months ended March 31, 2024 and 2023, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $1,910,543 and $2,817,167, and our depreciation and amortization of $1,009,053 and $784,520. For the three months ended March 31, 2024 and 2023, stock-based compensation of $327,985 and none in lieu of using cash. We also realized interest expense on loans and notes payable of $187,524 and $1,205,669, a decrease (increase) in accounts receivable of ($1,551,490) and $1,191,512, and an increase (decrease) in accounts payable and accrued expenses of $426,581 and ($1,775,681).
Current wording
For the three months ended June 30, 2024 and 2023, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $5,243,781 and $4,739,198, and our depreciation and amortization of $1,997,473 and $1,452,387. For the six months ended June 30, 2024 and 2023, stock-based compensation of $1,138,052 and none in lieu of using cash. We also realized interest expense on loans and notes payable of $313,103 and $1,588,689, an increase in accounts receivable of $845,872 and $42,934, and as increase (decrease) in accounts payable and accrued expenses of $2,331,635 and $(111,556).
Previous wording
For the three months ended March 31, 2024 and 2023, our net cash used in investing activities was mainly attributed to our purchase of equipment of $1,028,885 and $883,819 related to the manufacturing of our RPCs and our wash plant facilities.
Current wording
For the six months ended June 30, 2024 and 2023, our net cash used in investing activities was mainly attributed to our purchase of equipment of $2,176,798 and $2,025,303 related to the manufacturing of our RPCs and our wash plant facilities.
Previous wording
For the three months ended March 31, 2024 and 2023, and we received proceeds of $3,002,192 and $1,988,797 related to the issuance of notes and other loans. For the three months ended March 31, 2023 we also received proceeds from related party notes and loans of $345,000. For the three months ended March 31, 2024 and 2023, we paid down notes payable and lease liabilities by $120,662 and $367,727. For the three months ended March 31, 2023, we made distributions to Viva Wealth Fund I, LLC (which was deconsolidated later on October 1, 2023) unit holders of $289,002.
Current wording
For the three months ended June 30, 2024 and 2023, and we received proceeds of $3,132,959 and $3,213,666 related to the issuance of notes and other loans. For the six months ended June 30, 2024 and 2023 we also received proceeds from related party notes and loans of 635,150 and $771,000. For the six months ended June 30, 2024 and 2023, we paid down notes payable and lease liabilities by $1,415,334 and $601,171. For the three months ended June 30, 2023, we made distributions to Viva Wealth Fund I, LLC (which was deconsolidated later on October 1, 2023) unit holders of $606,236.
Previous wording
Capitalized interest on construction in process was $318,447 and $237,998 for the three months ended March 31, 2024 and 2023. There are no further existing firm obligations; however, we anticipate further construction costs of approximately $1.5 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.
Current wording
Capitalized interest on construction in process was $656,492 and $589,775 for the six months ended June 30, 2024 and 2023. There are no further existing firm obligations; however, we anticipate further construction costs of approximately $1.5 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.