Vivakor (US:VIVK)2024-11-19 22:28Financial Performance - For the three months ended September 30, 2024, the company reported revenues of $15,916,423, a decrease of $396,983 or 2.43% compared to $16,313,406 in the same period of 2023 [189]. - For the nine months ended September 30, 2024, revenues increased to $48,118,936, representing a growth of $2,670,020 or 5.87% from $45,448,916 in 2023 [189]. - The company's cost of revenues for the three months ended September 30, 2024, was $14,190,073, a decrease of $576,421 or 3.90% from $14,766,494 in 2023 [191]. - Operating expenses for the three months ended September 30, 2024, increased to $3,684,987, an increase of $1,392,961 or 60.77% compared to $2,292,026 in 2023 [193]. - Interest expense for the three months ended September 30, 2024, decreased to $641,244, a reduction of $703,852 or 52.33% from $1,345,096 in 2023 [195]. - The company reported an unrealized gain of $826,377 for the three months ended September 30, 2024, compared to an unrealized loss of $661,101 in the same period of 2023, representing an increase of $1,487,478 or 225% [196]. - As of September 30, 2024, the company had an accumulated deficit of approximately $72.8 million and a working capital deficit of approximately $42.5 million [199]. Financing Activities - The company recognized a gain on deconsolidation of $438,099 for the year ended December 31, 2023, and a gain of $177,550 for the six months ended September 30, 2024, due to the deconsolidation of Viva Wealth Fund I, LLC and Vivasphere, Inc. [117]. - The company entered into a financing agreement with Maxus Capital Group, LLC, for approximately $2.1 million for equipment related to a pipeline extension, with expected lease payments of about $32,161 per month over four years [122]. - A separate financing agreement with Maxus for approximately $1 million for wash plant equipment in Houston, with expected lease payments of about $58,595 per month over four years, is also in place [124]. - The company anticipates a lease for another $2.2 million financing agreement with Maxus to commence in the first quarter of 2025, with expected payments of approximately $57,962 per month over four years [125]. - A promissory note was issued to Ballengee Holdings, LLC, for up to $1,500,000, with a principal and accrued interest balance of $804,150 and $21,274 as of September 30, 2024 [126]. - A secured promissory note of $3,000,000 was issued on February 5, 2024, with $250,000 of principal repaid by September 30, 2024 [143]. - The Company has a new loan agreement with a principal amount of $3,670,160.77, maturing on October 31, 2025, with a 22% annual interest rate [146]. - The Company plans to prepay the entire outstanding balance of the term loan if it raises $10,000,000 or more from equity sales [148]. - The Company issued a convertible promissory note for $500,000 with a conversion price set at 90% of the average closing price of common stock [152]. - The company raised approximately $4.7 million through debt financings and $1.4 million through the sale of common stock during the nine months ended September 30, 2024 [200]. Mergers and Acquisitions - The company is in the process of acquiring several entities through a merger agreement with Empire Energy Acquisition Corp. and a membership interest purchase agreement with Endeavor Crude, LLC [130]. - The Company entered into a merger agreement with Empire Energy Acquisition Corp., resulting in the issuance of 67,200,000 shares valued at $67,200,000 [156]. - The Company completed the acquisition of Endeavor Crude, LLC and related entities for a purchase price of $120 million, making them wholly-owned subsidiaries [183]. - The Endeavor Entities operate a fleet of over 500 commercial tractors and trailers, hauling approximately 60,000 barrels of crude oil and 30,000 barrels of produced water daily [184]. - The Merger Agreement requires approval from the necessary stockholders of both the Parent and Empire before the Closing Date [164]. - The Parent must obtain a Fairness Opinion confirming the Merger's financial fairness to its stockholders [164]. - Empire must maintain a Net Cash Minimum on hand as a condition for the Merger [167]. - A lock-up agreement will be established for Empire Stockholders representing at least 65% of the outstanding shares, lasting 12 months post-Closing [176]. - An Escrow Agreement will be executed, involving 5,040,000 Consideration Shares as security for the Parent's obligations [178]. - The Parent's liability for indemnification payments is capped at $500,000, with a threshold of $250,000 for claims [168]. - The Merger Agreement allows for termination under specific conditions, including failure to obtain necessary stockholder votes [172]. - The Parent Common Stock must remain listed on Nasdaq and not be suspended at the Closing Date [167]. - The Parent and Empire must deliver voting and support agreements from stockholders holding at least 51% of voting power within 30 days of the Execution Date [173][174]. Employment and Compensation - The new employment agreement for the Chief Financial Officer includes an annual base salary of $450,000 and potential bonuses based on performance and transactions [133]. - The new Executive Vice President, General Counsel, & Secretary, Patrick M. Knapp, has an annual base salary of $350,000 and potential annual incentive compensation of up to $840,000 [138]. - Mr. Nelson was granted 917,825 stock options at an exercise price of $1.80, with full vesting by June 9, 2024 [135]. - The Vice President of Marketing's base salary is $200,000, which may increase to $350,000 contingent upon achieving net profitability of $500,000 [140]. - The Board of Directors will consist of seven members, including James Ballengee as Chairman, with at least four independent directors [162]. - The company has appointed Mr. Michael Thompson as an independent director and chair of the Audit Committee [128]. Operational Highlights - The company is focused on soil remediation services, particularly in Kuwait and Houston, Texas, utilizing patented processes to recover hydrocarbons [120]. - Stock-based compensation for the nine months ended September 30, 2024, was $1,626,409, up from $1,260,476 in 2023, marking an increase of about 29% [202]. - Capitalized interest on construction in process was $1,015,402 for the nine months ended September 30, 2024, compared to $735,919 in 2023, reflecting an increase of approximately 37.9% [205]. - The company anticipates further construction costs of approximately $1.5 million for the Texas remediation and wash plant facilities [205]. - Contractual obligations for finance lease liabilities as of September 30, 2024, total $1,307,523, with significant payments due in 2025 and 2026 [207]. - The company expects lease payments to Maxus to be approximately $32,161 per month over four years for a new pipeline extension [207]. Risks and Challenges - Interest rate risk exists due to variable interest rates on financing arrangements, which could increase interest expenses if the prime rate rises [213]. - Inflationary pressures may lead to increased costs of doing business, potentially affecting gross margins and return on investment [216].