UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2022

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

For the Transition Period from _________ to _________

Commission file number: 000-41286

VIVAKOR, INC.

(Exact name of registrant as specified in its charter)

Nevada

26-2178141

(State or other Jurisdiction

of Incorporation or Organization)

(I.R.S. Employer

Identification No.)

4101 North Thanksgiving Way

Lehi, UT

84043

(Address of Principal Executive Offices)

(Zip Code)

(949) 281-2606

(Registrant’s telephone number, including area code)

433 Lawndale Drive

South Salt Lake City, UT

84115

(Address of Principal Executive Offices)

(Zip Code)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act: ☐

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

As of August 11, 2022, there were 18,064,838 shares of the registrant’s common stock outstanding.

VIVAKOR, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	4

	Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months ended June 30, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Three and Six Months ended June 30, 2022 and 2021 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	29

ITEM 4.	Controls and Procedures	29

PART II. OTHER INFORMATION		31

ITEM 1.	Legal Proceedings	31

ITEM 1A.	Risk Factors	31

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

ITEM 3.	Defaults Upon Senior Securities	31

ITEM 4.	Mine Safety Disclosures	32

ITEM 5.	Other Information	32

ITEM 6.	Exhibits	33

SIGNATURES		35

EXPLANATORY NOTE

On February 14, 2022, the Company closed its underwritten public offering for 1,600,000 shares of common stock, at a public offering price of $5.00 per share, for aggregate gross proceeds of $8.0 million, prior to deducting underwriting discounts, commissions, and other offering expenses of approximately $1.8 million. We effected a 1-for-30 reverse split of our authorized and outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State, which was filed simultaneously with the close of the underwritten public offering of our common stock and the commencement of the trading of our common stock on the Nasdaq Capital Market, LLC (see, Part II, Item 5 “Other Information”). As a result of the Reverse Stock Split, all authorized and outstanding common stock, preferred stock, and per share amounts in this Quarterly Report on Form 10-Q, including, but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIVAKOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2022			2021
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents	$	4,908,334		$	1,293,767
Cash and cash equivalents attributed to variable interest entity		296,257			199,952
Accounts Receivable, less allowances of none and $33,000, respectively		845			845
Marketable securities		1,818,029			2,231,218
Inventories		222,000			192,000
Precious metal concentrate		1,166,709			1,166,709
Other assets		237,422			73,245
Total current assets		8,649,596			5,157,736

Other investments		4,000			4,000
Notes receivable		1,150,743			1,194,235
Property and equipment, net		25,878,930			24,692,111
Rights of use assets- operating leases		721,550			663,291
License agreement, net		2,291,942			2,370,835
Intellectual property, net		13,002,504			13,662,037
Total assets	$	51,699,265		$	47,744,245

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	3,061,610		$	2,023,985
Operating lease liabilities, current		364,103			287,769
Loans and notes payable, current		962,405			1,511,447
Loans and notes payable, current attributed to variable interest entity		2,308,232			3,416,379
Long-term debt (working interest royalty programs), current		8,565			3,256
Total current liabilities		6,704,915			7,242,836

Operating lease liabilities, long term		414,947			434,109
Loans and notes payable, long term		543,869			1,185,970
Long-term debt (working interest royalty programs)		5,017,592			6,171,298
Deferred income tax liabilities		5,156,899			5,156,899
Total liabilities		17,838,222			20,191,112

Stockholders' equity:
Convertible, preferred stock, $.001 par value; 3,400,000 shares authorized;⁽¹⁾ Series A- 66,667 issued and outstanding⁽¹⁾		–			67
Common stock, $.001 par value; 41,666,667 shares authorized; 15,038,619 and 12,330,859 were issued and outstanding as of June 30, 2022 and December 31, 2021⁽¹⁾		15,039			12,331
Additional paid-in capital		67,857,646			58,279,590
Treasury stock, at cost		(20,000	)		(20,000	)
Accumulated deficit		(41,237,559	)		(35,731,359	)
Total Vivakor, Inc. stockholders' equity		26,615,126			22,540,629
Noncontrolling interest		7,245,917			5,012,504
Total stockholders' equity		33,861,043			27,553,133
Total liabilities and stockholders’ equity	$	51,699,265		$	47,744,245

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

See accompanying notes to consolidated financial statements

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021

Revenues	$	–		$	22,000		$	–		$	117,000
Cost of revenues		–			20,530			–			112,450
Gross profit		–			1,470			–			4,550
Operating expenses:
Sales and marketing		119,252			125,912			310,591			828,440
General and administrative		2,922,753			1,235,549			4,235,560			2,309,394
Amortization and depreciation		558,595			364,635			933,813			727,914
Total operating expenses		3,600,600			1,726,096			5,479,964			3,865,748
Loss from operations		(3,600,600	)		(1,724,626	)		(5,479,964	)		(3,861,198	)
Other income (expense):
Unrealized gain (loss) on marketable securities		(1,652,755	)		(8,949,169	)		(413,189	)		3,734,275
Interest income		6,083			1,242			12,461			2,485
Interest expense		(22,981	)		(241,448	)		(114,946	)		(395,469	)
Gain on disposition of asset		2,456			–			2,456			–
Other income		39,934			92,590			40,084			93,884
Total other income (expense)		(1,627,263	)		(9,096,785	)		(473,134	)		3,435,175
Loss before provision for income taxes		(5,227,863	)		(10,821,411	)		(5,953,098	)		(426,023	)
Provision for income taxes		–			296,477			(800	)		(723,911	)
Consolidated net loss		(5,227,863	)		(10,524,934	)		(5,953,898	)		(1,149,934	)
Less: Net loss attributable to noncontrolling interests		(322,546	)		(1,114,003	)		(447,698	)		(1,255,844	)
Net income (loss) attributable to Vivakor, Inc.		(4,905,317	)		(9,410,931	)	$	(5,506,200	)	$	105,910

Net loss attributable to common shareholders	$	(4,905,317	)	$	(9,410,931	)	$	(5,506,200	)	$	105,910
Dividend on preferred stock		–			42,196			–			42,196
Net income loss to parent	$	(4,905,317	)	$	(9,453,127	)	$	(5,506,200	)	$	63,714

Basic and diluted net loss per share ⁽¹⁾	$	(0.33	)	$	(0.79	)	$	(0.38	)	$	0.00
Diluted net income per share ⁽¹⁾	$	(0.33	)		(0.79	)	$	(0.38	)	$	0.00

Basic weighted average common shares outstanding ⁽¹⁾		15,038,619			11,966,840			14,388,004			11,640,306
Effect of dilutive securities ⁽¹⁾		–			–			–			910,483
Diluted weighted average common shares outstanding ⁽¹⁾		15,038,619			11,966,840			14,388,004			12,550,789

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

See accompanying notes to consolidated financial statements

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


	Series A Preferred Stock			Common Stock				Additional Paid-in		Treasury			Accumulated			Non-controlling			Total Stockholders'
	Shares		Amount	Shares		Amount		Capital		Stock			Deficit			Interest			Equity
March 31, 2022 (unaudited)	–	$	–	15,038,619	$	15,039	$	66,200,971	$	(20,000	)	$	(36,332,242	)	$	6,671,402		$	36,535,170
Stock options issued for services	–		–	–		–		427,500		–			–			–			427,500
Stock based compensation	–		–	–		–		1,229,175		–			–			–			1,229,175
Distributions by noncontrolling interest	–		–	–		–		–		–			–			(207,939	)		(207,939	)
Issuance of noncontrolling interest for a reduction of debt	–		–	–		–		–		–			–			1,105,000			1,105,000
Net loss	–		–	–		–		–		–			(4,905,317	)		(322,546	)		(5,227,863	)
June 30, 2022 (unaudited)	–	$	–	15,038,619	$	15,039	$	67,857,646	$	(20,000	)	$	(41,237,559	)	$	7,245,917		$	33,861,043

	Series A Preferred Stock					Common Stock				Additional Paid-in			Treasury			Accumulated			Non-controlling			Total Stockholders'
	Shares			Amount		Shares		Amount		Capital			Stock			Deficit			Interest			Equity
December 31, 2021 ⁽¹⁾	66,667		$	67		12,330,859	$	12,331	$	58,279,590		$	(20,000	)	$	(35,731,359	)	$	5,012,504		$	27,553,133
Common Stock issued for a reduction of liabilities	–			–		272,156		273		1,144,719			–			–			–			1,144,992
Conversion of Series A Preferred Stock to Common Stock	(66,667	)		(67	)	833,333		833		(766	)		–			–			–			–
Common Stock issued for cash, net of offering costs	–			–		1,600,000		1,600		6,238,400			–			–			–			6,240,000
Common stock issued for fractional shares from reverse stock split	–			–		2,271		2		–			–			–			–			2
Stock options issued for services	–			–		–		–		855,000			–			–			–			855,000
Stock based compensation	–			–		–		–		1,340,703			–			–			–			1,340,703
Distributions by noncontrolling interest	–			–		–		–		–			–			–			(343,889	)		(343,889	)
Issuance of noncontrolling interest for a reduction of debt	–			–		–		–		–			–			–			3,025,000			3,025,000
Net loss	–			–		–		–		–			–			(5,506,200	)		(447,698	)		(5,953,898	)
June 30, 2022 (unaudited)	–		$	–		15,038,619	$	15,039	$	67,857,646		$	(20,000	)	$	(41,237,559	)	$	7,245,917		$	33,861,043

	Series A Preferred Stock			Common Stock				Additional Paid-in		Treasury			Accumulated			Non-controlling			Total Stockholders'
	Shares		Amount	Shares		Amount		Capital		Stock			Deficit			Interest			Equity
March 31, 2021 ⁽¹⁾	66,667	$	67	11,321,269	$	11,322	$	46,818,373	$	(20,000	)	$	(20,688,151	)	$	1,137,248		$	27,258,859
Common Stock issued for a reduction of liabilities ⁽¹⁾	–		–	25,835		26		228,774		–			–			–			228,800
Conversion of temporary equity Series B and B-1 Preferred Stock to Common Stock ⁽¹⁾	–		–	944,312		944		9,384,396		–			–			–			9,385,340
Stock options issued for services	–		–	–		–		427,500		–			–			–			427,500
Stock based compensation	–		–	–		–		111,528		–			–			–			111,528
Issuance of noncontrolling interest for a reduction of debt	–		–	–		–		–		–			–			735,000			735,000
Dividend paid in Series B-1 Preferred Stock	–		–	–		–		–		–			(42,196	)		–			(42,196	)
Net loss	–		–	–		–		–		–			(9,410,931	)		(1,114,003	)		(10,524,934	)
June 30, 2021 (unaudited)	66,667	$	67	12,291,416	$	12,292	$	56,970,571	$	(20,000	)	$	(30,141,278	)	$	758,245		$	27,579,897

	Series A Preferred Stock			Common Stock				Additional Paid-in		Treasury			Accumulated			Non-controlling			Total Stockholders'
	Shares		Amount	Shares		Amount		Capital		Stock			Deficit			Interest			Equity
December 31, 2020⁽¹⁾	66,667	$	67	11,255,967	$	11,256	$	45,623,146	$	(20,000	)	$	(30,204,992	)	$	1,279,089		$	16,688,566
Common Stock issued for services⁽¹⁾	–		–	33,667		34		437,967		–			–			–			438,001
Common Stock issued for a reduction of liabilities⁽¹⁾	–		–	29,168		29		264,771		–			–			–			264,800
Common Stock issued for the purchase of a license⁽¹⁾				16,667		17		224,983		–			–			–			225,000
Conversion of temporary equity Series B, B-1, and C-1 Preferred Stock to Common Stock⁽¹⁾	–		–	955,947		956		9,466,648		–			–			–			9,467,604
Stock options issued for services	–		–	–		–		730,000		–			–			–			730,000
Stock based compensation	–		–	–		–		223,056		–			–			–			223,056
Issuance of noncontrolling interest for a reduction of debt	–		–	–		–		–		–			–			735,000			735,000
Dividend paid in Series B-1 Preferred Stock	–		–	–		–		–		–			(42,196	)		–			(42,196	)
Net income (loss)	–		–	–		–		–		–			105,910			(1,255,844	)		(1,149,934	)
June 30, 2021 (unaudited)	66,667	$	67	12,291,416	$	12,292	$	56,970,571	$	(20,000	)	$	(30,141,278	)	$	758,245		$	27,579,897

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

See accompanying notes to consolidated financial statements

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


	Six Months Ended
	June 30,
	2022			2021
OPERATING ACTIVITIES:
Consolidated net loss	$	(5,953,898	)	$	(1,149,934	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		933,813			727,914
Common stock options issued for services		855,000			730,000
Common stock issued for services		–			438,001
Gain on disposal of asset		(2,456	)		–
Unrealized gain (loss) marketable securities		413,189			(3,734,275	)
Deferred income taxes		–			711,070
Stock-based compensation		1,340,703			223,055
Changes in operating assets and liabilities:
Accounts receivable		–			6,515
Inventory		(30,000	)		–
Other assets		(164,177	)		13,807
Accounts payable and accrued expenses		(303,452	)		(412,764	)
Accrued interest on notes receivable		(12,461	)		(2,485	)
Accrued interest on notes payable		114,946			395,469
Net cash used in operating activities		(2,808,793	)		(2,053,627	)

INVESTING ACTIVITIES:
Proceeds from notes receivable		55,953			–
Payment on costs of patents		–			(10,329	)
Purchase of a technology license		–			(40,000	)
Proceeds from disposal of equipment		6,000			–
Purchase of equipment		(1,129,515	)		(1,334,123	)
Net cash used in investing activities		(1,067,562	)		(1,384,452	)

FINANCING ACTIVITIES:
Payment of long-term debt		–			(7,735	)
Proceeds from loans and notes payable		1,968,261			6,666,811
Proceeds from sale of common stock		6,240,000			–
Payment of notes payable		(277,145	)		(2,464	)
Distributions to noncontrolling interest		(343,889	)		–
Net cash provided by financing activities		7,587,227			6,656,612

Net increase (decrease) in cash and cash equivalents		3,710,872			3,218,533
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,493,719			398,904
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,204,591		$	3,617,437

SUPPLEMENTAL CASHFLOW INFORMATION:
Cash paid during the year for:
Interest	$	223,639		$	46,936
Income taxes	$	–		$	–

Noncash transactions:
Conversion of Series A, B, B-1, and C-1 Preferred Stock to Common Stock	$	1,200,000		$	9,467,604
Common stock issued for a reduction in liabilities	$	1,144,992		$	264,800
Noncontrolling interest issued for a reduction in liabilities	$	3,025,000		$	735,000
Preferred stock Series C-1 issued for a reduction in liabilities	$	–		$	64,950
Common stock issued for the purchase of a license	$	–		$	225,000
Capitalized interest on construction in process	$	256,235		$	822,700
Dividend paid in Series B-1 Preferred Stock	$	–		$	42,196

See accompanying notes to consolidated financial statements

VIVAKOR, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

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

COVID-19

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

COVID-19 and the U.S. response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions, Utah has resumed operations in full. Kuwait has allowed for the Company to obtain site personnel visas to recommence operations. These suspensions have had a negative impact on our business and there can be no guaranty that we will not need to suspend operations again in the future as a result of the pandemic.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2021. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.

Principles of Consolidation

The Company follows ASC 810-10-15 guidance with respect to accounting for Variable Interest Entities (“VIE”). A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions of the entity’s expected residual returns. For the six months ended June 30, 2022 and year ended December 31, 2021 the following entities are considered to be a VIE and are consolidated in our consolidated financial statements: Viva Wealth Fund I, LLC and RPC Design and Manufacturing, LLC. For the six months ended June 30, 2022 and year ended December 31, 2021 the following entities were considered to be a VIE, but were not consolidated in our consolidated financial statements due to a lack of the power criterion or the losses/benefits criterion: Vivaventures UTS I, LLC, Vivaventures Royalty II, LLC, Vivaopportunity Fund, LLC, and International Metals Exchange, LLC. For the six months ended June 30, 2022 and year ended December 31, 2021 the unaudited financial information for the unconsolidated VIEs is as follows: Vivaventures UTSI, LLC held assets of $3,383,610 and $3,753,296 (where the primary asset represents a receivable from the Company), and liabilities of $47,049 and $12,608. Vivaventures Royalty II, LLC held assets of $2,939,498 and $2,648,810 (where the primary asset represents a receivable from the Company), and liabilities of $1,720 and $300. Vivaopportunity Fund LLC held assets of $2,119,856 and $2,119,961 (where the primary asset represents a noncontrolling interest in units of a consolidated entity of the Company) and no liabilities. International Metals Exchange, LLC held assets of $29,938 and $30,461 and liabilities of $1,900.

RPC Design and Manufacturing, LLC: As of June 30, 2022 and year ended December 31, 2021, investors in RDM have a noncontrolling interest of $387,049 and $629,694, respectively. As of June 30, 2022 and December 31, 2021, the cash and cash equivalents of this VIE are not restricted and can be used to settle the obligations of the reporting entity. As of June 30, 2022 and December 31, 2021 this VIE has an outstanding note payable to the reporting entity in the amount of $628,828 and $354,566, which is eliminated upon consolidation. We have the primary risk (expense) exposure in financing and operating the assets and are responsible for 100% of the operation, maintenance and any unfunded capital expenditures, which ultimately could be 100% of a custom machine, and the decisions related to those expenditures including budgeting, financing and dispatch of power. Based on all these facts, it was determined that we are the primary beneficiary of RDM. Therefore, RDM has been consolidated by the Company. Any intercompany revenue and expense associated with RDM and its license agreement with the Company has been eliminated in consolidation.

Viva Wealth Fund I, LLC: As of June 30, 2022 and December 31, 2021, the cash and cash equivalents of this VIE are restricted solely for the use of proceeds of the VWFI offering (to manufacture RPCs) and cannot be used to settle the obligations of the reporting entity. As of June 30, 2022 and December 31, 2021, the Company has cash attributed to variable interest entities of $296,257 and $199,952. As of June 30, 2022, VWFI has reached $6,250,000 in funding and has released the funding for construction of RPC Series A. VWFI has commenced fundraising for RPC Series B. In the event that VWFI does not raise at least $6,250,000 for these RPC Series by the offering termination date (which date has been extended until November 13, 2022), then the convertible notes and/or units would convert into Vivakor common stock where the minimum conversion price will be the greater of $13.50 or a 10% discount to market per share or in the event of a public offering, 200% of the per share price of the Company common stock sold in the underwritten offering, which was closed on February 14, 2022 at $5.00 per share. As of August 8, 2022, VWFI has raised approximately $4,690,000 for RPC Series B. VWFI unit holders may also sell their units to the Company for their principal investment amount on the 3^rd, 4^th, and 5^th anniversary of the offering termination date, which if this option were exercised, the Company may elect to pay the amount in either cash or common stock. The Company also has the option to purchase any LLC units where the members did not exercise their conversion option under the same terms and pricing for cash or common stock. VWFI has entered into a license agreement with the Company indicating that VWFI will pay the Company a license fee of $1,000,000 per series of equipment manufactured with the Company’s proprietary technology, however these transactions are eliminated upon consolidation. All of the operations of VWFI relate to private placement offering to fund and manufacture proprietary equipment for the Company, as intended in VWFI’s design and organization by the Company, so that the Company controls VWFI in its business purpose, use of proceeds, and selling and leasing of its equipment solely to the Company. Creditors of VWFI have no recourse to the general credit of the Company. We have the primary risk (expense) exposure in financing and operating the assets and are responsible for 100% of the operation, and any unfunded capital expenditures, and the expense to the unit holders in conversion to common stock if series of equipment cannot be fully funded, which ultimately could be 100% of any custom machine. By request of the fund manager, we are responsible for the decisions related to the expenditures of VWFI proceeds including budgeting, financing and dispatch of power surrounding the series of equipment. Based on all these facts, it was determined that we are the primary beneficiary of VWFI. Therefore, VWFI has been consolidated by the Company.

Long Lived Assets

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the six months ended June 30, 2022 or for the year ended December 31, 2021, as the Company was still in the early phases of our business plan and operating losses were expected in our early phases. On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease. We have observed supply chain disruptions from the COVID-19 pandemic that has contributed to delays in the completion of the manufacturing of our RPCs, although we do not believe that these delays have constituted a triggering event for impairment of our assets. Our Kuwait operations were suspended to comply with the social distancing measures implemented in Kuwait, but in 2022 has allowed for the Company to obtain site personnel visas to recommence operations. Our Utah operations were temporarily suspended from March through May 2020, but have since resumed in full in its manufacturing of its RPCs, and construction and implementation of site and infrastructure preparations in anticipation of commencing operations in 2022. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

Intangible Assets:

We account for intangible assets in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). Intangible asset amounts represent the acquisition date fair values of identifiable intangible assets acquired. The fair values of the intangible assets were determined by using the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflected a weighted average cost of capital based on our industry, capital structure and risk premiums including those reflected in the current market capitalization. Definite-lived intangible assets are amortized over their useful lives, which have historically ranged from 10 to 20 years. The carrying amounts of our definite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that the entity may be unable to recover the asset’s carrying amount.

We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We have evaluated our intangible assets and found that certain losses and a delay in our business plan may have constituted a triggering event for our intangible assets. We performed an analysis and assessed that there was no impairment for the six months ended June 30, 2022 or for the year ended December 31, 2021.

Advertising Expense

Advertising costs are expensed as incurred. The Company did not incur advertising expense for the six months ended June 30, 2022 and 2021.

Net Income/Loss Per Share

Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of June 30, 2022 and 2021 include the following: convertible notes payable convertible into approximately 14,560 and 227,150 shares of common stock, convertible Series A preferred stock convertible into none and 666,667 shares of common stock (due to the event of a public offering of the Company’s common stock in February 2022 this will convert to 833,333 shares), stock options granted to employees of 2,039,585 and 183,333 shares of common stock. Stock options granted to Board members or consultants of 466,667 shares of common stock were granted as of June 30, 2022 and 2021. There were also warrants issued and outstanding to EF Hutton of 80,000 shares of common stock as of June 30, 2022. These warrants were related to and granted during the close of the underwritten public offering in February 2022

Use of Estimates

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

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

Fair Value of Financial Instruments

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

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

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

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

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

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

Note 2. Liquidity

We have historically suffered net losses and cumulative negative cash flows from operations, and as of June 30, 2022, we had an accumulated deficit of approximately $41.3 million. As of June 30, 2022 we had cash of $5,204,591. The Company closed an underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share, for aggregate gross proceeds of $8 million, prior to deducting underwriting discounts, commissions, and other offering expenses. Prior to the offering, we financed our operations primarily through debt financing, private equity offerings our working interest agreements. We believe we have other liquid assets that may be used to assist in financing the operations of the Company if needed, including marketable securities in Scepter, which hold a fair value $1,818,029 as of June 30, 2022 and have been deposited for trading. We believe the liquid assets from the Company’s available for sale investments and funding provided from subsequent fundraising activities (see Note 15) of the Company give it adequate working capital to finance our day-to-day operations for at least twelve months through August 2023.

Note 3. Prepaid Expenses and Other Assets

As of June 30, 2022 and December 31, 2021, our other assets mainly consist of various deposits with vendors, professional service agents, or security deposits on office and warehouse leases. As of June 30, 2022 and December 31, 2021 we had office and warehouse lease deposits in the amount of $61,676 and $73,245. As of June 30, 2022 we had deposits in the amounts of $161,458 with vendors, professional service agencies, and a reclamation bond with the Utah Division of Oil, Gas and Mining in the amount of $14,288.

Note 4. Marketable Securities

As of December 31, 2020, the Company owned 3,309,758 shares of common stock in Odyssey Group International, Inc. (“Odyssey”) ticker: ODYY, OTC Markets. In December 2021 we sold such shares of Odyssey in a private transaction for a purchase price of $860,491, with $10,000 cash delivered at signing and a note issued in favor of Vivakor in the amount of $850,491, reflecting the market price at that time. The Company accounted for such securities based on the quoted price from the OTC Markets where the stock is traded, which resulted in the Company recording an unrealized loss of $595,392 on these marketable securities for the three months ended June 30, 2021 compared to an unrealized gain of $1,494,275 for the six months ended June 30, 2021.

In 2019 the Company had an investment of $800,000 or 800,000,000 shares of common stock, or a diluted 23% equity holding in Scepter Holdings, Inc. (“Scepter”), ticker: BRZL, OTC Markets. In the fourth quarter of 2020, the Company was diluted to a 19% equity holding in Scepter, and was no longer deemed to have significant influence and ceased to be an equity investment, and as the stock is traded on an active market, the Company has classified the investment as marketable securities with the change in unrealized gains and losses on the investment included in the statement of operations for the three months ended June 30, 2022 and 2021. In August 2021 we converted $81,768 of our note receivable with Scepter into 26,376,882 shares of Scepter common stock pursuant to the terms of the note at $0.0031 per share. On the date of the conversion, the Scepter price per share on OTC Markets was $0.0062 per share, which resulted in a $87,044 gain on the disposition of the note receivable. The Company has accounted for such securities based on the quoted price from the OTC Markets where the stock is traded, which resulted in the Company recording an unrealized loss on marketable securities of $1,652,755 and $8,353,777 for the three months ended June 30, 2022 and 2021 compared to an unrealized gain (loss) of $(413,189) and 2,240,000 for the six months ended June 30, 2022 and 2021. As of June 30, 2022 and December 31, 2021, the Company’s Chief Executive Officer has an immediate family member who sits on the board of directors of Scepter Holdings, Inc. As of June 30, 2022 and December 31, 2021 our Scepter marketable securities were valued at $1,818,029 and $2,231,218.

As of June 30, 2022 and December 31, 2021, marketable securities were $1,818,029 and $2,231,218. For the three months ended June 30, 2022 and 2021, the Company recorded a total unrealized loss of $1,652,755 and $8,949,169 compared to an unrealized gain (loss) of $(413,189) and $3,734,275 for the six months ended June 30, 2022 and 2021 on marketable securities in the statement of operations.

Note 5. Inventories

As of June 30, 2022, inventories consist primarily of raw materials (including tar-sand stockpiles) and finished goods (which includes Fenix iron). The tar-sand stockpiles consist of 10,000 tons of tar sand stockpile and are anticipated to be used for our extraction remediation units. The stockpiles were acquired when the Company entered into a land lease agreement for located in Vernal, Utah. Under the terms of the lease agreement, we are required to pay $3 per ton of oil sands processed. As a condition of the lease, we were required to provide $30,000 toward initial tonnage of oil sands to be processed at a cost of approximately $3.00 per ton. The nano Fenix Iron are finished goods that have a 20-year shelf life and were acquired at cost for $192,000. As of December 31, 2021, inventories consist primarily of the Fenix Iron. Inventories are valued at the lower of cost or market (net realizable value).

Note 6. Property and Equipment

The following table sets forth the components of the Company’s property and equipment at June 30, 2022 and December 31, 2021:

Schedule of property and equipment, net
	June 30, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Depreciation		Net Book Value		Gross Carrying Amount		Accumulated Depreciation		Net Book Value

Office furniture and equipment	$	14,998	$	4,956	$	10,042	$	14,998	$	4,000	$	10,998
Vehicles		36,432		22,466		13,966		48,248		26,306		21,942
Precious metal extraction machine- 1 ton		2,280,000		285,000		1,995,000		2,280,000		228,000		2,052,000
Precious metal extraction machine- 10 ton		5,320,000		665,000		4,655,000		5,320,000		532,000		4,788,000

Construction in process:
Bioreactors		1,440,000		–		1,440,000		1,440,000		–		1,440,000
Nanosponge/Cavitation device		22,103		–		22,103		22,103		–		22,103
Remediation Processing Unit 1		6,150,506		–		6,150,506		6,249,082		–		6,249,082
Remediation Processing Unit 2		5,489,760		–		5,489,760		5,201,098		–		5,201,098
Remediation Processing Unit System A		3,127,669		–		3,127,669		2,561,467		–		2,561,467
Remediation Processing Unit System B		2,974,884		–		2,974,884		2,345,421		–		2,345,421
Total fixed assets	$	26,856,352	$	977,422	$	25,878,930	$	25,482,417	$	790,306	$	24,692,111

For the year ended December 31, 2021 the Company issued 5,413 shares of Series C-1 Preferred Stock value at $64,950 for equipment, which has been valued based on similar cash purchases of the Series C-1 Preferred Stock at approximately $12.00 per share. For the six months ended June 30, 2022 and 2021 depreciation expense was $195,387 and $5,781. For the six months ended June 30, 2022 and 2021 capitalized interest to equipment from debt financing was $256,235 and $822,700. Equipment that is currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into service.

Note 7. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:


	June 30,		December 31,
	2022		2021
Accounts payable	$	851,495	$	1,450,531
Office access deposits		340		340
Accrued compensation		400,798		175,000
Unearned revenue		69,784		–
Accrued interest (working interest royalty programs)		1,341,079		–
Accrued tax penalties and interest		398,114		398,114
Accounts payable and accrued expenses	$	3,061,610	$	2,023,985

As of December 31, 2021 the Company accrued $225,000 for a milestone payment to be paid to TBT Group, Inc. (of which an independent Vivakor Board member is a 7% shareholder) related to our worldwide, exclusive license agreement for the license of piezo electric and energy harvesting technologies for creating self-powered sensors for making smart roadways. This milestone payment was paid in March 2022.

Note 8. Loans and Notes Payable

Loans and Notes payable (including accrued interest) consist of the following:

Schedule of loans and notes payable
	June 30,		December 31,
	2022		2021
Various promissory notes and convertible notes	$	50,960	$	50,960
Novus Capital Group LLC Note (a)		283,612		378,854
Triple T Notes		329,613		353,330
National Buick GMC		16,977		19,440
Various Convertible Bridge Notes (b)		–		1,075,813
Blue Ridge Bank		410,200		410,200
Small Business Administration		324,267		318,175
JP Morgan Chase Bank		90,645		90,645
Various Promissory Notes (c)		2,308,232		3,416,379
Total Notes Payable	$	3,814,506	$	6,113,796

Loans and notes payable, current	$	962,405	$	1,511,447
Loans and notes payable, current attributed to variable interest entity		2,308,232		3,416,379
Loans and notes payable, long term	$	543,869	$	1,185,970


2022	$	2,787,944
2023		518,114
2024		72,278
2025		68,878
2026		111,979
Thereafter		255,313
Total	$	3,814,506

__________________

(a)

On September 5, 2017, the Company acquired patents in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt on asset in the amount of $334,775 due in December 2019 with no interest accruing until 2020 and a deferred tax liability of $1,043,398. As of April 1 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid.

(b)

In 2021 and 2020 the Company entered into various convertible promissory notes as follows:

	Throughout 2021 and 2020 the Company entered into convertible promissory notes with an aggregate principal of $415,000. The notes accrue interest at 10% per annum and have a maturity of the earlier of 12 months or the consummation of the Company listing its Common Stock on a senior stock exchange. The notes are convertible at the Company’s option into shares of the Company’s common stock at a price equal to 80% of the opening price of the Company’s common stock on the national exchange or the offering price paid by the investors in the financing in connection with the uplist, whichever is lower, or (ii) repaid in cash in an amount equal to the indebtedness being repaid plus a premium payment equal to 15% of the amount being repaid. If an event of default has occurred and the Company does not convert the amounts due under the Note into the Company’s common stock, then the Company will have the option to convert the outstanding indebtedness into shares of the Company’s common stock at a price equal to 80% of the weighted average trading price of the Company’s common stock on the OTC Markets, or be repaid in cash in an amount equal to all principal and interest due under the Note. All of these notes were converted to common stock as of June 30, 2022.

	On October 13, 2020, the Company entered into a convertible promissory note in an amount of $280,500 having an interest rate of 12% per annum. The note bears a 10% Original Issue Discount. The loan shall mature in 1 year and may be convertible at the lower of $12.00 or 80% of the lowest median daily traded price over ten trading days prior to conversion, but in the event of a Qualified Uplist the note may be converted at a 30% discount to market. The Company also issued 3,333 restricted shares with no registration rights in conjunction with this note, which was recorded as a debt discount in the amount of $44,000, which is amortized to interest expense over the term of the agreements using the effective interest method. On March 28, 2021 the parties amended this agreement to state that in no event shall the conversion price be lower than $3.00 per share. In October 2021 the parties agreed to extend the maturity of this loan to April 13, 2022 in exchange for an increase in principal owed of $30,000. This note has been converted to common stock as of June 30, 2022.

	On February 4, 2021, the Company entered into a convertible promissory note in an amount of $277,778 having an interest rate of 12% per annum. The note bears a 10% Original Issue Discount. The loan shall mature in 1 year and may be convertible at the lower of $12.00 or 80% of the lowest median daily traded price over ten trading days prior to conversion, but in the event of a Qualified Uplist the note may be converted at a 30% discount to market. The Company also issued 3,333 restricted shares with no registration rights in conjunction with this note, which was recorded as a debt discount in the amount of $36,000, which is amortized to interest expense over the term of the agreements using the effective interest method. On March 28, 2021 the parties amended this agreement to state that in no event shall the conversion price be lower than $3.00 per share. In February 2022 the parties agreed to extend the maturity of this loan to August 8, 2022 in exchange for an increase in principal owed of $25,000. This note has been converted to common stock as of June 30, 2022.

(c)	Viva Wealth Fund I, LLC is offering up to $25,000,000 in convertible notes in a private offering. As of June 30, 2022, VWFI has raised $10,510,000 and converted $8,575,000 of this debt to VWFI LLC units. A convertible note will automatically convert into the LLC units at the earlier of (i) the date that the Equipment is placed into quality control and testing or (ii) six months from the date of investment. The convertible notes will accrue interest at 12% per annum and are paid quarterly. At the maturity date, remaining interest will be paid, at which time no further interest payments will accrue. Upon the offering termination date, all units accepted for any series of equipment will automatically convert to Vivakor common stock if the Company has not accepted subscriptions for at least $6,250,000 for a series of equipment. The conversion price of the automatic stock conversion will be the the greater of $13.50 or a 10% discount to market per share or in the event of a public offering, 200% of the per share price of the Company common stock sold in an underwritten offering, which was closed on February 14, 2022 at $5.00 per share. The termination date of the offering has been extended until November 13, 2022 in the sole discretion of the Company. As of April 28, 2021 VWFI has reached $6,250,000 in funding and has released the funding for construction of RPC Series A. VWFI has commenced fundraising for RPC Series B and has raised approximately $4,690,000 to manufacture RPC Series B. Subsequent to June 30, 2022 an additional $30,000 of this debt has been converted into units of the LLC.

Note 9. Commitments and Contingencies

Leases

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

On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $1,950, Year 2 $2,028, Year 3 $2,110. As a condition of the lease, we were required to provide a $2,418 security deposit.

On March 28, 2022, the Company entered into a lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 is comprised of April to May 2022 $867, June 2022 to March 2023 $3,550, Year 2 $3,657, Year 3 $3,766. As a condition of the lease, we were required to provide a $3,766 security deposit.

On April 1, 2022, the Company entered into a lease agreement for approximately 2,000 square feet of office and warehouse space located in Houston, Texas. Commencing on April 1, 2022, the Company en

SEC Form 10-Q filed by Vivakor Inc.