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 March 31, 2023

☐ 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)

(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 July 20, 2023, there were 18,064,838 shares of the registrant’s common stock outstanding.

VIVAKOR, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION		1

ITEM 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	1

	Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2023 and 2022 (unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months ended March 31, 2023 and 2022 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2023 and 2022 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	26

ITEM 4.	Controls and Procedures	26

PART II. OTHER INFORMATION		28

ITEM 1.	Legal Proceedings	28

ITEM 1A.	Risk Factors	28

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

ITEM 3.	Defaults Upon Senior Securities	28

ITEM 4.	Mine Safety Disclosures	28

ITEM 5.	Other Information	28

ITEM 6.	Exhibits	29

SIGNATURES		30

EXPLANATORY NOTE

On February 14, 2022, we effected a 1-for-30 reverse split of our authorized and outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State, which was filed simultaneously with the close of an underwritten public offering of our common stock and the commencement of the trading of our common stock on the Nasdaq Capital Market, LLC (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

	March 31,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,495,205		$	3,101,186
Cash and cash equivalents attributed to variable interest entity		204,714			81,607
Accounts receivable		2,222,079			2,615,354
Accounts receivable- related party		150,115			948,352
Prepaid expenses		90,632			31,523
Marketable securities		1,156,928			1,652,754
Inventories		69,998			47,180
Other assets		770,829			700,298
Total current assets		7,160,500			9,178,254

Other investments		4,000			4,000
Property and equipment, net		23,808,236			22,578,876
Rights of use assets- operating leases		1,795,440			1,880,056
License agreements, net		1,741,946			1,772,153
Intellectual property, net		27,537,612			28,251,053
Goodwill		12,678,108			12,678,108
Total assets	$	74,725,842		$	76,342,500

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	4,557,135		$	3,242,667
Accounts payable and accrued expenses- related parties		1,278,982			4,142,978
Accrued compensation		1,846,072			1,302,890
Operating lease liabilities, current		509,327			471,991
Finance lease liabilities, current		963,900			963,900
Loans and notes payable, current		894,000			885,204
Loans and notes payable, current attributed to variable interest entity		2,595,000			1,325,000
Loans and notes payable, current attributed to variable interest entity- related parties		944,500			599,500
Long-term debt (working interest royalty programs), current		13,341			9,363
Total current liabilities		13,602,257			12,943,493

Operating lease liabilities, long term		1,367,031			1,457,483
Finance lease liabilities, long term		2,203,395			2,298,960
Loans and notes payable, long term		28,016,224			28,383,950
Loans and notes payable, long term- related party		300,000			300,000
Long-term debt (working interest royalty programs)		4,572,043			3,897,553
Total liabilities		50,060,950			49,281,439

Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 3,400,000 shares authorized, none outstanding⁽¹⁾		-	-		-		-
Common stock, $0.001 par value; 41,666,667 shares authorized; 18,064,838 were issued and outstanding as March 31, 2023 and December 31, 2022, respectively⁽¹⁾		18,065			18,065
Additional paid-in capital		74,026,163			74,026,163
Treasury stock, at cost		(20,000	)		(20,000	)
Accumulated deficit		(57,704,373	)		(55,169,781	)
Total Vivakor, Inc. stockholders’ equity		16,319,855			18,854,447
Noncontrolling interest		8,345,037			8,206,614
Total stockholders’ equity		24,664,892			27,061,061
Total liabilities and stockholders’ equity	$	74,725,842		$	76,342,500

(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

(UNAUDITED)


	Three Months Ended
	March 31,
	2023			2022
Revenues
Product revenue - third parties	$	11,194,467		$	-
Product revenue - related party		4,350,405			-
Total revenues		15,544,872			-
Cost of revenues		14,031,714			-
Gross profit		1,513,158			-
Operating expenses:
Sales and marketing		589			191,339
General and administrative		1,852,921			1,312,807
Amortization and depreciation		784,520			375,218
Total operating expenses		2,638,030			1,879,364
Loss from operations		(1,124,872	)		(1,879,364	)
Other income (expense):
Unrealized gain (loss) on marketable securities		(495,826	)		1,239,566
Interest income		-			6,378
Interest expense		(451,294	)		(87,802	)
Interest expense- related parties		(754,375	)		(4,163	)
Other income		10,000			150
Total other income (expense)		(1,691,495	)		1,154,129
Loss before provision for income taxes		(2,816,367	)		(725,235	)
Provision for income taxes		(800	)		(800	)
Consolidated net loss		(2,817,167	)		(726,035	)
Less: Net loss attributable to noncontrolling interests		(282,575	)		(125,152	)
Net loss attributable to Vivakor, Inc.	$	(2,534,592	)	$	(600,883	)

Basic and diluted net loss per share⁽¹⁾	$	(0.14	)	$	(0.04	)

Basic weighted average common shares outstanding⁽¹⁾		18,064,838			13,730,159

(1)

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’ Equity
	Shares		Amount		Shares		Amount		Capital		Stock			Deficit			Interest			(Deficit)
December 31, 2022		-	$	-		18,064,838	$	18,065	$	74,026,163	$	(20,000	)	$	(55,169,781	)	$	8,206,614		$	27,061,061
Distributions to noncontrolling interest		-		-		-		-		-		-			-			(289,002	)		(289,002	)
Issuance of noncontrolling interest for a reduction of debt		-		-		-		-		-		-			-			710,000			710,000
Net loss		-		-		-		-		-		-			(2,534,592	)		(282,575	)		(2,817,167	)
March 31, 2023 (unaudited)		-	$	-		18,064,838	$	18,065	$	74,026,163	$	(20,000	)	$	(57,704,373	)	$	8,345,037		$	24,664,892

	Series A Preferred Stock						Common Stock				Additional Paid-in			Treasury			Accumulated			Non-controlling			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital			Stock			Deficit			Interest			(Deficit)
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		-			-			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		-			-			-		-		427,500			-			-			-			427,500
Stock based compensation		-			-			-		-		111,528			-			-			-			111,528
Distributions by noncontrolling interest		-			-			-		-		-			-			-			(135,950	)		(135,950	)
Issuance of noncontrolling interest for a reduction of debt		-			-			-		-		-			-			-			1,920,000			1,920,000
Net loss		-			-			-		-		-			-			(600,883	)		(125,152	)		(726,035	)
March 31, 2022 (unaudited)		-		$	-			15,038,619	$	15,039	$	66,200,971		$	(20,000	)	$	(36,332,242	)	$	6,671,402		$	36,535,170

(1)

See accompanying notes to consolidated financial statements

VIVAKOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDTED)


	Three Months Ended
	March 31,
	2023			2022
OPERATING ACTIVITIES:
Consolidated net loss	$	(2,817,167	)	$	(726,035	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		784,520			375,218
Forgiveness of notes payable		(10,000	)		-
Common stock options issued for services		-			427,500
Stock-based compensation		-			111,528
Unrealized (gain)/loss- marketable securities		495,826			(1,239,566	)
Changes in operating assets and liabilities:
Accounts receivable		1,191,512			-
Prepaid expenses		(59,109	)		-
Inventory		(22,818	)		(30,000	)
Other assets		(70,531	)		(2,418	)
Right of use assets- finance leases		261,939			-
Right of use assets- operating leases		84,616			(131,816	)
Operating lease liabilities		(41,985	)		131,816
Financing lease liabilities		(502,914	)		-
Accounts payable and accrued expenses		(1,775,681	)		131,389
Interest on notes receivable		-			(6,379	)
Interest on notes payable		1,205,669			91,965
Net cash used in operating activities		(1,276,123	)		(866,798	)

INVESTING ACTIVITIES:
Proceeds from notes receivable		-			10,000
Purchase of equipment		(883,819	)		(206,298	)
Net cash used in investing activities		(883,819	)		(196,298	)

FINANCING ACTIVITIES:
Proceeds from loans and notes payable		1,988,797			177,496
Proceeds from loans and notes payable- related party		345,000			250,000
Proceeds from sale of common stock		-			6,240,000
Payment of notes payable		(367,727	)		(114,945	)
Distributions to noncontrolling interest		(289,002	)		(135,950	)
Net cash provided by financing activities		1,677,068			6,416,601

Net increase (decrease) in cash and cash equivalents		(482,874	)		5,353,505
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		3,182,793			1,493,719
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,699,919		$	6,847,224

SUPPLEMENTAL CASHFLOW INFORMATION:
Cash paid during the year for:
Interest	$	851,005		$	113,975
Income taxes	$	-		$	-

Noncash transactions:
Conversion of Series A, B, B-1, and C-1 Preferred Stock to Common Stock	$	-		$	1,200,000
Common stock issued for a reduction in liabilities	$	-		$	1,144,992
Noncontrolling interest issued for a reduction in liabilities	$	710,000		$	1,920,000
Capitalized interest on construction in process	$	237,978		$	488,014
Accounts payable on purchase of equipment	$	406,653		$	-

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 were issued as a result of the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share. All issued and outstanding common stock, preferred stock, and per share amounts in the consolidated financial statements and footnotes included herein have been retroactively adjusted to reflect this reverse stock split for all periods presented.

COVID-19

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

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

Interim Financial Information

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

Long Lived Assets

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. During the three months ended March 31, 2023, the operations were limited due to supply and personnel limitations. Subsequent to March 31, 2023, the Company entered into an agreement to move the Vernal plant to Kuwait to service the contract with DIC for a scaled up RPC, as the Vernal plant was not producing product toward the off-take agreement, which has further delayed scaled operations. The Company evaluated these events and determined that there is no trigger event, and therefore there was no impairment incurred during the three months ended March 31, 2023. There can be no assurance that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

Intangible Assets and Goodwill:

We account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We performed an analysis and assessed no triggering event has occurred, and no impairment for the three months ended March 31, 2023.

Revenue Recognition

In August 2022, we acquired Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, from which approximately 99% of the Company’s revenue is derived. For the three months ended March 31, 2023, our sales consist of storage services and the sale of crude oil or like products. For the three months ended March 31, 2023, disaggregated revenue by customer type was as follows: $11,123,530 in crude oil sales and $3,580,601 in product related to natural gas liquids sales.

Related Party Revenues

We sell sale of crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC. These contracts were entered into in the normal course of our business. Our revenue from related parties for the three months ended March 31, 2023 was $4,350,405.

Major Customers and Concentration of Credit Risk

The Company has two major customers, which account for approximately 98% and 100% of the balance of accounts receivable as of March 31, 2023 and December 31, 2022.

Advertising Expense

Advertising costs are expensed as incurred. The Company did not incur advertising expense for the three months ended March 31, 2023 and 2022.

Net Income/Loss Per Share

Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of March 31, 2023 and December 31, 2022 include the following: convertible notes payable convertible into approximately 14,560 shares of common stock, stock options granted to current or previous employees of 1,421,760 shares of common stock, stock options granted to Board members or consultants of 395,139 shares of common stock. The Company also has a warrant outstanding to purchase 80,000 shares of common stock as of March 31, 2023.

Use of Estimates

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

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

Fair Value of Financial Instruments

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

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

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

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

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

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

Note 2. Liquidity

We have historically suffered net losses and cumulative negative cash flows from operations, and as of March 31, 2023, we had an accumulated deficit of approximately 57,704,373 $57.7 million. As of March 31, 2023 and December 31, 2022, we had a working capital deficit of approximately $6.4 million and $3.7 million, respectively. As of March 31, 2023 we had cash of approximately $2.7 million. In addition, we have obligations to pay approximately $14.1 million (of which approximately $13.2 million can be satisfied through the issuance of our common stock under the terms of the debt and $410,200 is related to PPP loans that are anticipated to be forgiven with the remainder) of debt in cash within one year of the issuance of these financial statements. Our CEO has also committed to provide credit support through December 2024, as necessary, for an amount up to $8 million to provide the Company sufficient cash resources, if required, to execute its plans for the next twelve months. These conditions raise substantial doubt about the Company's ability to continue as a going concern. We believe the liquid assets and CEO commitment give it adequate working capital to finance our day-to-day operations for at least twelve months through July 2024.

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

Note 3. Accounts Receivable

Accounts receivable primarily relates to sales to trade accounts receivable of customers for crude oil and natural gas liquid products. Accounts receivable is presented as amounts due from customers less an estimated allowance for doubtful accounts. An allowance for doubtful accounts, if deemed necessary by management, is based on a review of all outstanding amounts by customer on a monthly basis. Management determines the allowance for doubtful accounts, if any, by identifying troubled accounts and by using historical experience applied to an aging of accounts, as well as the current and projected financial condition of the specific customer. As of March 31, 2023 and December 31, 2022 no allowance for doubtful accounts was deemed necessary. Trade accounts receivable are zero interest bearing. Trade accounts receivable of $1,381,436 are with a vendor of which our CEO is a beneficiary.

Note 4. Prepaid Expenses

As of March 31, 2023 and December 31, 2022, our prepaid expenses of $90,632 and $31,523 mainly consist of prepaid insurances.

Note 5. Marketable Securities

The Company owns 826,376,882 shares of common stock of Scepter Holdings, Inc. (“Scepter”), ticker: BRZL, OTC Markets., for a diluted 17% equity holding in the company. 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 gain (loss) on marketable securities of $(495,826) and $1,239,566 for the three months ended March 31, 2023 and 2022. The Company’s previous Chief Executive Officer, who resigned on October 6, 2022, had an immediate family member who sits on the board of directors of Scepter Holdings, Inc. As of March 31, 2023 and December 31, 2022 our marketable securities were valued at $1,156,928 and $1,652,754.

Note 6. Inventories

As of March 31, 2023 and December 31, 2022, inventories of $69,998 and $47,180 consist of crude oil. The crude oil is related to our oil gathering facility in Delhi, Louisiana.

Note 7. Property and Equipment

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

Schedule of property and equipment, net
	March 31, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Depreciation		Net Book Value		Gross Carrying Amount		Accumulated Depreciation		Net Book Value
Office furniture	$	14,998	$	6,390	$	8,608	$	14,998	$	5,912	$	9,086
Vehicles		36,432		27,931		8,501		36,432		26,110		10,322
Equipment		942,880		330,706		612,174		942,880		295,855		647,025
Property		17,000		-		17,000		17,000		-		17,000
Finance lease- Right of use assets		3,579,544		611,192		2,968,352		3,579,544		349,253		3,230,291

Construction in process:
Wash Plant Facilities		1,087,376		-		1,087,376		199,800		-		199,800
Cavitation device		44,603		-		44,603		44,603		-		44,603
Remediation Processing Unit 1		4,438,006		-		4,438,006		4,396,753		-		4,396,753
Remediation Processing Unit 2		6,591,144		-		6,591,144		6,285,547		-		6,285,547
Remediation Processing Unit System A		4,019,475		-		4,019,475		3,893,051		-		3,893,051
Remediation Processing Unit System B		4,012,997		-		4,012,997		3,845,398		-		3,845,398
Total fixed assets	$	24,784,455	$	976,219	$	23,808,236	$	23,256,006	$	677,130	$	22,578,876

For the three months ended March 31, 2023 and 2022 depreciation expense was $37,151 and $2,890. For the three months ended March 31, 2023 and 2022 capitalized interest to equipment from debt financing was $237,978 and $488,014. Equipment that is currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into service. Equipment that is temporarily not in service is not depreciated until placed into service.

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

As of December 31, 2022 we continued to pursue a test facility or third party reactor for our nano catalyst technology that facilitates chemical manufacturing, with a focus on the production of ammonia, which includes our bioreactor equipment. The Company received recent quotes for testing or building our own test facilities with new partners for this venture. After taking into consideration this new information, we noted that the newly requested capital expenditure to test and scale the business triggered an impairment loss of assets related to our ammonia synthesis assets, including our bioreactors. The impairment loss related to our bioreactors was $1,440,000 for the year ended December 31, 2022. There was no impairment loss during the three months ended March 31, 2023

Note 8. Intellectual Property, Net and Goodwill

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


	March 31, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Extraction Technology patents	$	113,430	$	13,901	$	99,529	$	113,430	$	12,233	$	101,197
Extraction Technology		16,385,157		6,690,606		9,694,551		16,385,157		6,485,791		9,899,366
Acquired crude oil contracts		19,095,420		1,351,888		17,743,532		19,095,420		844,930		18,250,490
Total Intellectual property	$	35,594,007	$	8,056,395	$	27,537,612	$	35,594,007	$	7,342,954	$	28,251,053

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

Schedule of goodwill
	Goodwill
January 1, 2021	$	-
Acquisition		12,678,108
December 31, 2022	$	12,678,108

There were no changes in goodwill for the three months ended March 31, 2023.

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

Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill. Based on the valuation study, the fair values of goodwill and the acquired contracts were $12,678,108 and $19,095,420 on August 1, 2022. Amortization expense for the three months ended March 31, 2023 and 2022 was $747,369 and $372,328.

Note 9. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:


	March 31,		December 31,
	2023		2022
Accounts payable	$	2,972,461	$	910,002
Office access deposits		235		235
Unearned revenue		-		20,936
Accrued interest (various notes and loans payable		99,587		349,497
Accrued interest (working interest royalty programs)		959,766		1,437,711
Accrued tax penalties and interest		525,086		524,286
Accounts payable and accrued expenses	$	4,557,135	$	3,242,667

	March 31,		December 31,
	2023		2022
Accounts payable- related parties	$	1,039,829	$	4,112,300
Accrued interest (notes payable)- related parties		239,153		30,678
Accounts payable and accrued expenses- related parties	$	1,278,982	$	4,142,978
Accrued compensation	$	1,846,072	$	1,302,890

As of March 31, 2023 and December 31, 2022, our accounts payable are primarily made up of trade payables for the purchase of for crude oil. Trade accounts payables in the amount of $923,028 and $4,000,681 is with a vendor who our CEO is a beneficiary of. As of March 31, 2023 and December 31, 2022, $96,388 and $37,685 of accounts payable related to services rendered, which are not trade payables, with a vendor of which our CEO is a beneficiary. $20,413 of accounts payable related to services rendered, which are not trade payables, are with a vendor where our Chief Financial Officer sits on the board of the directors and is an officer.

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

Note 10. Loans and Notes Payable

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

Schedule of loans and notes payable
	March 31,		December 31,
	2023		2022
Various promissory notes and convertible notes	$	50,960	$	50,960
Novus Capital Group LLC Note (a)		171,554		171,554
Triple T Notes (b)		351,626		342,830
National Buick GMC		16,006		16,006
Blue Ridge Bank		410,200		410,200
Small Business Administration		299,900		299,900
Jorgan Development, LLC		27,609,978		27,977,704
Various variable interest promissory notes (c)		2,595,000		1,325,000
Total Notes Payable	$	31,505,224	$	30,594,154

Loans and notes payable, current	$	894,000	$	885,204
Loans and notes payable, current attributed to variable interest entity		2,595,000		1,325,000
Loans and notes payable, long term	$	28,016,224	$	28,383,950

	March 31, 2023		December 31, 2022
Various variable interest promissory notes (c)- related parties	$	1,244,500	$	899,500
Loans and notes payable, current attributed to variable interest entity- related parties		944,500		599,500
Loans and notes payable, long term- related parties	$	300,000	$	300,000


2023	$	4,433,500
2024		13,581,928
2025		13,348,654
2026		33,640
2027		17,232
Thereafter		1,334,770
Total	$	32,749,724

(a)

In 2017, the Company acquired assets, including patents, in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt on asset in the amount of $334,775. The debt currently accrues interest at 10% per annum. In November 2021, the lender agreed to extend the maturity of the note to April 1, 2022. On April 1, 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid. As of the date of this report, we are currently renegotiating the terms of this debt.

(b)

The balance of this note is due to a related party, a company owned by the 51% owner of Vivakor Middle East LLC. The loan was granted to Vivakor Middle East LLC by the majority owner for operational use. On March 10, 2021, the Company entered into a master revolving note with Triple T Trading Company LLC to set forth the relationship of the parties to retain the previous terms of the note payable to Triple T Trading Company LLC, to include a note maturity of March 10, 2023, and maximum lending amount of 1,481,482 QAR or approximately $400,000, valued at an exchange rate of approximately $0.27 per QAR. In March 2023 the parties agreed to extend the maturity date of the loan to March 10, 2024.

(c)

The balance of these various promissory notes are related to the special purchase vehicle, Viva Wealth Fund I, LLC (VWFI) of which the balance primarily related to an offering up to $25,000,000 in convertible notes in a private offering, which was closed on March 31, 2023. During the three months ended March 31, 2023, an additional $1,980,000 has been raised in relation this offering, and $710,000 of this debt has been converted into units of the LLC. VWFI has also entered into various master revolving notes outside of the offering: and additional $345,000, was raised from a related party as of March 31, 2023, which accrues 6% interest per annum, has a maturity date of October 11, 2023, where no payments are made prior to the maturity date unless at the option of the fund.

Note 11. Commitments and Contingencies

Finance Leases

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

On March 17, 2020, the SFD entered into two sale and leaseback transactions with Maxus Capital Group, LLC (“Maxus”). The first transaction involved the Company assigning twelve storage tanks and other equipment and the second transaction involved the Company assigning the remaining property at the oil gathering facility with the exception of land, to Maxus Future minimum lease payments for each of the next three years under the Maxus lease obligations is as follows: 2023 $369,108, 2024 $492,144, and 2025 $123,036.

On December 28, 2021, the WCCC entered into a sale and leaseback transaction with Maxus, where WCCC assigned the crude oil, natural gas liquids, condensate, and liquid hydrocarbon receipt, throughput, processing, gathering, and delivery terminal, commonly known as the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus. Future minimum lease payments for each of the next four years under the Maxus lease obligation are as follows: 2023 $353,817, 2024 $471,756, 2025 $471,756, and 2026 $471,756.

The following table reconciles the undiscounted cash flows for the finance leases as of March 31, 2023 to the finance lease liability recorded on the balance sheet:

Schedule of financing lease liability
2023	$	722,925
2024		963,900
2025		594,792
2026		471,756
Total undiscounted lease payments		2,753,373
Less: Imputed interest		1,339,078
Present value of lease payments		1,414,295
Add: carrying value of lease obligation at end of lease term		1,753,000
Total finance lease obligations	$	3,167,295

Finance lease liabilities, current	$	963,900
Finance lease liabilities, long-term	$	2,203,395

Weighted-average discount rate		18.00	%
Weighted-average remaining lease term (months)		37.49

Operating Leases

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

On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $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 entered into a month-to-month lease with JVS Holdings, Inc. The lease may be terminated at any time or for any reason with a 30-day written notice to terminate. The lease requires a monthly lease payment of $2,000 as long as the Company remains in the space.

On December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”) with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months at our discretion. Our monthly rent is $0 for the first three months and then at month 4 it is approximately $7,000 (based on a 50% reduction) and increases to approximately $13,000 in month 7 and then increases annually up to approximately $16,000 per month by the end of the initial term. We plan to place one or more of our RPC machines on the property, as well as store certain equipment.

The following table reconciles the undiscounted cash flows for the leases as of March 31, 2023 to the operating lease liability recorded on the balance sheet:


2023	$	373,924
2024		435,906
2025		162,545
2026		136,975
2027		153,089
Thereafter		2,872,048
Total undiscounted lease payments		4,134,487
Less: Imputed interest		2,258,129
Present value of lease payments	$	1,876,358

Operating lease liabilities, current	$	509,327
Operating lease liabilities, long-term	$	1,367,031

Weighted-average remaining lease term		211.05
Weighted-average discount rate		10.00	%

Employment Agreements

On October 28, 2022 we entered into an executive employment agreement with a new Chief Executive Officer, James Ballengee, which provides for annual compensation of $1,000,000 payable in shares of our common stock issued in four equal quarterly installments, priced at the volume weighted average price (VWAP) for the five trading days preceding the date of the Employment Agreement and each anniversary thereof (the “CEO Compensation”). For the first twelve months of Mr. Ballengee’s employment, we will issue him a total of 923,672 shares of our common stock, issuable 230,918 per quarter. The CEO Compensation shall be subject to satisfaction of Nasdaq rules, the provisions of the Company’s equity incentive plan and other applicable requirements and shall be accrued if such issuance is due prior to satisfaction of such requirements. Additionally, Mr. Ballengee shall be eligible for a discretionary performance bonus. The Employment Agreement may be terminated by either party for any or no reason, by providing a five days’ notice of termination. In June 2022, the Company entered into employment agreements with its previous Chief Executive Officer and its current Chief Financial Officer, which provided for annual base salaries of $375,000 and $350,000, respectively, and provided for incremental increases in their salaries upon the Company’s achievement of specific performance metrics. The Company is currently accruing substantial portions of executive base salaries (see Note 9). The employment agreements provided for the grant of stock options to the previous Chief Executive Officer and the current Chief Financial Officer to purchase up to 955,093 and 917,825 shares of the Company’s common stock, respectively, at an exercise price equal to 110% and 100% of the fair market value of the Company’s common stock on the date of grant. The previous Chief Executive Officer vested in 503,935 of these stock options before his resignation without good reason with the remainder of his stock options cancelled. The total stock options for the former Chief Executive Officer vest over two years of continuous employment, subject to acceleration if terminated without cause or resignations for good reason. The Chief Financial Officer’s agreement also provides that it is anticipated that the executive will receive bonuses for 2023 which will be determined by the Company’s Compensation Committee and Board of Directors after taking into account the general business performance of the Company, including any completed financings and/or acquisitions.

Note 12. Long-term Debt

Due to delays in achieving scaled up operations (Note 1 Long Lived Assets) the effective interest rate of these agreements range from approximately 11% to 34% for the three months ended March 31, 2023 and for the year ended December 31, 2022.

Long-term debt consists of the following:

SEC Form 10-Q filed by Vivakor Inc.