Vivakor, Inc.
For the period ended Dec 31, 2024. Filed Apr 15, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 15, 2025
VIVK$0.38-23.6%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-17.
0001829126-24-002582
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-15.
0001829126-25-002687
Item 1A. Risk FactorsThe 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 122 previous paragraphs and 136 current paragraphs.
84 unchanged; 24 reworded; 28 added; 13 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 10 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 (28)
Current report
Our revenues are substantially dependent on ongoing oil and natural gas exploration, development and production activity on or around our facilities and in basins in which we have established trucking operations. If exploration and production companies do not maintain drilling, completion and production activities on or around those areas, the demand for the use of our transportation and facilities, as well as the marketing activities and revenue we obtain related to those businesses, could be reduced, which could have a material adverse effect on our results of operations, cash flows and financial position.
Current report
We are not an exploration and production company, and we have no control over the oil and natural gas development activity on or around our facilities and assets. The willingness and ability of exploration and production companies to continue development activities on and around our facilities and assets is dependent on a variety of factors that are outside of their and our control, including:
Current report
The customer agreements we enter into and the petroleum commodities we sell in the marketplace are substantially dependent on drilling, completion and production activities by exploration and production companies near and around our facilities and transportation assets. Similarly, the revenues we earn from White Claw Crude, LLC (“WC Crude” or White Claw”) are substantially dependent on those same activities. White Claw Crude is controlled by James Ballengee, our Chief Executive Officer and member of our Board of Directors. If exploration and production companies do not maintain such activities near our facilities and transportation assets, their demand for the use of assets and transportation logistics services will decline, negatively impacting our results of operations, cash flows and financial position.
Current report
Demand for the use of our assets, as well as the revenues provided by White Claw, depends substantially on capital spending by producers to develop and produce oil and natural gas in the area. These expenditures are generally dependent on such producers’ overall financial position, capital allocation priorities and ability to access capital, and their views of future demand for, and prices of, oil and natural gas. Volatility in oil or natural gas prices (or the perception that oil or natural gas prices will decrease) affects such producers’ capital expenditures and willingness to pursue development activities. This, in turn, could lead to lower demand for the use of our assets and services, delays in payment of, or nonpayment of, amounts that are owed to us and cause lower rates and lower utilization of our transportation assets, facilities, and may negatively impact our marketing activities. For additional information, please see below,The willingness of exploration and production companies to engage in drilling, completion and production activities on and around our land is substantially influenced by the market prices of oil and natural gas, which are highly volatile. A substantial or extended decline in oil and natural gas prices may adversely affect our results of operations, cash flows and financial position.
Current report
For the year ended December 31, 2024, on an actual basis, we and the Endeavor Entities received approximately 75.76% of our total revenues from two major customers. While we expect these revenue streams to be recurring, our contracts with our significant customers, which represent a large portion of our revenues, typically do not contain minimum volume commitment provisions for transportation or processing of petroleum commodities or produced water volumes handled. As a result, our revenues are dependent on ongoing demand from these customers, which may decrease due to factors beyond our control. Our producer customers make all decisions as to investments in, and production from, their wells, and our revenues are dependent upon decisions made by such producers, among other factors. For example, we cannot control whether a producer chooses to develop a property or the success of drilling and development activities, which depend on a number of factors under the control of such producer. There can be no assurance that such producers will take actions or make decisions that will be beneficial to us, which could result in adverse effects on our results of operations, cash flows and financial position.
Current report
The willingness of exploration and production companies to engage in drilling, completion and production activities near our facilities and transportation assets is substantially influenced by the market prices of oil and natural gas, which are highly volatile. A substantial or extended decline in oil and natural gas prices may adversely affect our results of operations, cash flows and financial position.
Current report
Market prices for oil and natural gas are volatile and a decrease in prices could reduce drilling, completion and production activities by producers on or around our land, resulting in a reduction in the use of transportation and facilities services, as well as the amount of revenues we receive from marketing activities. The market prices for oil and natural gas are subject to U.S. and global macroeconomic and geopolitical conditions, among other things, and, historically, have been subject to significant price fluctuations and may continue to change in the future. Prices for oil and natural gas may fluctuate widely in response to relatively minor changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control and the control of producers on or around our land, such as:
Current report
These factors have at times resulted in, and may in the future result in, a reduction in global economic activity and volatility in the global financial markets and make it extremely difficult to predict future oil and natural gas price movements with certainty. A sustained decline in oil and natural gas prices may reduce the amount of oil and natural gas that can be produced economically by producers on or around our land, which may reduce such producers’ willingness to develop such land and hire our transportation assets and facilities services. Producers near or around our transportation assets and facilities could also determine during periods of low oil and natural gas prices to shut-in or curtail production from wells on such land, or plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices. The scale and duration of the impact of these factors cannot be predicted but could lead to an increase in our customers’ operating costs or a decrease in our or our customers’ revenues, and any substantial decline in the price of oil and natural gas or prolonged period of low oil and natural gas prices may materially and adversely affect our results of operations, cash flows and financial position.
Current report
We may not be successful in pursuing additional commercial opportunities for our facilities and transportation assets.
Current report
Future growth may place strains on our resources, possibly negatively affecting our results of operations, cash flows and financial position. Our ability to grow will depend on a number of factors, including:
Current report
We may also be unable to make attractive acquisitions, which could inhibit our ability to grow, or we could experience difficulty commercializing any acquired assets or facilities. It may be difficult to identify attractive acquisition opportunities and, even if such opportunities are identified, our existing and/or future debt agreements contain, or may contain, limitations on our ability to enter into certain transactions, which could limit our future growth.
Current report
Our construction of new facilities and infrastructure and successful execution upon our growth plans is subject to regulatory, construction, supply chain and other risks common in the development and operation of facilities and other infrastructure.
Current report
We intend to grow our business through revenues and contracts tied to newly-constructed facilities. Facility construction projects involve numerous regulatory, environmental, political and legal uncertainties, including political opposition by environmental groups, local groups and other advocates. Such opposition can take many forms, including the delay or denial of required governmental permits, organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings related to our permitting efforts or otherwise involving their assets, or lawsuits or other actions designed to prevent, disrupt or delay the operation of our assets or their business. There can be no assurance that such infrastructure will be developed at all or that we will complete these projects on schedule or at an economical cost, and we may not realize the anticipated benefits of such projects.
Current report
We may also encounter technical difficulties during the construction of such infrastructure leading to a reduction in capacity or a shorter useful life. Moreover, we may undertake expansion projects to capture anticipated future growth that does not materialize or for which they are unable to acquire new customers. As a result, the new facilities and infrastructure developed by us may not be able to attract enough demand to achieve their expected investment return, which could materially and adversely affect our results of operations, cash flows and financial position.
Current report
In addition, acts of sabotage or eco-terrorism could cause significant damage or injury to people, property or the environment or lead to extended interruptions of operations. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits our customers require to conduct their operations to be withheld, delayed or burdened by requirements that restrict our customers’ ability to profitably conduct their business. Any such event that delays or otherwise interrupts the revenues generated by our operations, or which causes us to make significant expenditures not covered by insurance, could adversely affect our revenue in respect of use of existing transportation and facilities assets as well as our future development of facilities.
Current report
Technological advancements in connection with alternatives to hydraulic fracturing could decrease the demand for our produced water sales and the Endeavor Entities’ produced water transportation and handling operations.
Current report
Wide-scale development of techniques to recycle produced water for use in completion activities or otherwise could adversely affect the amount of produced water transported to and handled by our transportation fleet, which could materially and adversely affect our results of operations, cash flows and financial position. Some exploration and production companies are focusing on developing and utilizing non-water fracturing techniques, including those utilizing propane, carbon dioxide or nitrogen instead of water. If producers in the Permian and Eagle Ford Basins begin to shift their fracturing techniques to waterless fracturing in the development of their wells, our produced water transportation business could be materially and negatively impacted.
Current report
A substantial portion of our operating assets are located in the Permian and Eagle Ford Basins, making us vulnerable to risks associated with geographic concentration in two geographic areas.
Current report
While we have positions in every major oil and natural gas-producing basin in the contiguous lower 48 states, our assets are disproportionately located in the Permian and Eagle Ford Basins of Texas and New Mexico, making us vulnerable to risks associated with geographic concentration in those areas. In particular, we and our customers may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from oil and natural gas wells in this area, availability of equipment, facilities, personnel or services, market limitations, governmental regulation and political activities, processing or transportation capacity constraints, natural disasters, adverse weather conditions, water shortages or other drought related conditions or interruption of the processing or transportation of oil and natural gas. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the South Karnes Trough or the Delaware Basin, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions.
Current report
If we are able to begin operations with our RPCs and remediation services we could incur substantial losses from those operations.
Current report
In the event we are not able to successfully set up and/or refurbish our RPCs located in Kuwait or obtain a contract for remediation services in the area to be able to operate we could incur substantial losses from those operations and in then having to potentially move the RPCs to another location due to those losses.
Current report
Because a significant portion of our future revenue growth is expected to be derived from WC White Claw, any development that materially and adversely affects their business, operations or financial condition could have a material adverse impact on us.
Current report
WC Crude is anticipated to be, among our most significant customers and is expected to play an increasingly important role in our financial performance over the long term. Accordingly, we are indirectly subject to the business risks faced by WC Crude. Because a significant portion of our revenues is derived from WC Crude, any development that materially and adversely affects WC Crude’s businesses, operations or financial condition could have a material adverse impact on us.
Current report
In addition, if WC Crude is unable to enter into favorable commodity marketing contracts or to obtain the necessary trade credit on favorable terms, it may not be able to perform its obligations as anticipated, or at all, which could negatively affect our results of operations, cash flows and financial position.
Current report
On October 1, 2024, we closed the acquisition of the Endeavor Entities. We are in the process of integrating their operations and personnel with our own. If we are unable to complete this transition timely and effectively it could adversely affect our operations.
Current report
We are in the process of integrating the Endeavor Entities personnel and operations into our operations since we close the acquisition on October 1, 2024. Due to the size of the acquisition, we anticipate this transition will take some time. If we are not able to effectively and timely complete this transition it could adversely affect our operations.
Current report
Prior to our acquisition of the Endeavor Entities, they were private companies and, as a result, they did not have the same audit and review of financial statements requirements that we have, and their disclosure controls and procedures processes for financial reporting were not the same as a reporting, public company. We anticipate we will have additional material weaknesses in our disclosure controls and procedures over financial reporting during the time that we integrate their financial reporting processes with our financial reporting processes.
Current report
As private companies the Endeavor Entities did not have the same requirements for audited and reviewed financial statements that we do as a public company reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, the methods the Endeavor Entities used to prepare their financial statements, as well as the disclosure controls and procedures they had in place around the preparation of such financial statements, may not have been as stringent as the requirements we have as a public company reporting under the Exchange Act. If this is the case, then we may have additional material weaknesses in our disclosure controls and procedures over financial reporting during the time we integrate their financial reporting processes with our financial reporting processes.
Removed paragraphs (13)
Previous report
A majority of the members of our Board of Directors are not currently independent, in violation of Nasdaq Listing Rules.
Previous report
On December 6, 2023, we received notice from David Natan of his resignation, effective immediately, from our Board of Directors (the “Board”) and from his positions as Chairman of the Audit Committee and as a member of the Compensation Committee and the Nominating and Governance Committee. We informed The Nasdaq Stock Market LLC (“Nasdaq”) of Mr. Natan’s resignation on December 7, 2023. On December 12, 2023, we received notice (the “Notice”) from the Listing Qualifications Department of Nasdaq notifying us, based upon the resignation of David Natan from the Board, we are not currently in compliance with the board of directors independence requirements set forth inNasdaq Listing Rule 5605(b)(1) and the requirement inNasdaq Listing Rule 5605(c)(2)(A) to have an audit committee comprised of at least three independent directors. As a result of Mr. Natan’s resignation, the Board, as currently constituted, does not have a majority of directors who would be considered “independent directors,” as that term is defined inNasdaq Listing Rule 5605(a)(2). Consistent withNasdaq Listing Rules 5605(b)(1)(A) and Rule 5605(c)(4),Nasdaq provided us a cure period until June 3, 2024 to evidence compliance with the Listing Rules. If we are not able to appoint additional independent members to our Board of Directors prior to June 3, 2024 our common stock could be delisted fromNasdaq.
Previous report
We do not currently have three independent directors on our audit committee and do not have a member that qualifies as an “audit committee financial expert” in violation of Nasdaq Listing Rules.
Previous report
As indicated above, on December 6, 2023, David Natan, our Audit Committee chairman, resigned from the Board and from all Board committees, including the Audit Committee. As a result, the Audit Committee of the Board currently consists of only two independent directors, in violation ofNasdaq Listing Rule 5605(c)(2)(A), which requires the Audit Committee to have three independent directors. We also do not currently have a member on our Audit Committee that qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. Consistent withNasdaq Listing Rules 5605(b)(1)(A) and Rule 5605(c)(4),Nasdaq provided us a cure period until June 3, 2024 to evidence compliance with the Listing Rules. If we are not able to appoint at least one independent director to our Audit Committee and/or appoint at least one independent director that qualifies as an “audit committee financial expert” prior to June 3, 2024 our common stock could be delisted fromNasdaq.
Previous report
We will need to achieve commercial acceptance of our RPCs and related products in order to generate revenues from those operations and sustain profitability.
Previous report
Our goal at many of our sites is to produce asphaltic cement and/or other petroleum-based products from the hydrocarbons we recover and sell these products to customers; however, we may not be able to successfully commercialize our products related to those operations, and even if we do, we may not be able to do so on a timely basis. Superior competitive technologies may be introduced, or customer needs may change, which will diminish or extinguish the commercial uses for our applications. We cannot predict when significant commercial market acceptance for our RPCs and related products will develop, if at all, and we cannot reliably estimate the projected size of any such potential market. If the markets fail to accept those products, then we may not be able to generate revenues from the commercial application of our technologies related to those products. Our revenue growth and profitability will partially depend on our ability to manufacture and deploy additional RPCs and produce our products to the specifications required by each of our potential customers.
Previous report
Our operations in the U.S. Gulf of Mexico region are particularly susceptible to interruption and damage from hurricanes. Any of these operating hazards could cause personal injuries, fatalities, oil spills, discharge of hazardous substances into the air and water or environmental damage, lost production and revenue, remediation and clean-up costs and liability for damages, all of which could adversely affect our business, financial condition and results of operations and may not be fully covered by our insurance.
Previous report
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.
Previous report
In connection with our work on the Kuwait Environmental Remediation Program (KERP), we are in the process of relocating, refurbishing, and installing an RPC from Vernal, Utah to Kuwait. The installation of this RPC in Kuwait will allow us to work on the KERP with a full-sized RPC. 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 and in potentially moving the RPC to another location.
Previous report
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.
Previous report
If we fail to make the Threshold Payment, or otherwise breach the terms of the MIPA entered into on August 1, 2022, the transaction consummated by the MIPA may be unwound.
Previous report
Under the terms of the MIPA entered into on August 1, 2022, as amended subsequent to December 31, 2023, we agreed with the Sellers that, in the event of a breach of the terms of the MIPA, the Notes, or the Pledge Agreement, the sole and exclusive remedy of the parties will be to unwind the MIPA transaction (the “Unwinding”). Under the MIPA documents, as amended, the Threshold Payment, and corresponding Unwinding right held by the Sellers, will expire upon the earliest to occur of (i) payment of the Threshold Payment on or before the extended Threshold Payment Date (February 1, 2025), (ii) the closing of the proposed merger transaction with Empire Diversified Energy, Inc., or (iii) the proposed acquisition of Endeavor Crude, LLC and affiliated entities. In the event the Threshold Payment is not extinguished by the occurrence of (i) – (iii) above, then the Sellers could force the Unwinding. In any such Unwinding, the Membership Interest (as defined in the MIPA) will be transferred to Sellers and Sellers will assign and transfer to us, the number of shares of our common stock constituting the Purchaser Stock Consideration and any other amounts (the “Pre-Payment Amounts”) paid to Sellers by us above and beyond the monthly amounts required to be paid to Sellers under the Notes. If the MIPA transaction were to be unwound we would no longer own SFD and WCCC, which would substantially impact our operations and revenues.
Previous report
Effective March 21, 2024, we entered into the aforementioned Membership Interest Purchase Agreement with Jorgan Development, LLC and JBAH Holdings, LLC (the “Endeavor MIPA”), pursuant to which we would acquire 100% of the outstanding membership units of Endeavor Crude, LLC (f/k/a Meridian Transport, LLC), Equipment Transport, LLC, Meridian Equipment Leasing, LLC, and Silver Fuels Processing, LLC (the “Endeavor Entities”) from Jorgan and JBAH and the Endeavor Entities will become a wholly-owned subsidiaries of ours at the closing of the transaction. The Endeavor MIPA is subject to numerous closing conditions that must be met by both parties and in the event those conditions are not satisfied the structure of the transaction may change prior to closing or the transaction may not close at all.
Reworded paragraphs (24)
Previous wording
Our RPC services are at an early operational stage, and the success of these services is subject to the substantial risks inherent in the establishment of a new business venture.
Current wording
Our RPC services will be at an early operational stage after operations commence, and the success of these services is subject to the substantial risks inherent in the establishment of a new business venture.
Previous wording
Our RPC services are in an early stage, and our initial operations focused on the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and hydrocarbon-based substances. We intend to, but have not yet, completed the second stage of our operational strategy related to our RPCs, which involves the selling the asphaltic cement and/or other petroleum-based products we are able to produce from the hydrocarbons we recover. Our business and operations related to SFD and WCCC, the gathering, storage and transportation, are also in their early stages.
Current wording
Our RPC services will be in an early operational stage after operations commence, and our initial operations will focus on the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and hydrocarbon-based substances. Thereafter, we plan for the second stage of our operational strategy related to our RPCs, which involves the selling the asphaltic cement and/or other petroleum-based products we are able to produce from the hydrocarbons we recover.
Previous wording
Our services related to our RPCs may not prove to be successful. We have deployed only two RPC units to date to Kuwait. We will need to scale our remediation business beyond these two RPCs and demonstrate that our scaled-up recovery and remediation business can be profitable. Any future success that we may enjoy related to our RPC business will depend on many factors, some of which may be beyond our control, and others which cannot be predicted at this time. Although we began operations in 2008 as a technology acquisition company primarily focused on medical technologies, we have been operating under our current business plan focused on soil remediation since 2011, and we have not yet proven to be profitable. We have not yet sold any substantial amount of products or services commercially and have not proven that our business model will allow us to identify and develop commercially feasible products or technologies. Likewise, SFD and WCCC have limited operating histories and subject to similar risks as new business ventures.
Current wording
Our services related to our RPCs may not prove to be successful. We currently have two RPCs in Kuwait but neither are presently engaged in remediation operations and we have fully-impaired the value of these two RPCs in our financial statements as of December 31, 2024. We will need to deploy these two RPC and scale our remediation business beyond these two RPCs and demonstrate that our scaled-up recovery and remediation business can be profitable. Any future success that we may enjoy related to our RPC business will depend on many factors, some of which may be beyond our control, and others which cannot be predicted at this time.
Previous wording
We had an accumulated deficit of $65,908,406 as of December 31, 2023, and we expect to continue to incur significant development expenses in the foreseeable future related to the completion of the development and commercialization of our RPC products. As a result, we are incurring operating and net losses, and it is possible that we may never be able to sustain the revenue levels necessary to achieve and sustain profitability. If we fail to generate sufficient revenues to operate profitably on a consistent basis, or if we are unable to fund our continuing losses, you could lose all or part of your investment.
Current wording
We had an accumulated deficit of approximately $99 million as of December 31, 2024, and we expect to continue to incur significant development expenses in the foreseeable future related to the completion of the development and commercialization of our sites and products. As a result, we are incurring operating and net losses, and it is possible that we may never be able to sustain the revenue levels necessary to achieve and sustain profitability. If we fail to generate sufficient revenues to operate profitably on a consistent basis, or if we are unable to fund our continuing losses, you could lose all or part of your investment.
Previous wording
We depend on the continued services of our key personnel, including James Ballengee, our Chief Executive Officer, Tyler Nelson, our Chief Financial Officer, and Leslie D. Patterson, our Executive Vice President, Operations and Construction. Our work with each of these key personnel are subject to changes and/or termination, and our inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.
Current wording
We depend on the continued services of our key personnel, including James Ballengee, our Chief Executive Officer, Tyler Nelson, our Chief Financial Officer, Russ Shelton, our Executive Vice President and Chief Operating Officer, and Pat Knapp, our Executive Vice President, General Counsel & Secretary. Our work with each of these key personnel are subject to changes and/or termination, and our inability to effectively retain the services of our key management personnel, could materially and adversely affect our operating results and future prospects.
Previous wording
We expect to continue to devote significant capital resources to fund the continued development of our RPCs and related technologies, as well as for potential acquisitions. In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through the sale of public or private debt or equity financing or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our common stock and the development or prospects for development of competitive technologies by others. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
Current wording
We expect to continue to devote significant capital resources to fund the continued development of our sites and related technologies, as well as for potential acquisitions. In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through the sale of public or private debt or equity financing or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our common stock and the development or prospects for development of competitive technologies by others. Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
Previous wording
We expect to obtain additional capital during 2024 through financing lease structures for our RPCs or other financing structures related to our RPCs. Unless we can achieve and sustain profitability, we anticipate that we will need to raise additional capital to fund our operations while we implement and execute our business plan.
Current wording
We expect to obtain additional capital during 2025 through financing structures for our sites. Unless we can achieve and sustain profitability, we anticipate that we will need to raise additional capital to fund our operations while we implement and execute our business plan.
Previous wording
Additionally, we have certain potential dilutive instruments, of which the conversion of these instruments could result in dilution to shareholders: As of December 31, 2023, the maximum potential dilution is 3,793,801, and includes convertible notes payable convertible into approximately 224,560 shares of common stock, vested stock options and stock awards granted to current and previous employees of 1,821,011 shares of common stock. Vested stock options and stock awards grants granted to Board members of 668,230 shares of common stock were granted as of December 31, 2023. 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 2023 (see Note 19). There was also a warrant issued and outstanding to EF Hutton for the purchase of 80,000 shares of common stock as of December 31, 2023. These warrants were related to and granted during the close of the underwritten public offering in February 2022.
Current wording
Additionally, we have certain potential dilutive instruments, of which the conversion of these instruments could result in dilution to shareholders: Potential dilutive instruments as of December 31, 2024 include the following: convertible notes payable, which are convertible into approximately 1,044,477 shares of common stock, stock options and vesting or unissued stock awards granted to previous and current employees of 2,038,673 shares of common stock, stock options and vesting or unissued stock awards granted to board members or consultants of 477,809 shares of common stock. The Company also has warrants outstanding to purchase 399,040 shares of common stock as of December 31, 2024.
Previous wording
We have identified material weaknesses in our internal controls related to the segregation of duties and financial reporting process within our internal controls. We did not have enough personnel in our accounting and financial reporting functions. (1) 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. (2) We did not always follow certain review procedures related to corporate governance. Due to a vacancy of an independent audit committee chairman with financial expertise, and failing to adhere to certain corporate governance administrative procedures, we did not achieve adequate review at the independent Board of Director level over subjective and complex accounting and risk assessment. These control deficiencies, which are pervasive in nature, result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. We believe we may be able to substantially resolve our identified material weakness in our internal controls in the future as we continue to hire personnel to fulfill the duties related to the financial reporting process and growth in our business. There can be no assurances that weakness in our internal controls will not occur in the future.
Current wording
We have identified material weaknesses in our internal controls related to the segregation of duties and financial reporting process within our internal controls. As of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that: (1) we did not have enough personnel in our accounting and financial reporting functions. Due to insufficient personnel in our accounting department, we were not able to achieve adequate segregation of duties, and as a result, we did not have adequate review controls surrounding: (i) our technical accounting matters in our financial reporting process, and (ii) the work of specialists involved in the estimation process. (2) Due to new relationships with a small banking institution and consultants in 2023, we were not able to achieve adequate controls surrounding the review and dual authorization of certain treasury transactions and fixed assets. (3) We did not always follow certain review and authorization procedures related to corporate governance and the release of information to the public. After failing to adhere to certain corporate governance administrative procedures, we did not achieve adequate review at the executive or independent Board of Director level over certain accounting and risk assessments or the timely reporting of material transactions. We also did not achieve adequate review of certain public reports and disclosures prior to the public disclosure of the information. We believe we may be able to substantially resolve our identified material weakness in our internal controls in the future as we continue to hire personnel to fulfill the duties related to the financial reporting process and growth in our business. There can be no assurances that weakness in our internal controls will not occur in the future.
Previous wording
A major portion of our business is dependent on the oil industry, which is subject to numerous worldwide variables.
Current wording
Our business is dependent on the oil industry, which is subject to numerous worldwide variables.
Previous wording
Our prospective customers are concentrated in the oil industry. As a result, we will be subject to the success of the oil industry, which is subject to substantial volatility based on numerous worldwide factors. A decline in the oil industry may have a material adverse effect on our business, financial condition, results of operations and cash flows. The oil and gas industry is competitive in all its phases. Competition in the oil and gas industry is intense. We will compete with other participants in the search for oil sand properties and in the marketing of oil and other hydrocarbon products. Our customers could include competitors such as oil and gas companies that have substantially greater financial resources, staff and facilities than those of our customers and lessees. Competitive factors in the distribution and marketing of oil and other hydrocarbon products include price and methods and reliability of delivery.
Current wording
Our prospective customers operate in the oil and gas industry. As a result, we will be subject to the success of the oil and gas industry, which is subject to substantial volatility based on numerous worldwide factors. A decline in the price of crude oil or natural gas will have a material adverse effect on our business, financial condition, results of operations and cash flows. The oil and gas industry is competitive in all its phases. Competition in the oil and gas industry is intense. Our customers could include competitors such as oil and gas companies that have substantially greater financial resources, staff and facilities than those of our customers and lessees. Competitive factors in the distribution and marketing of oil and other hydrocarbon products include price and methods and reliability of delivery.
Previous wording
Within the oil remediation market, demand for our services will be limited to a specific customer base and highly correlated to the oil industry. The oil industry’s demand for equipment is affected by a number of factors including the volatile nature of the oil industry’s business, increased use of alternative types of energy and technological developments in the oil extraction process. A significant reduction in the target market’s demand for oil would reduce the demand for the equipment, which would have a material adverse effect upon our business, financial condition, results of operations and cash flows.
Current wording
Within the oil remediation market, demand for our services will be limited to a specific customer base and highly correlated to the oil and gas industry. The oil and gas industry’s demand for equipment is affected by a number of factors including the volatile nature of the oil industry’s business, increased use of alternative types of energy and technological developments in the oil remediation process. A significant reduction in the target market’s demand for oil and gas would reduce the demand for the equipment, which would have a material adverse effect upon our business, financial condition, results of operations and cash flows.
Previous wording
Our operations are subject to unforeseen interruptions and hazards inherent in the oil industry, for which we may not be adequately insured and which could cause us to lose customers and substantial revenue.
Current wording
Our operations are subject to unforeseen interruptions and hazards inherent in the oil and gas industry, for which we may not be adequately insured and which could cause us to lose customers and substantial revenue.
Previous wording
We currently have a limited number of customers for our crude oil gathering, transportation and storage services and our RPC services. The failure to obtain additional customers or the loss of all or a portion of the revenues attributable to any current or future customer as a result of competition, creditworthiness, inability to negotiate extensions or replacement of contracts or otherwise could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Current wording
We currently have a limited number of customers for our crude oil gathering, transportation and terminaling services and our RPC services. The failure to obtain additional customers or the loss of all or a portion of the revenues attributable to any current or future customer as a result of competition, creditworthiness, inability to negotiate extensions or replacement of contracts or otherwise could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Previous wording
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.
Current wording
Under our agreement with Maxus Capital Group, LLC (“Maxus”), we are building out a facility on land we lease near Houston, Texas and are obligated to pay Maxus approximately $58,000 per month for four years. In the event we are not able to complete the facility and commence remediation operations we could default on our obligation to Maxus, which could cause us substantial losses.
Previous wording
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.
Current wording
Any escalation in the current Israeli/Hamas conflict could involve additional Middle East countries and could impact our ability to operate our RPCs located in Kuwait in the future, which could have a material impact on our Middle East projects and our ability to monetize those projects in the future.
Previous wording
James Ballengee, one of our officers and directors, and Chairperson of the Board of Directors, beneficially owns approximately 41.49% 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.
Current wording
James Ballengee, one of our officers and directors, and Chairperson of the Board of Directors, beneficially owns approximately 43.63% of our outstanding Common Stock. As a result, Mr. Ballengee is able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Because the interests of Mr. Ballengee may not always coincide with those of our other stockholders, such stockholder may influence or cause us to take actions with which our other stockholders disagree.
Previous wording
We will continue to be subject to competition in our business.
Current wording
We will continue to be subject to competition in both of our business segments.
Previous wording
Regarding crude oil gathering, storage and transportation, many of our competitors are large tank farm businesses and if one or more of them built storage tanks and/or facilities near our current facilities they could compete with us for business at our current location. As larger companies, they have greater resources than we do to compete for business in our area and may be able to price us out of business.
Current wording
In the crude oil gathering, storage and transportation business many of our competitors are large tank farm businesses and if one or more of them built storage tanks and/or facilities near our current facilities they could compete with us for business at our current location. As larger companies, they have greater resources than we do to compete for business in our area and may be able to price us out of business.
Previous wording
The availability and reliability of transportation and fluctuation in transportation costs could negatively impact our business. Transportation logistics may play an important role in the sale of our products and related services and in the oil industry generally. Delays and interruptions of transportation services because of accidents, failure to complete construction of infrastructure, infrastructure damage, lack of capacity, weather-related problems, governmental regulation, terrorism, strikes, lock-outs, third-party actions or other events could impair the operations of our customers and may also directly impair our ability to commence or complete production or services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Current wording
The availability and reliability of transportation and fluctuation in transportation costs could negatively impact our business. Transportation logistics may play an important role in the sale of our products and related services and in the oil industry generally. Delays and interruptions of transportation logistics services because of accidents, failure to complete construction of infrastructure, infrastructure damage, lack of capacity, weather-related problems, governmental regulation, terrorism, strikes, lock-outs, third-party actions or other events could impair the operations of our customers and may also directly impair our ability to commence or complete production or services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Previous wording
Our RPCs depend on our ability to manufacture various pieces of equipment, many of which are quite large. Any disruption in our manufacturing ability will adversely affect our business and operations.
Current wording
When operational, our RPCs depend on our ability to manufacture various pieces of equipment, many of which are quite large. Any disruption in our manufacturing ability will adversely affect our business and operations.
Previous wording
Our RPCs involve manufacturing and plant operation risks of delay that may be outside of our control. Production or services may be delayed or prevented by factors such as adverse weather, strikes, energy shortages, shortages or increased costs of materials, inflation, environmental conditions, legal matters and other unknown contingencies. Our RPCs also require certain manufacturing apparatus to manufacture the equipment. If the manufacturing apparatus were to suffer major damage or are destroyed by fire, abnormal wear, flooding, incorrect operation or otherwise, we may be unable to replace or repair such apparatus in a timely manner or at a reasonable cost, which would impact our ability to stay in production or service. Any significant downtime of the equipment manufacturing could impair our ability to produce for or serve customers and materially and adversely affect our results of operations. In addition, changes in the equipment plans and specifications, delays due to compliance with governmental requirements or impositions of fees or other delays could increase production costs beyond those budgeted for the business. If any cost overruns exceed the funds budgeted for operations, the business would be negatively impacted.
Current wording
Our RPCs are not currently in operation. When operational, our RPCs involve manufacturing and plant operation risks of delay that may be outside of our control. Production or services may be delayed or prevented by factors such as adverse weather, strikes, energy shortages, shortages or increased costs of materials, inflation, environmental conditions, legal matters and other unknown contingencies. Our RPCs also require certain manufacturing apparatus to manufacture the equipment. If the manufacturing apparatus were to suffer major damage or are destroyed by fire, abnormal wear, flooding, incorrect operation or otherwise, we may be unable to replace or repair such apparatus in a timely manner or at a reasonable cost, which would impact our ability to stay in production or service. Any significant downtime of the equipment manufacturing could impair our ability to produce for or serve customers and materially and adversely affect our results of operations. In addition, changes in the equipment plans and specifications, delays due to compliance with governmental requirements or impositions of fees or other delays could increase production costs beyond those budgeted for the business. If any cost overruns exceed the funds budgeted for operations, the business would be negatively impacted.
Previous wording
Although our shares of Common Stock are listed on The Nasdaq Capital Market, our shares of Common Stock may be subject to potential delisting if we do not meet or continue to maintain the listing requirements of The Nasdaq Capital Market.
Current wording
Although our shares of Common Stock are listed on The Nasdaq Capital Market, our shares of Common Stock are subject to potential delisting if we do not meet or continue to maintain the listing requirements of The Nasdaq Capital Market.
Previous wording
We are not in the business of buying and selling securities of other companies. As our strategy had involved the Company investing in other companies, including Scepter Holdings, it is possible that we could be deemed an investment company, although, given the nature and extent of our business operations, we do not believe that we are or will be subject us to the Investment Company Act. Our investment in Scepter Holdings arose from loan agreements that were settled in the form of equity because cash was not available for the borrowers to pay the loans in cash. The Company has not traded or sold any securities of other companies that it has acquired. For those LLCs for which the Company serves as manager, it has been disclosed in the business plan of these LLCs that their primary business is manufacturing heavy machinery or to provide the Company with cash to specifically manufacture or purchase heavy machinery in exchange for a royalty from the production of the heavy machinery. These entities do not engage in activities such as investing, reinvesting, owning, holding or trading “investment securities,” and neither the units of ownership for these entities, nor rights to royalties, have any market and are not traded, and such interests are accounted for at cost.
Current wording
We are not in the business of buying and selling securities of other companies. As our strategy had involved the Company investing in other companies, including Scepter Holdings, it is possible that we could be deemed an investment company, although, given the nature and extent of our business operations, we do not believe that we are or will be subject us to the Investment Company Act. Our investment in Scepter Holdings arose from loan agreements that were settled in the form of equity because cash was not available for the borrowers to pay the loans in cash. The Company has not traded or sold any securities of other companies that it has acquired. For those LLCs for which the Company serves as manager, it has been disclosed in the business plan of these LLCs that their primary business is related to our administration, or our operations, or our proposed future operations. These entities do not engage in activities such as investing, reinvesting, owning, holding or trading “investment securities,” and neither the units of ownership for these entities, nor rights to royalties, have any market and are not traded, and such interests are accounted for at cost.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The Membership Interest Purchase Agreement we entered into regarding Endeavor is subject to numerous closing conditions and may not close as structured, or at all.